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Trivia Tidbit Of The Day: Part 298 -- The Irony Of Blue States.

Blue States Taxing The Heck Out Of Themselves-

One of the more awkward ironies in politics today is the propensity for voters in non-Bush states to support candidates who love taxes on "the rich."

What's so odd about this is that the cost of living varies wildly from region to region. Blue states are generally high cost of living states. Red states tend to be lower cost of living states. In order to maintain the same standard of living, someone earning a $50,000 salary in Midland, Texas would need to earn $119,679.33 in New York City.

Similarly, someone earning $100,000 a year in Seattle would only need $80,581.45 in Wichita, Kansas to maintain the same standard of living. So, corporations, small businesses, and government agencies usually pay accordingly.

Thus, whether or not one is a member of "the rich" is usually just a matter of geography. Yet, federal tax policy makes no such geographic distinction.

Some states, then, become donor states, sending more tax revenue to Washington than they get back in benefits. Other states send relatively little in taxes to the federal government but get back quite a bit. Notice how most of the top 10 donor states are blue states, while most of the top 10 recipient states are red states (.pdf):

Click map for larger version.

This sort of state-to-state wealth redistribution scheme is just one reason to cut down on earmarks (pork) in Congress. It's also reminds us why federal taxes should be much, much lower: so states, with their varied tax levels, can serve as economic laboratories. Some states will prosper, some will not. Eventually, "what works" (low taxes) will be emulated by the tax-loving states, if only out of competitive necessity.

Federal taxes shouldn't be about wealth confiscation/redistribution. Those funds should should be limited to basic Constitutionally-mandated federal responsibilities (like national defense).

If blue states want to tax the heck out of themselves to fund lavish socialist paradises, let's let them. In the meantime, the rest of us can pay a reasonable rate of taxes and suffer the cruel prosperity of free enterprise.

The great irony of the erroneous "tax cuts for the rich" schpiel is that, if we suspend reality for a moment and conclude that Bush gave tax cuts only to rich people, it would mean that the President gave more tax cuts to those who hate/loathe/dislike him than support him.

The Tax Foundation.


Previous Trivia Tidbit: The Limits Of Fox News.

Posted by Will Franklin · 16 March 2006 09:20 PM



How much of that is based on Entitlement spending? The real question we have to ask is why so many retirees leave the Blue States to move to Red States and how the wealth redistribution of the entitlement taxes at the Federal Level are taking money from folks checks in Blue States and sending it to retired folks in Red States.

Clearly Social Security and Medicare money when flowing into a state causes some significant impact. Imagine what would happen to the economy of Arizona or Florida if those inflows were suddenly shut off. But we never really trace back what is going to happen when we continue to have a larger and larger economic catalyst providing a growth engine in Red States but increasingly the Blue States have their wealth sucked out of them at literally 15% of every dollar earned by their wage earners.

And it is only going to get get worse.

Posted by: Justin B at March 17, 2006 01:23 PM

Actually, yeah, you are right. This does include Social Security payments and such. Florida would be a donor state without those kinds of funds. Same with Arizona.

Posted by: Will Franklin at March 17, 2006 03:07 PM

Even given that, it is extremely important to note that retirees are not inclined to own property or reside in states that tax the heck out of them. So one of the net effects of having high state and local taxes, as we have looked at before, is that high state and local taxes increasingly push out retirees which in the not too distant future are going to greatly determine whether entitlement money is going to flow back into a state.

If over 50% of Federal Spending is on entitlements, and more retirees are moving to Red States, this amounts as a redistribution system to take Federal Tax Dollars from the higher wage Blue States and transfer them via entitlements to the Red States. Add in that Blue States have high local and state tax rates, and factor in the eventual rising tax rate needed to pay for entitlements, and it has a much more stagnating effect on Blue States than Red. The entitlement money will have a huge net inflow for Red States and make the problem even worse.

Chucky Schumer and Hillary as well as Nan, Babs Boxer, Teddy Boy, and John "I bagged a Rich Woman" Kerry are simply choosing not to reform a system that is a huge burden on their states. Entitlements are going to suffocate them.

Posted by: Justin B at March 18, 2006 11:40 PM

The reason for the wealth redistribution has nothing to do with pork or earmarks. It has everything to do with poverty. States with low per capita income get more in food stamps, Medicare, even Social Security than well-off states. Which is where the real money is
If anything, your chart proves the futility of balancing a budget $400 billion out of whack by eliminating, at best, $25 billion in earmarks
No offense. Carry on

Posted by: donsurber at March 22, 2006 06:27 AM

For many states, it's less poverty than an influx (or outflux) of old (and other) people.

Posted by: Will Franklin at March 22, 2006 08:30 AM