Where the heck did you read that??? The system works as deduction from your gross income on both sides. So federal implements it's tax brackets on the 100k as does the provincial. It doesn't calculate one then charges tax on the remainder. Both federal and provincial are deducting income tax on the 100'k from your example
Yes. I overly simplified the mechanics (I mentioned the deduction component earlier and you disliked how i phrased it so I went away from that). In short, your federal system also takes your provincial tax burden into consideration. They don't set the federal system independent from the provincial one.
Yes, federal collects more (from high income earners that actually itemize) by cutting out deductions but it does not handcuff the state from raising taxes on their level to offset. The fear comes from wealth flight in roughly 6 high tax and income states because they just don't want to pay the additional state levies - that's the basis of it, state collects less federal income, but pays out less itemized deductibles, the top 10-15 percent now recieves less back in deductibles (offsetted by whatever gains they get in income reduction) still doesn't prevent states from being able to raise revenue to pay for social programs -- like Canada. Alberta pays a ton into federal taxes, receives no equalization payments, and funds all of its social programs
Unless I'm missing something like states actually get a federal check back from salt deductions?
You keep talking about wealth fleeing fear, which is not what I'm talking about.
Our states don't collect any federal income and they don't get a federal check back from SALT deductions.
We have 2 completely separate tax codes but they pay for the same program. State taxes and federal taxes both pay for the same program. Let's take Medicare, a federal program, States opt in and they pay a percentage while the fed pays another percentage. The state taxes pay for the state portion, the federal taxes pay for the federal portion - but it's the same federal program.
If the fed reduces their contribution, the state will have to pick up the slack with state taxes. Every state has to do this independently. So, State A's need is $100B and the states pay 60% while the fed pays 40% while State B's need is $50B with the same percentage allocation. So when the fed cuts its percentage (40 --> 30%), both states have to cover a greater percentage (60-->70%). Every state that has Medicaid is in the same boat. Every state with a school system is in the same boat. Whenever the fed cuts its percentage to these programs the state has to cover a greater percentage.
Now, because this is done on a national level, the fed isn't just affecting high tax states. Even low tax states will experience the same percentage increase in their financial burden. A state with no income tax will still have to cover a greater percentage of their Medicare costs, their education costs, etc. So, the extra money will have to come from those state residents, even if they don't have state taxes.
Now, normally you get a deduction for state taxes which fund your local portion of the programs and the fed funds their portion by taxing the remainder of your income. With the new proposal, you pay local taxes to cover the state portion of Medicare. But you don't get a deduction for it. You are now paying taxes on the money you spent to fund the state portion of the program. Plus you're still funding the federal portion of the program at a higher rate because you have lost a deduction. However, even though the federal government is taxing more of your money, the fed is cutting the program while you are technically paying more money to them.
This affects every single state the exact same way. Red and Blue. Because they are all partnered with the fed on Medicare, Medicaid, Education, infrastructure, etc. So, every state is going to see it's local costs go up and every resident of every state is going to be paying more in taxes while getting less from the federal government for it.
So, a red state will not want a bunch of people showing up from blue states because it means more people using infrastructure, more people using the school system. And since the fed is paying less money into those programs, all of the red states will have to cover a greater percentage of the programs for a greater number of people. The only person who wins is the fed - they take in more money (the tax revenue that used to be deducted) but contribute less to the system (by cutting their percentage contribution to the programs the revenue is funding).
That's simplified to a large degree.
