Some Democrats on Capitol Hill are seeking tax breaks — for their constituents:

New York Representative Jerrold Nadler, who wants to exempt his own six-figure constituents from the tax hike he supports. Mr. Nadler’s bill would “require the IRS to adjust tax brackets proportionally in regions where the average cost of living is higher than the national average.”

In other words, the various tax brackets would apply to residents in certain regions at higher income levels versus other parts of the country. A family with an income of $50,000 or even $1 million in Manhattan would pay less federal income tax than a family with the same earnings in Omaha. The bill is called the Tax Equity Act, but a more accurate title would be the Blue State Tax Preference Act.

“The basic costs of life in the New York region are much steeper than in most parts the country,” says Mr. Nadler. “The reality is that a dollar in New York isn’t worth nearly as much as a dollar in Spokane or Knoxville or Topeka. It’s time for our tax code to take reality into account when assessing someone’s tax liability.”

This, to me, would fall under the “Fairness is Subjective” tag, if I had tags. From the perspective of a Coaster, this makes perfect sense. If $200k does not mean as much in New York City as it does in Boise, Idaho, then why should they be taxed more? Why should the Boiseans get to take home more of their money than Bostonians? The Federal Government actually takes into account cost-of-living when it comes to wages – I made less as a Census Courier than someone on the Coast did. Of course, that shows some of the inexactness of these calculations. According to the Federal Government, my very affordable home city of Colosse is actually considered a high-wage area. They do it based on income and the statistics are skewed by the inordinate number of engineers that make it look like everyone with a bachelor’s earns a whopping big salary. Not that the Truman family complained! But seriously, when it comes to wages, I think that this is a fair question. And yet, when it comes to taxation, I am actually disinclined to be all that sympathetic.

I am more inclined to extra taxes that come with living on the coast as a sort of luxury tax. Living in places like NYC or the Bay Area is considered to be desirable. You can earn a good living in the very affordable Boise, if you want the take-home pay. But few choose to do so. In fact, they often disdain places like Boise. Which is their god-given right! But that they choose to spend their money living in a more desirable place rather than choosing to spend their money on big screen TVs and power-wheels for children in a less “desirable” place is not something that the government should particularly show favoritism to.

A lot of this comes down to a subjective opinion, though, as to whether or not people living on the coast in metropolii is more desirable or less desirable than living in smaller cities in the interior. It’s probably pretty obvious where I stand on the issue, though others look at cities like Phoenix and the like as environmental catastrophes while NYC and DC have public transportation and are less sprawling. And it’s hard to consider these issues without also considering how we ourselves would prefer to live. If we would ourselves prefer to live in cosmopolitan places with millions of others, we don’t think that people (by which “we” is meant) should be penalized. If we would prefer to live in places that are affordable, it seems unfair that should be penalized by cutting into one of the big advantages of living in places like these. Personally, I lived on the coast in an expensive city in the northwest and there was a lot to like about it. But there is also a lot to like about the city that I come from, large but affordable.

Of course, we are all born someplace. If you’re born on the coast and stay there simply because it’s what you know or because it’s where your family is or what-have-you, it does seem unfair that you should be penalized for living there with higher tax rates with assumptions of a comfier standard of living than you have. But people are penalized for where they are born all the time. Most of the people that grow up where I live, if they want to work in any sector but agriculture or the service industry, are likely going to have to move. As long as a good bulk of the increased cost-of-living in the cities is a product of it being a more desirable place to live or because of the labor requirements or regulations that make it more expensive, I still say: luxury.

And on a pragmatic level, taxing the coasts is pretty useful because… that’s where the rich people are. That’s where the money is. There’s no indication that either party in Washington is remotely worried about the deficit, but even if they only want to provide cover for the next government program, there’s only so much money to be raised by taxing the super-rich in the interior US. That’s where the money isn’t.


Category: Statehouse

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18 Responses to The Coastal Tax

  1. rob says:

    Blue states are probably more likely to have state income tax, and higher state taxes in general. Since at least some state taxes are deductible on federal income taxes, Blue staters already get an advantage. They get the goods and services bought with state taxes and pay less federal tax because of it. It isn’t as if states pay some portion of taxes collected to feds, it’s a benefit for blue states. There is also a bit of justice in that people who want higher taxes pay higher taxes. Though I have been less sympathetic to Republican anti-taxers since they decided we should borrow ~a trillion dollars do break things in Middle Eastern and Central Asian wastelands.

  2. David Alexander says:

    As a Northeasterner, I’m probably going to be the biggest supporter of such legislation since it’s geared toward those of us who live in high cost of living regions of the country, and allows us some degree of fairness and promotes an equal playing ground.

    New York Representative Jerrold Nadler, who wants to exempt his own six-figure constituents from the tax hike he supports

    His district actually covers a sizable bit of Brooklyn, so he district runs the gamut of high end seven figure earners to some low wage residents of Brooklyn, and adjusted federal taxation would benefit all of his constituents.

    Living in places like NYC or the Bay Area is considered to be desirable.

    Except isn’t “desirable” in all locations. There are suburbs of Colosse that make my “middle class” suburb look like a dump for comparison purposes. High cost of living doesn’t just mean Manhattan and San Francisco, but it also means their inner cities and suburbs too where the proles and lower class live.

    Regardless, as I noted before, if the tax policy is applied to all brackets, it’s a boon not just to high income earners, but their low income counterparts. The problem is that if higher incomes are needed to maintain a basic standard of living, it creates a situation where low income earners are in higher brackets which taxes them more at the federal level than if they lived in a low cost of living state which can also make them ineligible for certain programmes at the federal level. As an example, while $30K seems like a decent salary in certain low cost areas of the country, it doesn’t buy as much in a high cost of living region where crummy suburban rentals in the basements of homes are going for $1000 a month (which can rent a home in other parts of the country), homes in the high crime areas sell for $250K.

  3. David Alexander says:

    Since at least some state taxes are deductible

    FWIW, some of us have incomes that are too low to make itemizing of any value for us, or we don’t pay enough in terms of income or property tax either when compared with the standard deduction. At $30K, in NYS, one would pay only $2055 in income tax before credits which is less than the standard deduction…

  4. Escapist says:

    This seems like a straightforward “swag for areas which support me, a kick in the ass to those that don’t” sort of thing from the Dems.

    Attention David Alexander: yes railfanning may be fun, but are there not trains and cities in lower cost, better job opportunity areas, like say Texas cities and such? Just sayin’

    Hugs,
    Escapist

  5. David Alexander says:

    I have a personal preference for not living in states where segregation was legally practiced, so I’ll refrain from living anywhere in the South. Hell, I’m nearly tempted to try my luck at moving to Canada in lieu of anywhere else in the States for that reason.

    Otherwise, if I move anywhere, my mom will have to go with me, and the problem is that the low cost of living urban regions are areas where one would need to run an air conditioner for more then a two to three months of use here in NYC, and my mother really can’t take six months with an AC on. Plus, the bulk of my family lives in NYC Metro including my niece and nephew.

    FWIW, if I moved to low COL land, I’d end up spending most of my money on trying to travel by plane to other places that have real transit networks. The fun quirk of New York is that’s perfect for my hobbies since it’s basically short and “cheap” direct flights to Europe, there are big systems within a three hour drive of where I am now, and the roads are pretty in the rural areas. So yes, my housing costs would be lower, but I’d be isolated, bored, and I would still earn considerably less to adjust for the lower cost of living so I really wouldn’t be happier.

  6. David Alexander says:

    And FWIW, as an associate’s degree holder, there’s pretty much little chance of me finding work anywhere at this point until I finish college, if I ever do go back…

  7. trumwill says:

    I’ve got more to say on the subject generally, but I wanted to respond to this real quick:

    I would still earn considerably less to adjust for the lower cost of living so I really wouldn’t be happier.

    Wages do not fall to meet the lower cost of living. They can fall a little, but only a fraction of the COL differential.

    I see a lot of people on Half Sigma making the assumption that if COL is low somewhere that wages must be correspondingly low. I’ve not seen any evidence for it. Median incomes in places like Boise and Atlanta are actually higher than in Brooklyn and the latter on-par with Boston.

  8. David Alexander says:

    Median incomes in places like Boise and Atlanta are actually higher than in Brooklyn and the latter on-par with Boston.

    Boston admittedly is a circle jerk in terms of wages. As I pointed out, it has what can arguably called NYC housing costs, but without the NYC wages to support it*. It’s not as bad in somewhere like Philadelphia where the housing is “cheap”. Brooklyn in contrast is hampered by the fact there’s a large portion of the population that ultimately doesn’t earn much. Brooklyn is basically a mix of young people cramming themselves into apartments in hip neigbourhoods, a few trust funders and SWPLs in the are around Park Slope, working class civil servants, older people and immigrants. Everybody else with more money, but unable to pay Manhattan prices simply moves to the suburbs where the schools are better, especially since Catholic schools aren’t cheap anymore at $3K per student for elementary school.

    And FWIW, anecodtally, some of the folks that moved down to Atlanta are crawling back to NYC as they’re no longer able to find work down there.

  9. trumwill says:

    Boston, Brooklyn, Manhattan, none of them have sufficient wage increases (in the Median sense) to compensate for the increased cost of living. Compare NYC’s suburbs to that of southern cities and the wage differences really do not appear to be all that much.

    For certain careers I think that you have to move to NYC in order to make lots of money. But I have not seen anything to suggest that wages are notably higher enough across the board to justify the COL increase.

    As for the folks you know that moved to Atlanta, I believe it. There is no good place right now where jobs are plentiful. Atlanta is a little worse than NYC as far as unemployment goes, but not a whole lot. Other cities I’ve lived in are a little better, but not a whole lot.

    On a sidenote, back when I was working at Mindstorm and there were layoffs, an Indian coworker and I were talking about losing our jobs. I said that it was tough to lose work but I imagine it had to be particularly tough for the Indians because they had to either find something or leave. He shrugged it off saying that the difference to him was that if he lost his job that unemployment in India was affordable while everything in the US was so expensive that losing your job was much more disastrous. I hadn’t thought of it like that.

  10. trumwill says:

    Okay, back to the subject at hand. David makes some fair points about how it’s not just wealthy people being affected by the tax rates that exceed their standard of living.

    I would still say, though, that getting to live in NYC is part of their standard of living. People living in NYC get to live in places that people from all across the country desire to live. That’s one of the things that makes living in the coasts more desirable. Now, their reasons for doing so (such as David’s to live near family) may not fall under the “luxury” category in that people from Colosse get to live in Colosse without paying so much to do so. But, they get to live in NYC (or Boston or wherever) and live near family, which is an impossibility for us.

    If middle class people in Brooklyn are getting squeeze, I’m not happy about that. Ultimately, though, that’s a product of what Brooklynders have decided. They attract people from all across the country, prices get driven up. They have higher taxes, living there becomes more expensive (or, if they’re really getting their money’s worth, then you have to factor that mostly as money spent on services which is how Colosseans spend a lot of their extra money anyhow).

    When it reaches the point that nobody but the rich can afford to live there, more people and businesses will relocate elsewhere, easing much of the cost-of-living strain there and either (a) increasing cost-of-living in the heartland or (b) demonstrating that everybody is better off with more people living in middle (and southern) America.

    Truth be told, I wouldn’t mind all that much if lower-income coasters did get some sort of break. But I don’t know how you can do that without giving the really wealthy a break. Doing the latter strikes me as a far-too-easy way to make it sound like you’re being harder on the rich than you are and it strikes me as a way as giving preferential treatment to those that are making a decision that benefits themselves (We get to live in Manhattan! Wheee!) but does not provide a great benefit to society. A lot of that, of course, comes back to my belief that we would generally be better off spreading out. That’s a pretty subjective judgment on my part.

  11. Maria says:

    Living on the coasts is over-rated. A lot of us live here just because that’s where the jobs are. There aren’t any jobs in my field in many parts of the country.

    Once upon a time, living on the coasts was good and the quality of life was high, but that was a long time ago, at least for California.

  12. trumwill says:

    Maria, I think you in particularly would be much happier in Boise. I was actually thinking of you and thinking of that when I was writing the post. I understand about the job thing, though. Sometimes you are tied to an area for such reasons.

    Southern California has the weather that a lot of people (though not me) kill for. The Bay Area has the concentration of educated people and the culture that brings. The urban area off the northwest coast where I lived had the latter and had weather that I loved and a culture that I greatly enjoyed. If I could move anywhere, I would consider moving there despite the COL (though ultimately I would probably go back to Colosse).

  13. Mike Hunt says:

    I don’t see what the big deal is about living near NYC. I have literally lived here all of my life, and I could take it or leave it. Then again, I might feel differently if I lived somewhere else. But, right now, my attitude is, you aren’t missing much.

    I don’t think Nsdler’s bill should pass. If one doesn’t want to pay a higher cost of living, one should vote with his feet. The Census Bureau has to regionally adjust pay, otherwise they would get even worse workers than they currently attract.

    @5

    if I move anywhere, my mom will have to go with me

    I would say this is white trash, except one of those words doesn’t apply in your case. So let’s just say that you are prole.

  14. David Alexander says:

    I would say this is white trash, except one of those words doesn’t apply in your case. So let’s just say that you are prole.

    At the risk of writing something somebody won’t see, I’ll explain this part…

    My mother suffers from fibromylagia which may be worsening, and with the passing of my father last year, my brothers and I are the only ones left to take care of her. Implicitly, the arrangement that may play itself out in a few years is that I take care of my mother and become responsible for her. Thus, I would have to avoid any location that’s very humid or requires air conditioning for more than three months of the year or severe winter as that aggravates her bone pain. Of course, I suspect the middle class avoids this type of situation by being able to pay for servants in such a situation…

    more people and businesses will relocate elsewhere

    To a certain extent, some of that has happened. New York City’s black population has grown rather slowly primarily because it’s been moving to the low COL places. For some of them, it’s closer to their families, and earning $9.50 at Target in Atlanta is easier than doing so in NYC. Food processing was basically the last bastion of manufacturing here, and it’s moving down South where one can build a new large factory for cheap and staff it with cheaper, non-union labour that offers better performance while offering competitive and livable wages.

    They attract people from all across the country, prices get driven up.

    To be honest, I’m trying to really figure out who comes here. There are the big money reasons to come here like BIGLAW and FIRE, but other wise, other than immigrants, it’s not like people are coming here to make big money. Nobody comes to NYC Metro to work as a dispatcher at a tow truck company or work at a day care centre. It’s a job that locals end up taking to support themselves while they’re here. FWIW, the local economy is arguably the capital and services generated by the elite, then attempting to service the elite, and servicing those people that service the elite.

    increasing cost-of-living in the heartland

    Allegedly, I’ve heard people from Atlanta were upset over how “refugees” from the Northeast can sell their homes and buy better homes for cash while still leaving sizable savings left over. Of course, I’ve also heard anecdotal stories of how people burnt their savings and now have nothing. Luckily, Atlanta metro is still in a position to sprawl outward without hitting any natural boundaries like some coastal regions.

  15. Maria says:

    12.Maria, I think you in particularly would be much happier in Boise.

    Actually I’d be happiest living exactly where I’m living today, only the way it was 40 years ago.

    Got a time machine?

  16. Maria says:

    My mother suffers from fibromylagia which may be worsening, and with the passing of my father last year, my brothers and I are the only ones left to take care of her.

    Sorry to hear that, David. Kudos to you for taking care of your Mom.

  17. trumwill says:

    To a certain extent, some of that has happened.

    Yeah, and it’s continuing to happen. And I consider this a good thing. Not because I hate New York City, but because I think that it’s a shame to have everyone huddled on the coasts when there is so much land in between where people can afford to move.

    To be honest, I’m trying to really figure out who comes here. There are the big money reasons to come here like BIGLAW and FIRE, but other wise, other than immigrants, it’s not like people are coming here to make big money

    Artist types. Actors. Writers. Would-be writers. I consider Nashville’s increasing status as a place for musicians (and not just country ones) to move to as a positive development. I would rather people that want to “make it big” do so in a place where people can afford to live.

    These days it seems like DC is the cooler place to be. A lesser variation of the same situation there, though. I give a pass to those that move to DC so that they can work in government. When they move there cause that’s where single people live, though, I view it differently.

    Allegedly, I’ve heard people from Atlanta were upset over how “refugees” from the Northeast can sell their homes and buy better homes for cash while still leaving sizable savings left over.

    Yeah, that’s one of the advantages to being raised in an expensive place. Easier to move from NYC to Atlanta than vice-versa.

    Luckily, Atlanta metro is still in a position to sprawl outward without hitting any natural boundaries like some coastal regions.

    That’s the beauty of the heartland. You have a lot more room for expansion. Of course, this is also what a lot of people hate. The lack of boundaries means that people can spread further and further out in larger and larger houses and the like. I understand the environmental concerns, but people talking about the social isolation of the suburbs (or of said isolation being a product of larger homes on larger lots) are often being pretty ridiculous.

  18. Maria says:

    I would rather people that want to “make it big” do so in a place where people can afford to live.

    But then it quickly becomes a place where people CAN’T afford to live.

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