In Most countries, the National legislature can restructure states, impose nationwide simplification of tax policy etc within the limits of the federal structure they have. US is one of the few countries the relationship is the other way around.
In most countries, the states get their power from the delegation of powers dictated by the union/federal constitution.
In US, The union gets their power from the few matters that were delegated to them from the states.
For example, India used to have such disparity in consumption taxes (not income tax) which was recently removed and simplified. The federal govt collects all consumption and income taxes and devolves the receipts to states based on pre-defined formulae enshrined in law.
Edit: In an ideal world, instead of filing separate state and federal tax returns US should move to a common system where tax can be collected/enforced by one entity and the receipts devolved to states as per certain rules. This will remove income tax disparity between states and equalise business/opportunity costs (No more Delaware tax havens for companies to skirt taxation). This will simplify a lot of things. Most countries including mine have such a singular system.
Exactly this! It’s the whole point of the United States.
If you don’t like the policies of a state enough, you can move to another one! It’s extremely rare that someone can move between regions with different laws if they don’t like the laws of their state. You get to choose your government by changing where you live, if you think one of the governments is wrong or bad somehow.
Sure, there are consequences. And inefficiencies. But if you’re French, you can’t just decide to live somewhere with different laws. It’s challenging to move to another country. Even though the EU has laws that make it easier to move and work in other countries, it’s nowhere near as easy as the USA. Forget it entirely if you live in a less progressive or allied country.
This forces the states of the USA to stay appealing - they compete with each other for population. This works because the Union of states allows people to leave if one becomes oppressive, else that state goes to war with the entire rest of the Union. So the states are forced to be accountable to each other and their people.
Each state is supposed to be independent for this reason, and it’s why I’m a big fan of limiting Federal government power and instead pushing changes at a state level
Playing cities and states off against each other for tax breaks and free money is very effective if you have the financial means.
The richest man in the world - Jeff Bezos - did exactly this to try and shift the taxation burden away from him and on to the rest of America with his HQ2 stunt.
This is indeed better for a limited class of people.
The federal government has the authority to appoint federal assessors to local property tax districts, to generate valuations for a national property taxation, and then share these updated valuations with state and local governments, which may then independently decide to use the same valuations for purposes of state and local taxation. It did so in order to collect the 1798 national property tax under John Adams and the three 1813-1816 national property taxes under James Madison.
The federal government also has the ability to regulate state and local taxes using the interstate commerce clause. After the provision in the Articles of Confederation limiting the federal government to collecting direct taxes in proportion to state land values was abandoned, the supporters of direct taxation influenced by the French Physiocrats lobbied for the interstate commerce clause in order to ban state and local governments from collecting excise and sales taxes on goods sold across state lines, so that state and local governments would be forced to rely more heavily on property tax.
I am neither an expert nor familiar with US constitutional law, but in most other countries the federal power trumps the power of any states/provinces and is not limited by a single clause and helps simplify and remove any disparities in taxation policy. As far as property taxes are concerned, most countries retain the policy to keep the local councils empowered to decide tax rates albeit "within the rate limits and fairness criteria imposed by the states and federal governments". In my country property taxes cannot be made zero/low or made exceptionally high by a showoff city council trying to get reelected for whatever reason as this causes unnecessary migration between cities/towns for no practical reason other than to skirt taxes with no practical systemic benefit to the populace at whole.
In the U.S. politicians were more concerned with the opposite, that low property taxes would be more likely to cause loss of population and emigration than high property taxes. At the time of the revolution the U.S. colonies were relying on revenue from land tax, property tax, property income tax, and public banking rather than sales tax and were rapidly growing in population due to immigration from European countries where most of the large landholders were exempt from property taxes. Early America had large quantities of land and few workers relative to Europe. In order to industrialize Franklin and founders associated with Democratic-Republican party thought it was first necessary to increase population and maximize rural agricultural productivity, which from reading the French economists they thought would be stimulated by some form of direct tax and hindered by indirect tax.
When I have visited the US I have been mystified by the way sales taxes work. The prices on labels exclude tax, but the percentage changes depending on where I go (or what I buy?).
It surprises me that residents tolerate that.
Local sales taxes are some of the easiest to get passed. Even in very conservative areas they tend to get passed and renewed. They are popular because the public gets to vote on them existing and because it's much easier to see how the taxes are being spent.
I live in a conservative area right now and can't remember a local sales tax ever being voted down. The only case I can think of was when I lived in the middle of a large city (very left leaning) and the local sales tax was voted down because the politicians pushing for it had not said exactly what it would be spent on other than "special projects". They had previously diverted a good chunk of property tax revenues to building a new sport stadium because the billionaire owner was threatening to move the team to another state. The public wasn't given an opportunity to vote on that gift of their taxes to a billionaire so there probably was both mistrust and a degree of blowback. Other than that case, local sales taxes, dedicated to a local purpose or project list, are popular here.
If the sales taxes all went to DC to be piled together and subject to the whims of whatever party was in charge at the time, they'd be far less popular. Asking locals to pay an extra 1% to renovate and expand the local schools is pretty easy. Asking the entire country to pay an extra 1% to "Make American Schools Great Again" is a much more difficult sell.
I strongly suspect that part of the reason sales taxes are easy to pass is because it's really hard to convert that into a dollar amount that you'll end up paying. For income tax, you can ballpark it by just multiplying your income by the percentage increase. If you want a better answer, you need to see how much of your income falls into the affected brackets, but you can still get an answer in 15 minutes or so.
It's really hard to figure out how many more dollars I'm going to pay in taxes if the sales tax goes up 1%. I have to figure out how much money I spend on goods that have sales tax. Okay, so I put $X in my savings account which isn't taxed, and I pay $Y in rent, which means I'm spending $Z on other stuff. Oh right, but not all of that has sales tax, so I have to take that stuff out. It gets complicated, fast, and the best you're going to get is an estimate. If any of those numbers change, my sales tax burden changes.
Plus sales tax is deferred until you spend the money, so there's no immediate obvious impact. It's not like you have less money than you did last year, although your spending power does go down every so slightly.
Income taxes are unpopular to adjust because it's easy to see how much you're losing, and it directly impacts your paychecks, which people don't like.
Americans in the states that haves sales tax, which is most states, basically ignore it. It's known that the price tag isn't what you pay but it's generally not much. No one here looks twice when your 2 dollar coke suddenly becomes $2.16.
Of course, depending on where you are, your 2.16 coke could also jump up to 2.21 or 2.26 because of the bottle deposit. And then another 2.34-2.42 if there's a sugar tax. It could even go up to 2.46 - 2.54 depending on if you buy that coke in a store vs a restaurant.
There's some hyperbole there, but the cities and states get to tack on their own taxes for whatever reason and the public largely doesn't care.
Oh they care, A few years ago WA instituted at sugar sin tax on candy and soda, and it was rapidly repealed by ballot initiative the same year. It didn't help that the definition of what was considered candy was extremely arbitrary. (the rule of thumb was if it contained any flour it wasn't "candy". so a Twix or Kitkat wasn't candy but Payday was)
Then there was New York Soda size cap that was almost immediate overturned in court challenges before it could even take affect.
Taxes make a pack of cigarettes $12 in NY but this was done slowly over time. And the loud protests have turned into teeny grumbles.
Though it also helped that Mike Bloomberg is not a man Big Tobacco can buy, given the fact that he is one of the richest men in town already, in a very wealthy town.
A move towards making sales taxes less transparent in the United States is unlikely, because many U.S. founders associated with the Democratic-Republican party such as James Madison were influenced by the French Physiocratic school economics, which considered broad-based sales taxes to be a quite harmful method of taxation that should never be relied on as a permanent source of revenue.
This opinion is most clearly expressed by Joel Barlow in "Letters Addressed to the Yeomanry of the United States: Showing the Necessity of Confining the Public Revenue to a Fixed Proportion of the Net Produce of the Land; and the Bad Policy and Injustice of Every Species of Indirect Taxation and Commercial Regulation" (1791).
This is a really interesting point and got me thinking — if taxes were hidden, people wouldn’t directly notice the cost increases associated with raising sales tax. If you pay $1.12 for a $1.00 soda in city one, but $1.07 in city two, you will directly realize the tax impact that the local sales tax has.
I wonder if this was originally intentional, to prevent taxes from invisibly rising without the people being aware of the impact of the price.
It also makes it much harder for national brands if they like to have nice round numbers as the cost of things (which they seem to) - they can’t charge $1.00 for a soda everywhere, or their margins would be crazy wonky depending on region
The policy sort of misses the point when you are at the till and the item doesn’t cost what you thought it did. There is no way of telling if you have been hit by a broad-based sales tax, a targeted one or both.
They have tried to introduce this practice to European countries several times. People just refused to accept that the real price is something else than advertised. I distinctly remember I was buying rather pricey welding machine in 1995 and it was suddenly +25% "with tax". I have never moved so fast, I just left every piece of shit on the checkout desk and run out.
Yes, Switzerland (cantons), India (states), and Canada (provinces), to name three I am familiar with, though the U.S. has the widest variation of tax burdens (at the local level).
Tax variation like this is generally a side effect of federalized systems of government.
Not sure why people down vote factual statements if they are wrong and not comment a correction. I can confirm that Canada does have different tax rates across the provinces across all types of taxes: corporate, income, sales, etc. Even at the local level, Canada doesn't have municipality based taxes so to speak but you can certainly find fees charged only in that city which is of course a type of tax. For example, Toronto used to force retailers to charge for plastic bags even though it wasn't collected by the city. This bylaw was removed in 2012.
Thanks, not to worried about the downvotes for factually true statements. There are plenty of people on HN who downvote statements that don't comport with their imaginary view of the world.
India does not have state income taxes, but they had wide variation with respect to state indirect taxes (which was eliminated in 2017 and replaced with a standardized federally-run GST), and the states are still free to impose more than a dozen other taxes, including land-use taxes, including a number of taxes not levied anywhere else in the world, such as agricultural estate taxes.
Canada's provinces have their own property tax and income tax rates (for example, compare Alberta, Sasketchewan, Quebec, and British Columbia rates), and generally also set their own PST rates (provincial sales tax, when combined with federal GST it is referred to as HST).
Since 2017, India has abolished state VAT by a constitutional amendment. Now there is a single consumption tax system called the GST across all states. A GST council collects all taxes and devolves receipts to states as per law.
Joking aside, I wonder if there is any other nation with as much tax variation between regions as the US? (Excluding special economic zones.)