State Income Tax

What state is an income tax always in? Depression. (Tax preparer's joke.)

State income tax used to be the most boring topic on the planet. States would levy a few percent add-on to the tax returns of the individuals filing federally with the IRS, and that'd be that. But then states diverged in tax policy and, well, politics. So today, the world looks like an oddly tilted set of highly disciplined break-even states that carry a balanced budget...from Wisconsin to Wyoming to Texas.

Then there are the profligate spenders. Hi, California. Hi, New York. They've been afforded the ability to borrow mountains of cash, without thinking about future liabilities, especially as they relate to their state government pension funds. School teachers work for what the press reports as $50,000. That number is factually true; it is, in fact, the salary of a typical school teacher who works 9 months a year. But what isn't reported is the fact that it costs the state $10,000 in health and other benefits to keep that teacher employed, and it costs another $10,000 in retirement benefit contributions.

But politicians don't get elected by doing honest accounting; they get elected by promising the world to the world. So the states have borrowed now...way more than they have. It's likely that, at some point, this chicken will come home to roost, and challenge the whole notion of the way we do State income Tax. Not to mention States' Rights. If a state goes bankrupt, is it fair to the other 49 states that did not go bankrupt this week for the government to step in and bail them out, without the state then losing future rights to manage its own money and budget?

Interesting fireworks coming. A bad moon a-risin'.