Wednesday, January 30, 2013
Wall Street Journal editorial: The State Tax Reformers:
Washington may be a tax reform wasteland, but out in the states the action is hot and heavy. Nine states—including such fast-growing places as Florida, Tennessee and Texas—currently have no income tax, and the race is on to see which will be the tenth, and perhaps the 11th and 12th.
Oklahoma and Kansas have lowered their income-tax rates in the last two years with an aim toward eliminating the tax altogether. North Carolina's newly elected Republican Governor Pat McCrory has prioritized tax reform this year and wants to reduce the income tax. Ditto for another newcomer, Mike Pence of Indiana, who has called for a 10% income-tax rate cut. Susana Martinez, New Mexico's Republican Governor, has called for slashing the state corporate tax to 4.9% from 7.6%, and the first Republican-controlled legislature since Reconstruction in Arkansas is considering chopping its tax rates by as much as half.
But those are warm-up acts compared to Nebraska Governor Dave Heineman's announcement this month that he wants to eliminate the state income tax and replace it with a broader sales tax. ... Then there's Louisiana Governor Bobby Jindal, who wants to zero out his state's income tax (top rate 6%) and the 8% corporate tax and replace them by raising the state's current 4% sales tax. ...
A new analysis by economist Art Laffer for the American Legislative Exchange Council [Rich States, Poor States] finds that, from 2002 to 2012, 62% of the three million net new jobs in America were created in the nine states without an income tax, though these states account for only about 20% of the national population. ...
This state reform trend is a rare bright spot in the current high-tax era, and it will further sharpen the contrast in economic policies between GOP reform Governors and the union-dominated high-tax models of California, Illinois, New York, Massachusetts and now Minnesota, where last week Governor Mark Dayton proposed a huge tax hike. Let the policy competition begin.