On Tap for Legislature: Kill some taxes, change other?

AJC.com ^ | 12/19/2006 | Jeremy Redmond

[groanup]

You're right. According to some on this board:

there's nothing inherently wrong with the income tax:

If you are a life insurance salesman, annuity salesman, tax shelter salesman, tax lawyer, tax accountant, third party administrator, peddler of retirement plans, oil and gas bag, REIT tax peddler, K-street lawyer or a congressman.

Otherwise it is the satan. It is 60 thousand pages of misery and pain and anti capitalism. It is MUCH worse than what caused the Boston Tea Party. MUCH worse than the reason this country went to war in 1776. MUCH worse.

[Principled]

I dipped into a thread last night, albeit breifly, about a poor fellow asking fellow FReepers a tax question.

I told him he'd get multiple answers from even the professionals and that nobody really knows the answer to tax questions.

An unbelieveable quagmire of nonsensical taxenclature ensued. Laughable if not for its reality.

[ancient_geezer]

An unbelieveable quagmire of nonsensical taxenclature ensued.

In an 1871 letter to the House of Representatives, A. Pleasonton, Commissioner of Internal Revenue wrote of income taxes:

"I regard the tax as the one of all others most obnoxious to the genius of our people, being inquisitorial in its nature, and dragging into public view an exposition of the most private pecuniary affairs of the citizen.

Such an unwilling exposition can only be compulsorily effected through a maintenance of the most expensive machinery; and both the nature of the tax and the means necessarily employed for its enforcement appear to be regarded by the better class of citizens with more and more disfavor from year to year."
A. Pleasonton (1871)
Commissioner of Internal Revenue 1871

 

Seems somethings just get worse no matter how many years Congress Critters work at "fixing" them.

[Principled]

Actual post from that thread:

http://www.freerepublic.com/focus/f-news/1755500/posts?page=21#21

And see #30... too long to copy and no replies - because nobody understandd it!

[CORedneck]

Connecticut, a lot of old money. Has the highest per capita of corporate executives. It has the highest traffic fines in the country and the strictest on traffic enforcement. I remembered how many of the rank and file people got pissed when the income tax was passed back in the 1980's.

Fie on the income tax. The seeds of its death are sown. Now state by state it is being given its last rites.

Unfortunately not in Connecticut.

[Kellis91789]

The interesting thing about a State replacing Income Taxes with an expanded Sales Tax base is that people are unlikely to cross State lines to avoid it.

That's because most States' Sales Tax excluded items are services, groceries, medicine, etc. and that is what a lower-rate Sales Tax would expand to cover. While some people will shop across the State border to save $50 in sales taxes on a big ticket item, I doubt many will do that to save $1 tax on a haircut, groceries, etc.

California could lower its sales tax to 7% on everything, no prebate, and it would bring in more revenue than the Income Tax + Sales Tax currently does.

[Principled]

I see a problem with big ticket items like new cars. People will have slightly more in their pockets (depending on state income tax levels), but the car's manufacturer and suppliers may not have been able to experience cost savings to enable a near corresponding price reduction.

I suppose the more of the manufacturing done in state, the more savings possible. Michigan will have cheaper cars!

[Kellis91789]

Actually, neighboring states probably already have their own sales tax on cars. By expanding the base, a state like California could REDUCE its sales tax rate at the same time it eliminates its income tax. So it would become cheaper to buy a car in CA at the same time the person has more money in their pocket from eliminated state PIT.

My point is that for a state that already has a sales tax, the areas it would expand into -- services, etc. -- are those things that people are unlikely to shop across state lines for even after they become included in the list of sales taxable items.

[enviros_kill]

I lived in Connecticut from 1981 to 1996. One of the reasons I moved there was because Connecticut had no state income tax.

That changed in 1991. The Governor twisted the arm of the last reluctant state legislator at 3 AM in the morning with pork barrel promises and Connecticut passed a state income tax. (This was before the days of talk radio and the Internet that could have mobilized the voters - as happened in Tennessee ten years later.) Over 40,000 taxpayers, including myself, subsequently assembled at the state capital on Saturday, October 5, 1991 to protest the income tax. A subsequent vote to repeal the hated state income tax failed by one vote and it became permanent.

What was the experience of a state that passed an income tax? Connecticut was one of only two states that experienced a net population decline in the 1990s as working people voted with their feet to relocate to low tax states.

Taxation and Migration
Dr. Richard Vedder of Ohio University published “Taxation and Migration” in 2003 (Vedder 2003). This comprehensive study of migration patterns in relation to state taxation covers the period from 1990 to 2002. He concludes that the net migration from high tax to low tax states was 1,000 persons per business day or 3.2 million! Pertinent excerpts from Dr. Vedder’s work:

“It is a movement on the scale with the Westward Movement that is a central part of the American historical story - but it is seldom mentioned in the newspapers or television, much less the history books.

“What this all suggests is that for most movers, that increasing taxes from low levels to higher levels makes life less attractive. The benefits associated with the added government services provided by high tax states are less than the added costs. People are suggesting that they can gain more utility (happiness) spending the money themselves.

“While the results suggest that taxation seems to lower the quality of life of many
Americans, leading to out-migration, it is worth noting that migration provides a “safety value” that constrains state lawmakers. If taxes are raised too much, resources migrate (both labor and capital). Indeed, the growing perception of this problem is probably a factor in the decline in interstate variation in tax burdens over time.” (Vedder, 2003)

Defeat of the Tennessee State Income Tax in 2002
Socialized health care (TennCare) had driven the state budget deep into the red by 2000. More money in the form of an income tax was proposed by state politicians. However, radio talk show hosts mobilized citizens numerous times around the state capital in 2001 and 2002 when key income tax votes were to occur and scared the legislators into NOT passing a state income tax. Tennessee does not have an income tax to this day and the organizations opposing the attempt continue to keep a spotlight on state and local spending. Several legislators supporting the income tax lost their jobs in 2002. Tennessee raised their sales tax slightly and ended 2003 and 2004 with budget surpluses, all without an income tax. Comparing the tax policies of two adjoining states, Kentucky and Tennessee, is also instructive:

“While Kentucky implemented massive hikes in its income tax between 1957 and 1999, Tennessee never even adopted an income tax. As a result, by 1997, Kentucky's overall tax burden was 25 percent higher than Tennessee's. On average, a family of four in Tennessee earned $703 more per month than its counterpart in Kentucky.” (Bauman, 2002)

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The FairTax should be adopted by Georgia (and Texas as well).