Abolish state income taxes (Statistics show they retard economic growth)

Washington Times ^ | 07/20/2010 | Richard W. Rahn

[SeekAndFind]

Did you know there are nine states that have no state income tax? The non-income-tax states (see accompanying chart) are geographically and economically diverse, ranging from the state of Washington in the Pacific Northwest, to Texas and Florida in the South, and up to New Hampshire in the Northeast.

Why is it that some of the states with the biggest fiscal problems have the highest individual state income tax rates, such as New York and California, while some of the states with the least fiscal problems have no state income tax at all? High-tax advocates will argue that the high-tax states provide much more and better state services, but the empirical evidence does not support the assertion. On average, schools, health and safety, roads, etc. are no better in states with income taxes than those without income taxes. More importantly, the evidence is very strong that people are moving from high-tax states to lower-tax-rate states - the migration from California to Texas and from New York to Florida being prime examples. (Next year, the combined federal, state and local income tax rate for a citizen of New York City will be well over 50 percent, as contrasted with approximately 38 percent for citizens of Texas and Florida.) If the citizens of California and New York really thought they were getting their money's worth for all of the extra state taxation, they would not be moving to low-tax states.

The obvious question then is: Where is all the extra money from these state income taxes going? It is going primarily to service debt, and to pay for inflated salaries and employee benefits. It is interesting that the high-tax-rate states also, on average, have much higher per capita debt levels than states without income taxes.

[SeekAndFind]

(Alaska is an outlier because it has its oil reserve to borrow against and actually gives its citizens a "dividend" each year.)

[SeekAndFind]

[SeekAndFind]

[MNDude]

would you believe that the democrat running for governor of MN is running ads that he’ll raise taxes on the rich?

[Thermalseeker]

would you believe that the democrat running for governor of MN is running ads that he’ll raise taxes on the rich?

Man, that Democrat playbook is so old it's moldy.....and yet people STILL keep falling for it......amazing.

[K-oneTexas]

Personally, the States could have an income tax ... if the Feds did away with it. It would not be harsh on economic growth then. A true division of labor and power.

Course with a fair tax with the Feds and states participating in taxing the same things then much would be better.

The 23% FairTax rate could be dropped much if entitlements, spending restraint and other things (little things like PORK) were eliminated from the federal budget.

[pnh102]

While I think that at the Federal level the FairTax is the best way to go for raising funds for the federal government, I'm a bit conflicted about abolishing income tax at the state and local levels.

Personally, I'd like to see property taxes abolished at the state and local level.

[RC2]

I think that people also need to look at sales tax and property tax. For instance, Oregon does not have sales tax but some of their property taxes are the highest in the country. Washington County in Oregon use to have the highest property taxes in the country. I don’t know what it is now.

[Texas Fossil]

Duuuhhh! All taxes retard economic growth. What is the secret in that? Additional taxes simply retard it more.

[umgud]

In the case of California, taxpayers are moving out and tax users are increasing in numbers.

[BitWielder1]

There are two main reasons raising taxes won't work:
We are apparently already beyond the crest of the Laffer Curve.
Whenever politicians get (or think they will get) more tax payer money, you can be sure they will spend it and then some.

NY and CA are prime examples of overspending.

[RightOnline]

One of the things that annoys the hell out of me, living in NC, is that they tax EVERYthing. There’s no one single tax that is outrageous unto itself; it’s the cumulative impact of every freakin’ thing you do or buy being taxed.

[Tolsti2]

Texas over PA, oy vey.

[Mr. Jeeves]

Man, that Democrat playbook is so old it's moldy.....and yet people STILL keep falling for it......amazing.

Advocating one of the Seven Deadly Sins is a sure way to get elected. Democrats know "Envy" is still the most popular of all.

[Pessimist]

Interesting that Illinois is actually fairly low on the income tax.

And am I to understand they have no city or locality income tax (as per the foot note)?

I live in Ohio. We actually get hit much harder.

[EternalVigilance]

Bump.

[Buckeye McFrog]

thanks to the 150% Medicaid mandate, Obamacare will force all of the yellow states on that map to start charging state income taxes within a few years

[equalitybeforethelaw]

Well, like we didn’t know this. Generally speaking, those states who representation are overshadowed by big urban cities seem to experience the worst taxation. This goes hand in hand with the Dems wet dream to abolish the electoral college and go to a strictly popular vote for President. Basically the vampire urbans have pretty much bankrupted their own states and wish to colonize the rural states to keep the cash flowing. It takes a lot of other peoples money to keep Chicago progressing.

[Thermalseeker]

Good point. Although not one of the “big seven” fear is another tactic they use ad nauseam...

[Liberty1970]

I live in a small town in IL, and have not heard of local income taxes here. Across the border nearby (Terre Haute, IN), they do have a county income tax, which started just after I moved out (ha!)

But look at the sales tax in Chicago - over 10%!!! I've read that when sales taxes start hitting double-digits, smuggling and other tax-avoidance fraud starts becoming a real problem. They are probably not doing themselves any favors jacking it up that high.