Fortune Magazine Column: You’re Better Off in a State With a Higher Income Tax

Fortune ^ | 10/30/2017 | Carl Davis

[SeekAndFind]

Many lawmakers in Congress and in statehouses around the country peddle the same supply-side theory about income taxes: the lower the tax, the more the economy will grow. But new research from the Institute on Taxation and Economic Policy reveals this economic approach is failing to deliver in the states. In fact, states with higher income taxes outperformed states with no income tax.

My colleagues and I compared the economic track record of the states that have charted the most radically different courses with their income tax policies, or lack thereof. Specifically, we examined economic growth in the nine states with the highest top income tax rates (averaging 10%), and the nine states with no broad-based personal income tax. What we found undermines claims that income taxes are a drag on growth that must be reduced or eliminated.

Over the last decade, states with the highest top tax rates saw their economies grow by 25.8% on a per-person basis, while those states without income taxes saw growth of just 17.4%. This growth isn’t just about numbers in a spreadsheet or bragging rights. It has translated into an improved quality of life for the residents of states with higher income tax rates. Over this same period, residents of those states saw more rapid growth in take-home pay (disposable personal income per person) and their job prospects, as measured by the official unemployment rate and the ratio of people in their prime working years who have managed to land a job.

To be clear, these types of cross-state comparisons don’t prove that higher income taxes are causing faster growth in the states that have embraced them. But they do cast serious doubt on claims that lowering income taxes is a surefire way to grow the economy.

[Pete Dovgan]

So.....if you have high state income tax, you deduct it from your federal taxes. Therefore, you keep the money at home but take the same share from the federal government in services. High state taxes, with deduction on federal taxes, is cost shifting your states federal expenses to another area or state. Specifically, it shifts the burden to states that have kept state taxes low, and MOST of those contain poorer people. This is what I call Reverse Robin-hood syndrome, which means stealing from the poor to enhance the rich, then saying it’s the poor people fault. Yes, stealing from the poor results in better conditions for those that have stooped to this moral degeneracy, as this Fortune magazine article demonstrates.

I have a great idea, you should be unable to deduct your state taxes from your federal government responsibilities, then let’s redo the math on the “Supply side failure”

[Nifster]

Utter nonsense

[SteveH]

Illinois is almost bankrupt, with California not far behind. How is living in a bankrupt state better than living in a state that can balance its budget (afford state highways, state patrol, etc)?

[Undecided 2012]

I want a flat Federal Tax, no deductions whatsoever.

[vpintheak]

Us Alaskans would disagree.

[steve8714]

DUUH, New York has the financials; California has the Movies and TV. Skews the findings.

[dainbramaged]

How about the government just do with less?
There you go again, using logic and common sense.

[Recompennation]

The same conclusuioners that said breaking windows stimulated the boconony. Makes just as little cents.

[KingofZion]

What is completely missing here is the cause and effect relationship, not to mention cross-segmentation.

The fact that taxes are high in CA and NY is not the cause of their economic success, though conversely I suspect that Texas would be pretty barren if it had a large income tax.

And of course the experience varies depend on your status. If you are a poor unemployed schmoe who doesn’t want to work of course you are better off in high income tax states where everything is handled to you on a platter including free housing, food, cell phones, internet, etc. States without income taxes tend to have less generous benefits for those permanently on the dole. Conversely, the business owner who works his butt off is much better in a no tax state v. CA and NY where you will pay a fortune in taxes.

[ichabod1]

Watch what happens when we take away the deduct-ability of state and local taxes. That’s when things get interesting.

[Lockbox]

2006 to 2016 Texas economy grew 36.7% and we have zero income tax!

[ichabod1]

Texas Has A Balanced Budget Amendment In It!!!!!

[zeugma]

Is “bogosity” a word?

A measure of bogusness?

[ConservaTeen]

If you think that Fortune, you are nuts....of course, being part of Time, you are...

[Intolerant in NJ]

States with robust economies feel free to impose higher taxes - states with sputtering economies try to hold taxes down - the rich get richer, the poor get poorer - been that way forever....

[bagster]

Yea, okay thanks. That makes sense.

gnarly

[Gay State Conservative]

I stream a local Hartford,CT station on weekday mornings because the morning guy they have is good plus they carry Rush at noon.The state has been having a budget crisis for several months and they're talking about the rich of the state leaving in droves.Part of the state is basically a suburb of NYC and there and a number of those suburbs are among the richest residential suburbs on earth (Greenwich,New Canaan,Darien,etc).

Sounds like *they* don't agree with the premise here (CT being one of the highest taxed states in the country).

[Dr. Sivana]

I originally from CT. Once the richest state in the country and in okay shape even outside Fairfield County when it had no income tax. Now, it is grouped with IL and CA as a basket case, and STILL has no budget.

[bobk333]

I live in Washington. We have no income tax and our economy is booming.

Also, we now have the two richest people in the world: Jeff Bezos and Bill Gates.

.