There is good news to share. Across the nation, states are either rolling back their income tax rates or debating this. Oklahoma is one of them. Kansas is considering this. So is Missouri. It’s being debated in Maine, Idaho, Nebraska, Indiana, and Ohio. Even New Jersey!
Lower taxes will not force school closings (sadly) and other state-funded necessities. The following states have no income tax: Alaska, Washington, Nevada, South Dakota, Florida, TexasHampshiremphire, and Tennessee (on wages). The best test case is New Hampshire. It’s just like Vermont geographically and socially. Vermont is a high-tax state. New Hampshire does not have a sales tax, either. The schools are much the same.
They have also recorded faster revenue growth to pay for government services over the past two decades than states with income taxes. That’s because growth in the economy from attracting jobs and capital has meant greater tax collections.
The tax burden isn’t the only factor that determines investment flows and growth. But it is a major signal about how a state treats business, investment and risk-taking. States like New York, California, Illinois and Maryland that have high and rising tax rates also tend to be those that have growing welfare states, heavy regulation, dominant public unions, and budgets that are subject to boom and bust because they rely so heavily on a relatively few rich taxpayers.
We need tax competition. It’s coming.
The politics of plunder is in trouble in the USA. I think this will continue.