Article: The (Tax) War Between the States
Why is it that THIS message not put forward more often to my people? Why aren't the FACTS of the current economic situation in the Rust Belt and the rise of the South depicted in the POLICY terms that are expressed here?
Why are the people who CLAIM to be about "job creation" and "FOR THE PEOPLE" not held to the real impact of the POLICIES that they put forth?
This is why I say that there is little relation between the POPULAR notions among the public and the facts that are expressed when things are looked at more dispassionately.
Monday, December 10, 2007
The (Tax) War Between the States
Art Laffer and Steven Moore in today's Wall Street Journal look at how tax competitiveness between states (i.e. lower taxes) results in greater population and economic growth:
Of all the policy variables we examined, two stand out as perhaps the most important in attracting jobs and capital. The first is the income tax rate. States with the highest income tax rates -- California and New York, for example -- are significantly outperformed by the nine states with no income tax, such as Texas and Florida. As a study from the Atlanta Federal Reserve Board put it: "Relative marginal tax rates have a statistically significant negative relationship with relative state growth."
The other factor for attracting jobs and capital is right-to-work laws. States that permit workers to be compelled to join unions have much lower rates of employment growth than states that don't. Many companies say they will not even consider locating a factory in a state that does not have a right-to-work law.
Our study also finds that states with antigrowth tax and spending policies don't just lose people. Noncompetitive states like New York, Michigan, Pennsylvania, Illinois and New Jersey are plagued by falling housing values, a shrinking tax base, business outmigration, capital flight and high unemployment rates, and less money for schools, roads and aging infrastructure. These factors of decline hurt the poor the most.
The Northeast is the classic case of a region suffering from self-inflicted wounds. In the year 2006, it was home to a smaller share of the U.S. population, and produced a smaller percentage of America's total value-added, than at any time in the nation's history. Why?
One big reason is that governments in the Northeast are about one-fifth more expensive than in the rest of America ($6,000 versus $5,000 of state spending per resident). An average-income family of four still saves $4,000 in lower income, property, sales taxes and fees by moving to just an average-tax state, and more like $6,000 a year by moving to, say, Florida. Since the Northeastern states tend to have highly progressive tax systems, the incentive to flee is
even greater for higher-income earners.