There is a theory out there that some go-go states are better off solely because they have no income tax.
There is yet a different theory, which may be the most compelling. These states without income taxes usually flourish, because they have something special going for them that allows them to derive state income from other sources.
Florida is the largest tourist trap in the world and has warm weather for retirees.
Nevada has its Las Vegas gaming and also warm weather for retirees.
Texas has its oil and gas.
Alaska has so much oil, it sends checks to its residents on a regular basis.
Wyoming has its abundance of coal.
South Dakota has no cap on credit card rates, so Sioux Falls is a mecca for large financial companies.
Washington imposes a highly lucrative business and occupation tax that is the same as taxing gross income.
Tennessee and New Hampshire have no tax on payrolls, but they do tax income from stocks and bonds.
(Before we go on, please note that Florida and Nevada, formerly go-go states, have been among the worst hit in the recession, even with their no-income-tax policies.)
Remember all of that the next time you hear a radio commercial espousing that Kansas residents should dump their income tax altogether, brought to you by Kansans for No Income Tax, reportedly funded by a multimillionaire St. Louis gadfly.
This is not quite what Kansas Gov. Sam Brownback’s tax reform task force has in mind. Word is, they are looking to slash income taxes, though not abolish them completely, at least not quite yet.
The shift of the tax burden from income tax to other taxes would not be pretty. Today, the income tax represents 44 percent of the state’s revenue, or $2.7 billion.
Unless the state comes into a gigantic windfall of new revenue that drops out of the sky — much bigger than the $300 million surplus recently projected — there are only two places to make up for any sizable income tax reductions: sales or property taxes, and sales taxes seem like the way they are headed.
The governor likely will announce in his State of the State address on Jan. 11 that he would like to keep some or all of the “temporary” sales tax hike of 1 cent passed mostly by moderate Republicans and Democrats. But that will not be enough to cover the shortfall, if the governor announces — as expected — that he would like to reduce the state income tax substantially “to spur growth.”
Our state leaders want to believe the fairytale pawned off by economist Arthur Laffer (whom the task force has hired for $75,000), who is telling them with lower income taxes, Kansas will attract enough growth to offset much of the lost revenue.
Laffer may be the only renowned economist in America who believes this bunk. If we cut or abolish our income tax, Kansans will pay for it, one way or the other.
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Gail Ogden
4 months, 2 weeks agoEnlightening! Now please tell us how to control the outrageous personal property taxes. Have you bought a new car recently? That will take your breath away.
J. Kent Eckles
4 months, 2 weeks agoAs usual, Steve Rose is standing up for the tax users (public sector) instead of the tax producers (private sector).
Years of evidence shows that the government often can lower rates and raise revenue. As economist Dan Mitchell has shown: • When tax rates were dropped in the 1920s from more than 70 percent to less than 25 percent, revenues grew from $719 million in 1921 to $1.16 billion in 1928.
• When Kennedy dropped the top tax rate from 90 percent to 70 percent, revenues rose from $94 billion in 1961 to $153 billion in 1968.
• Under Reagan’s sweeping tax reforms revenues rose 99.4 percent in the 1980s.
As Christopher Frenze, chief economist of the Joint Economic Committee of Congress wrote in 1996: “The Reagan tax cuts, like similar measures enacted in the 1920s and 1960s, showed that reducing excessive tax rates stimulates growth, reduces tax avoidance, and can increase the amount and share of tax payments generated by the rich. High top tax rates can induce counterproductive behavior and suppress revenues, factors that are usually missed or understated in government static revenue analysis.”
We can gradually eliminate income taxes in Kansas by setting aside revenue over a period of 12-14 years based on growth in the economy.
Kansas has literally poured billions of dollars into the public sector (made “investments” as liberals like to say) for things such as schools and roads and where’s that gotten us? We continue to lose population to lower tax states and shed private sector jobs (see today’s Boeing announcement in Wichita - who said they’re leaving in part because their costs are too high).
Steve Rose and his friends in JoCo are clinging to a failed economic growth model. We can’t keep taxing and spending - it’s not working. Period.
Paula Sayles
4 months, 2 weeks agoIn what fantasy world is Steve Rose a liberal? Talk about a “failed economic model”—since supply-side economic policies have been in play, this country’s economy has completely tanked. The Laffer curve should be called the Laughable Curve; it is based on ridiculous inferences. Laffer is only “renowned” in the circles where his failed theories are used as a tool to promote more economic stupidity vis a vis “supply side economics.” Where is the evidence that Kansas has lost population or jobs to states with lower taxes? There isn’t any because it’s just another propaganda myth. Even if Boeing said they were leaving because their costs were too high, they didn’t say TAXES. They want to slash their labor costs just like every other greedy multi-national board of directors. Let REAL capitalism that allows for little guys to compete eventually replace the jobs that are being lost instead of the current corporate socialism and government contracts that keep companies like Boeing in the multi-million dollar earnings bracket. Tax and Spend is a simplistic, jingoistic bumper sticker—not an economic model that anyone has ever practiced. You can say whatever you want. Period. That doesn’t make any of it fact.
J. Kent Eckles
4 months, 2 weeks agoIt’s no coincidence Boeing’s work is going to 2 states with no income taxes (TX & WA) and one with a version of Kansas’s Senate Bill 1 from last year in place (OK), which gradually reduces income taxes over time.
Yes, Steve Rose and his crony capitalists in JoCo have espoused a tax and spend model for roads and schools and have propogated the myth that businesses come here primarily for those reasons and that taxes “aren’t important.”
It’s also true that Kansas loses population and thus taxpayers to all our surrounding states except Nebraska, which is the only one with HIGHER tax rates/tax burden. Here’s the proof: http://www.taxfoundation.org/blog/show/27834.html
Finally, it’s a fact that Kansas ranked dead last in the nation for private sector job creation in 2010:
http://www.bizjournals.com/wichita/blog/2011/05/kansas-was-only-state-to-lose.html?ana=twt
All this is happening while Steve Rose and his ilk tell us that “taxes don’t matter” and “roads and schools” are the most important thing to businesses. Again, we’ve “invested” billions of dollars over the past couple of decades into both categories, yet still shed jobs and taxpayers. I’d call that a failed economic growth model.
Brian Mehnert
4 months, 2 weeks agohttp://online.wsj.com/article/SB124260067214828295.html
Updating some research from Richard Vedder of Ohio University, we found that from 1998 to 2007, more than 1,100 people every day including Sundays and holidays moved from the nine highest income-tax states such as California, New Jersey, New York and Ohio and relocated mostly to the nine tax-haven states with no income tax, including Florida, Nevada, New Hampshire and Texas. We also found that over these same years the no-income tax states created 89% more jobs and had 32% faster personal income growth than their high-tax counterparts.
Marcia Dimick
4 months, 1 week agoThere is no coincidence that poor, high tax cities are run by liberals and prosperous, low tax ones by conservatives. Art Laffer is considered one of the architects of the Reagan revolution, the most prosperous era in our lifetime which was brought about by reducing liberal tax levels. We now hear that Boeing is taking their business to Washington state where taxes are far less onerous than in our area. Money, business and jobs go to where they are treated the best. Rich liberals as well as Marxist presidents who have never held a real job will never understand this simple concept.
Dave Trabert
4 months, 1 week agoThere are 3 things to understand about tax reform:
Tax reform is about job creation and economic growth.
Reducing income taxes does not mean that other taxes would increase - the point is to reduce the burden, not shift it.
Reducing income taxes does not mean that essential services would be eliminated or reduced - just provided more efficiently.
We (Kansas Policy Institute) compiled research comparing the states with the highest tax burden to those with the lowest tax burdens and also those with no income tax. The low burden states dramatically outperform high burden states on job creation, gross domestic product, wage & salary distribution and domestic migration (U.S. residents moving in and out of states). The states with no income tax tend to do even better. The research article is available at http://www.kansaspolicy.org/Ta…
Steve Rose tries to make the case that states with no income tax can do so because they have access to tourism, oil or other revenues that most states lack but he didn’t do his homework. The key to having a low tax burden and/or no income tax is not access to extra revenue; it’s how much you spend.
The nine states with no income tax spent $1,767 per resident in 2009 out of their General Fund. That was 27% less than the national average and 21% less than Kansas. If Kansas had spent at the rate of the no-income-tax states, we would have spent $1.1 billion less that year.
Those states have figured out that they can have good quality government services AND high job growth by controlling spending and keeping taxes low.