Here's an e-mail about states abolishing their state income tax is on the rise.
Emil R. Wolanski (People's Republic of) Cleveland, Ohio -----Original Message----- From: [EMAIL PROTECTED] Sent: Friday, January 26, 2007 7:58 AM To: [EMAIL PROTECTED], [EMAIL PROTECTED], [EMAIL PROTECTED], [EMAIL PROTECTED], [EMAIL PROTECTED] Subject: [ohfairtax] Wall Street Journal -- on Abolishing State Income Taxes Rich States, Poor States January 25, 2007 Wall Street Journal, Page A18 If you're searching for the next big thing in American politics, it's wise to keep an eye on the states. Here's one possibility: the abolition of state income taxes. In Georgia, Missouri and South Carolina, Governors and state legislatures are drafting serious proposals to repeal their income taxes to promote economic development. St. Louis, one of America's most distressed cities, may overturn its wage/income tax as a way to spur urban revival. And in Michigan, the legislature is in the last stages of phasing out its hated business income tax -- the most onerous in the land. "States are now in a ferocious competition to attract jobs and businesses," says economist Arthur Laffer, who is advising several Governors and legislators on the issue, "and one of the best ways to win this race is to abolish the state income tax." The timing for fixing state tax codes could hardly be more ideal because states are swimming in budget surpluses thanks to the booming national economy. This should be a big year for state tax cuts. Governors in Arkansas, Florida and West Virginia have already announced major tax relief plans for 2007. Even New York City has a $1 billion surplus and Mayor Michael Bloomberg is promising a property tax cut. But the biggest target is the income tax. Newly re-elected South Carolina Governor Mark Sanford is talking of reviving his plan to phase out the income tax over 18 years. Mr. Sanford ran into opposition from the legislature in his first term, but he tells us that "I still consider this one of my top priorities and if the legislature wants to do it, I would be ecstatic." Georgia may beat Mr. Sanford to the punch. House Republicans in Atlanta have announced that one of their top priorities is to use the half-billion-dollar budget surplus as a downpayment to "dismantle the current tax code." House Republican Majority Leader Jerry Keen tells us the debate in Atlanta is between a flat-rate income tax and a plan that would "do away with the personal income tax but broaden the sales tax by eliminating 107 exemptions. We're committed to a pro-growth tax plan that announces to the country that Georgia is open for business." In Missouri the legislature is reviewing a plan by the state think tank, the Show Me Institute, that would increase the rate of the sales tax to 7.5% and limit spending growth to population plus inflation, in return for eliminating the state's income tax over 10 years. House Speaker Carl Bearden says "I would like to see a phasing out of our current tax structure in Missouri. . . . Eliminating the income tax can have a huge positive impact on a state's economy." The idea of financing state services without an income tax is hardly radical. Nine states today -- Alaska, Florida, Nevada, New Hampshire, South Dakota, Tennessee, Texas, Washington, and Wyoming -- manage well without one. With a few exceptions, the non-income tax states are America's most prosperous. Meanwhile, the high income tax states, which tend to be congregated in the Northeast, keep surrendering jobs, people, and voters to the South and West. State lawmakers also seem to have learned from two of the most recent states to adopt an income tax: New Jersey and Connecticut. As recently as 1965 New Jersey had neither an income nor sales tax, but managed to balance its budget every year. Now it has both taxes -- its income tax is the 5th highest in the nation -- but the state is facing what Stateline.org calls a "staggering budget deficit." Allied Van Lines reports that the Garden State is now one of the leading places for people to flee. The latest state to adopt an income tax was Connecticut in 1991, but a new report by the Yankee Institute reveals that the tax has been a calamity. The state has ranked last in employment growth since 1991, losing 240,000 of its native born citizens between 1991-2002. No other state has since enacted an income tax, and lawmakers in Georgia, Missouri and South Carolina say Connecticut is now the model for how not to run a state economy. Whether these states will be able to eliminate their income taxes in the next few years is an open question. But what's undeniable is that the debate in state capitals has swung decisively in the direction of chopping income tax rates, not raising them. [Non-text portions of this message have been removed]
