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« Pundit Roundtable | WILLisms.com | Quotational Therapy: Part 56 -- Winston Churchill. »

Trivia Tidbit Of The Day: Part 208 -- State Income Tax Comparisons.

States Benefit From No State Income Tax-

Alaska, Florida, Nevada, New Hampshire, South Dakota, Tennessee, Texas, Washington, and Wyoming have no state income taxes.

New York, California, Oregon, Rhode Island, Vermont, Ohio, New Jersey, Maine, and Hawaii have the highest state income taxes.

Notice a pattern?

In 2004, Bush won 7 of 9 of the states with no income tax, but just 1 of 9 of the states with the highest marginal income tax rates.

There are more patterns at play than mere politics. How about economics?

States with no or low-rate personal income taxes also tend to have more stable budgets and fewer revenue shortages, a seeming paradox which is simply the natural result of the combination of tax progressivity (or lack thereof), politics and human nature....

These trouble signals, all of which are often the result of revenue streams that are volatile and difficult to forecast, consist of: i.) mid-year budget cuts to an already-passed budget, ii.) legislated increases in taxes and/or fees, and iii.) year-end “rainy day” balances as a percentage of expenditures below the U.S. average....

In each and every case, for all four years examined, the nine states with the highest personal income tax rates experienced many more budget difficulties than did the nine states without personal income taxes.

So often, we hear from liberals here in Texas that our occasional budget troubles (and the creative ways to deal with them) would all go away with a simple, magical state income tax. They would smooth things over and allow us to finally become a first rate state, like... California.

While the 9 states with no income tax do experience "warning signs" or "trouble signals" from time to time, indicating budgetary crises, the 9 states with the highest income taxes experience these problems FAR MORE.

The government will always spend the money it receives from taxpayers. It will often spend more. Giving the government more just means it will spend more-- and then some, obviously.

So no more talk about how states with no income tax NEED the income tax in order to prevent deficits, stave off after-the-fact budget cuts, or prevent siphoning off some of the rainy day fund.

No more.


Texas Public Policy Foundation (.pdf).


Previous Trivia Tidbit: Lower Taxes, Faster Economic Growth.

Posted by Will Franklin · 6 November 2005 10:02 PM