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Willisms

« Quotational Therapy: Part 106 -- The Fed Chair Wants Social Security Reform. | WILLisms.com | Twilight Zone Economics. »

Trivia Tidbit Of The Day: Part 355 -- Best & Worst States For Taxes.

Policies Matter-

If there's one thing you should take from reading this blog, it's that ideas matter. In domestic public policy, the fundamental difference between Democrats and Republicans is found on the issue of taxes. Democrats almost unanimously want higher taxes. Republicans, by and large, want lower taxes. These are idea differences that manifest themselves in public policy, and these manifestations can then be observed at the state-by-state level.

Indeed, state tax policy is not arbitrary, and it's not created equal.

The ten best states in the Tax Foundation’s 2007 State Business Tax Climate Index are as follows:

1. Wyoming
2. South Dakota
3. Alaska
4. Nevada
5. Florida
6. Texas
7. New Hampshire
8. Montana
9. Delaware
10. Oregon

The ten worst states in the Tax Foundation’s 2007 State Business Tax Climate Index are:

41. Minnesota
42. Maine
43. Iowa
44. Nebraska
45. California
46. Vermont
47. New York
48. New Jersey
49. Ohio
50. Rhode Island

The red/blue dichotomy (based on 2004 Bush/Kerry) is pretty clear, without a lot of explanation. To quibble with the color system, New Hampshire and Iowa are more purple than anything (NH went for Bush in 2000; Iowa went for Gore in 2000), while Nebraska's legislature is non-partisan and unicameral. One could probably examine state legislatures and governorships to create a better red/blue/purple dynamic, but that's for another post.

Ultimately, though, it's the ideas and policies-- and the differences between and among the states-- that matter.

These differences have produced very real outcomes:

...between 2000 and 2005, income in the top 10 states in the 2007 Index grew 44 percent faster than in the bottom 10 states. Employment in the top 10 states grew 115 percent faster, output 52 percent faster and population 164 percent faster.

Think about that. States with lower taxes performed better than states with higher taxes. People and businesses wanted to move to low tax states from high tax states. More jobs-- and more higher paying ones-- were created in the low tax states than in the high tax states. How "duh" is all of that?

What we're seeing here is fifty economic laboratories competing against one another. Policies, not surprisingly for those of us who favor good policies, make a difference in economic outcomes.

Good polices = good outcomes. Poor policies = poor outcomes.

Tax competition is good. Low taxes are the way to "win" that competition. Why more states-- especially struggling ones-- don't already grasp this, given the growing profusion of empirical evidence, is increasingly mindboggling.


-------------------------------------

Previous Trivia Tidbit: School Choice Is Worth A Try.

Posted by Will Franklin · 16 October 2006 03:53 PM

Comments

Why more states-- especially struggling ones-- don't already grasp this, given the growing profusion of empirical evidence, is increasingly mindboggling.

Tell me about it. I live in Ohio, and we're all prepared to elect a Democratic governor who will do nothing to make the state more tax-friendly, despite the fact that he pledges to "keep jobs in Ohio." Granted, the Republicans before him were no better, but I'm not sure the solution to Republicans who act like Democrats is to vote in Democrats. But that's what's going to happen. I'm guessing I won't be an Ohioan too much longer.

It all seems so obvious, and yet for some reason, neither party in Ohio gets it. Nor do the people for that matter. Frustrating.

Posted by: Jason at October 17, 2006 08:48 AM