Dan Mitchell article Tax Policy, Tax Reform, and State Competitiveness

Tax Policy, Tax Reform, and State Competitiveness

I wrote two months ago about Iowa lawmakers voting for a simple and fair flat tax.

I explained how this reform would make the state more competitive, but I want to build upon that argument with some of the Tax Foundation’s data.

Starting with this map from the State Business Tax Climate Index, which shows Iowa in 38th place for individual income taxes.

That low ranking is where the state’s tax code was as of July 1, 2021, so it obviously doesn’t reflect the reforms enacted earlier this year.

So where will the state rank with the new flat tax?

The Tax Foundation crunched the data and shows the state will jump to #15 in the rankings.

The above table shows that the jump is even more impressive when you factor in some modest pro-growth changes that took place a few years ago.

What a huge improvement over just a few years. The only state that may beat Iowa for fastest and biggest increase in tax competitiveness is North Carolina, which jumped 30 spots in just one year.

P.S. Politicians in New York must be upset that there’s no way for them to drop lower than #50. But at least they can take comfort in the fact that they are worse than California.

We should lower federal taxes because jobs are going to states like Texas that have low taxes. (We should lower state taxes too!!)

One of the great things about federalism, above and beyond the fact that it both constrains the power of governments and is faithful to the Constitution, is that is turns every state into an experiment.

We can learn what works best (though the President seems incapable of learning the right lesson).

We know, for instance, that people are leaving high-tax states and migrating to low-tax states.

We also know that low-tax states grow faster and create more jobs.

I particularly enjoy comparisons between Texas and California. Michael Barone, for instance, documented how the Lone Star State is kicking the you-know-what out of the Golden State in terms of overall economic performance.

I also shared a specific example of high-quality jobs moving from San Francisco to Houston. And I was also greatly amused by this story (and accompanying cartoons) about Texas “poaching” jobs from California.

In this discussion with Stuart Varney of Fox News, we discuss how Texas is leading the nation in job creation.

But there’s another part of this discussion that is very much worth highlighting.

As illustrated by the chart, we are enduring the worst overall job performance in any business cycle since the end of World War II.

I note in the interview that Obama inherited a bad economy and that Bush got us in the ditch in the first place with all his wasteful spending and misguided intervention.

But Obama also deserves criticism for doubling down on those failed policies.

His so-called stimulus was a flop. Dodd-Frank is a regulatory nightmare. Obamacare is looking worse and worse every day.

No wonder job creation is so anemic.

The real moral of the story, though, is that the poor are the biggest victims of Obama’s statism. They’re the ones who have been most likely to lose jobs. They’ve been the ones to suffer because of stagnant incomes.

Sort of brings to mind the old joke that leftists must really like poor people because they create more of them whenever they’re in charge.

P.S. Speaking of jokes, here’s an amusing comparison of Texas and California. If you want some California-specific humor, this Chuck Asay cartoon is great. And to maintain balance, here’s a Texas-specific joke on how to respond to an attacker.

P.P.S. To close on a serious point, California would be deteriorating even faster if it wasn’t for the fact that the state and local tax deduction basically means that the rest of the country is subsidizing the high tax rates in the not-so-Golden State. Another good argument for the flat tax.

P.P.P.S. At the bottom of this post, you’ll find a great Kevin Williamson column dismantling some sloppy anti-Texas analysis by Paul Krugman.

________________

Even though Chuck Asay is one of my favorite cartoonists (see herehereherehere, and here), I was not a big fan of one of his recent two-frame cartoons.

But he has more than made up for that slight transgression with this new gem.

I’m biased, of course, since I’ve already written about California being the Greece of America, but there’s plenty of evidence to justify Asay’s cartoon.

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