Category Archives: Taxes

Dan Mitchell article: Government’s War on Dishwashers

February 23, 2024 – 8:53 pm

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Government’s War on Dishwashers

Bureaucrats must have a knee-jerk desire to make citizens miserable. That’s the most logical explanation for their various initiatives to lower our quality of life.

Let’s focus on one of those examples today.

George Will has a new column in the Washington Postabout the bureaucracy’s war against dishwashers that…well…actually clean dishes.

The Energy Department’s busy beavers, with their unsleeping search for reasons to boss us around for our own good, decided that dishwashers use too much water and energy… Responding to the Biden administration…, a slew of states sued the Energy Department… This dispute reached the U.S. Court of Appeals for the 5th Circuit, which, in its Jan. 8 ruling,swatted away what it tartly called the department’s “government-always-wins” argument…the court said, not only has the Energy Department acted in excess of statutory authority, but the record also contains “ample evidence” that the department’s new rules reduced efficiency in both energy and water use because “purportedly ‘energy efficient’ appliances do not work.” People “may use more energy and more water to preclean, reclean, or handwash their stuff before, after, or in lieu of using DOE-regulated appliances.” …DOE itself estimated in 2011 that handwashing consumes 350% more water and 140% more energy than machine washing.

The case involves the Biden Administration basically reversing some deregulation that took place during the Trump Administration.

The Wall Street Journal editorialized about this issue last year.

…the Energy Department dropped a sweeping proposal for “efficiency” mandates on dishwashers. Did you enjoy last night’s spaghetti, still crusted on the plate? Now you can taste it twice. …Americans have learned the hard way that stricter efficiency rules on already efficient appliances translate into higher costs, inconvenience, and ultimately waste.The Obama Administration’s dishwasher regulations raised the average price of a machine nearly $100, while producing a new norm of dirty forks and smelly glasses. …Machines can only meet much higher efficiency standards by recirculating water in longer cycles, meaning run times of two or three hours. Yet if the dishes aren’t clean, owners run them again, undermining the argument about conservation. The U.S. Energy Information Administration says that in 2020 nearly 20% of American households that owned a dishwasher never used it. That means they hand washed, which is as inefficient as it comes. The Biden …Energy Department plan gives manufacturers only until 2027 to produce the miracle of costlier washers that do a worse job.

This issue is ridiculous. I’m not sure what’s worse, the fact that bureaucrats are making our lives less pleasant, or that they’re making our lives less pleasant in a way that doesn’t actually save water or energy.

I’ll close on a related note. I was in Mexico City last week and was happily surprised at the quality of the hotel’s shower.

But then I realized that I was enjoying strong water pressure because Mexico presumably does not impose (or does not enforce) the stupid water-flow regulations we have in the United States.

This type of red tape is supposed to save water, but I wonder if that happens since you have to spend twice as long in the shower?

P.S. To its credit, the Trump Administration also tried to deregulation shower head regulations.

Lessons from Reaganomics for the 21st Century, Part IV

When Reagan campaigned for the White House, his economic plan was based on four pillars. I wrote a study about those policies for the Club for Growth Foundation and I wanted to answer two questions.

First, was Reaganomics successful? Second, should similar policies be pursued today?

Today’s column is Part IV of a five-part series.

  • In Part I, we reviewed Reagan’s successful record of spending restraint and explained why the same approach is needed today, particularly to control entitlements.
  • In Part II, we examined Reagan’s much-needed supply-side tax reforms and said the same insights are needed today to address the problem of double taxation.
  • In Part III, we looked at Reagan’s track record on red tape, noting that he arrested the growth of regulatory restrictions and regulatory budgets and urged the same policies today.

For Part IV, let’s look at Reagan’s approach to inflation.

We’ll start with Figure 14 from the study, which shows how inflation dramatically increased during the 1970s.

That was the problem Reagan faced when he took office.

Here’s some of what I wrote in the study.

The United States was plagued by double-digit inflation when Reagan was elected. Rising prices were a problem throughout the 1970s, and the problem became particularly acute during the Carter Administration (see Figure 14), with prices climbing by nearly 50 percent in just four years.…The Federal Reserve deserved the blame for the surge in prices. The central bank created too much liquidity, motivated in part by a belief in Keynesian monetary policy and in part by a desire to appease politicians who like the sugar high of easy money. To make a bad situation worse, prices were increasing faster than income, which meant that the average household was falling behind. According to the Census Bureau, when Reagan took office in 1981, both median and mean household income was several hundred dollars lower than when Carter took office in 1977.

Here’s what Reagan achieved.

Unlike other presidents, who favored the sugar high of easy money, Reagan understood that the Federal Reserve needed a restrictive policy to bring inflation under control. He supported Chair Paul Volcker’s efforts to slow monetary growth even when it became politically unpopular. He courageously did what was best for the nation, even though it hurt his party in the 1982 mid-term elections. …Reagan’s courage paid dividends. The inflation rate came down very quickly. As shown Figure 15 below, inflation was down to about 4 percent in 1988:

Here’s the chart showing what Reagan achieved.

As I did with Part I, Part II, and Part III, let’s now consider whether Reagan’s policies are still relevant today.

In the case of monetary policy, the answer clearly is yes. The Federal Reserve (and other central banks) recklessly expanded their balance sheets during the pandemic. In effect, they repeated the mistakes of the 1970s, albeit for a different reason.

Regardless of the reason for bad policy, the solution is the same. Replicate Reagan’s courage and bring inflation under control.

The bottom line is that Reaganism was the right approach in the 1980s and it is the right approach today

Tax Cartels Mean Ever-Higher Tax Rates

When President Biden proposed a “global minimum tax” for businesses, I immediately warned that would lead to ever-increasing tax rates.

Ross Kaminsky of KHOW and I discussed how this is already happening.

I hate being right, but it’s always safe to predict that politicians and bureaucrats will embrace policies that give more power to government.

Especially when they are very anxious to stifle tax competition.

For decades, people in government have been upset that the tax cuts implemented by Ronald Reagan and Margaret Thatchertriggered a four-decade trend of lower tax rates and pro-growth tax reform.

That’s the reason Biden and his Treasury Secretary proposed a 15 percent minimum tax rate for businesses.

And it’s the reason they now want the rate to be even higher.

Though even I’m surprised that they’re already pushing for that outcome when the original pact hasn’t even been approved or implemented.

Here are some passages from a report by Reuters.

Treasury Secretary Janet Yellen will press G20 counterparts this week for a global minimum corporate tax rate above the 15% floor agreed by 130 countries last week…the global minimum tax rate…is tied to the outcome of legislation to raise the U.S. minimum tax rate, a Treasury official said.The Biden administration has proposed doubling the U.S. minimum tax on corporations overseas intangible income to 21% along with a new companion “enforcement” tax that would deny deductions to companies for tax payments to countries that fail to adopt the new global minimum rate. The officials said several countries were pushing for a rate above 15%, along with the United States.

Other kleptocratic governments naturally want the same thing.

A G7 proposal for a global minimum tax rate of 15% is too low and a rate of at least 21% is needed, Argentina’s finance minister said on Monday, leading a push by some developing countries… “The 15% rate is way too low,” Argentine Finance Minister Martin Guzman told an online panel hosted by the Independent Commission for the Reform of International Corporate Taxation. …”The minimum rate being proposed would not do much to countries in Africa…,” Mathew Gbonjubola, Nigeria’s tax policy director, told the same conference.

Needless to say, I’m not surprised that Argentina is on the wrong side.

And supporters of class warfare also are agitating for a higher minimum rate. Here are some excerpts from a column in the New York Times by Gabriel Zucman and Gus Wezerek.

In the decades after World War II, close to 50 percent of American companies’ earnings went to state and federal taxes. …it was a golden period. …President Biden should be applauded for trying to end the race to the bottom on corporate tax rates. But even if Congress approves the 15 percent global minimum corporate tax, it won’t be enough. …the Biden administration to give working families a real leg up, it should push Congress to enact a 25 percent minimum tax, which would bring in about $200 billion in additional revenue each year. …With a 25 percent minimum corporate tax, the Biden administration would begin to reverse decades of growing inequality. And it would encourage other countries to do the same, replacing a race to the bottom with a sprint to the top.

I can’t resist making two observations about this ideological screed.

  1. Even the IMF and OECD agree that the so-called race to the bottom has not led to a decline in corporate tax revenues, even when measured as a share of economic output.
  2. Since companies legally avoid rather than illegally evade taxes, the headline of the column is utterly dishonest – but it’s what we’ve learned to expect from the New York Times.

The only good thing about the Zucman-Wezerek column is that it includes this chart showing how corporate tax rates have dramatically declined since 1980.

P.S. For those interested, the horizontal line at the bottom is for Bermuda, though other jurisdictions (such as Monaco and the Cayman Islands) also deserve credit for having no corporate income taxes.

P.P.S. If you want to know why high corporate tax rates are misguided, click here. And if you want to know why Biden’s plan to raise the U.S. corporate tax rate is misguided, click here. Or here. Or here.

P.P.P.S. And if you want more information about why Biden’s global tax cartel is bad, click here, here, and here.

I enjoyed this article below because it demonstrates that the Laffer Curve has been working for almost 100 years now when it is put to the test in the USA. I actually got to hear Arthur Laffer speak in person in 1981 and he told us in advance what was going to happen the 1980’s and it all came about as he said it would when Ronald Reagan’s tax cuts took place. I wish we would lower taxes now instead of looking for more revenue through raised taxes. We have to grow the economy:

What Mitt Romney Said Last Night About Tax Cuts And The Deficit Was Absolutely Right. And What Obama Said Was Absolutely Wrong.

Mitt Romney repeatedly said last night that he would not allow tax cuts to add to the deficit.  He repeatedly said it because over and over again Obama blathered the liberal talking point that cutting taxes necessarily increased deficits.

Romney’s exact words: “I want to underline that — no tax cut that adds to the deficit.”

Meanwhile, Obama has promised to cut the deficit in half during his first four years – but instead gave America the highest deficits in the history of the entire human race.

I’ve written about this before.  Let’s replay what has happened every single time we’ve ever cut the income tax rate.

The fact of the matter is that we can go back to Calvin Coolidge who said very nearly THE EXACT SAME THING to his treasury secretary: he too would not allow any tax cuts that added to the debt.  Andrew Mellon – quite possibly the most brilliant economic mind of his day – did a great deal of research and determined what he believed was the best tax rate.  And the Coolidge administration DID cut income taxes and MASSIVELY increased revenues.  Coolidge and Mellon cut the income tax rate 67.12 percent (from 73 to 24 percent); and revenues not only did not go down, but they went UP by at least 42.86 percent (from $700 billion to over $1 billion).

That’s something called a documented fact.  But that wasn’t all that happened: another incredible thing was that the taxes and percentage of taxes paid actually went UP for the rich.  Because as they were allowed to keep more of the profits that they earned by investing in successful business, they significantly increased their investments and therefore paid more in taxes than they otherwise would have had they continued sheltering their money to protect themselves from the higher tax rates.  Liberals ignore reality, but it is simply true.  It is a fact.  It happened.

Then FDR came along and raised the tax rates again and the opposite happened: we collected less and less revenue while the burden of taxation fell increasingly on the poor and middle class again.  Which is exactly what Obama wants to do.

People don’t realize that John F. Kennedy, one of the greatest Democrat presidents, was a TAX CUTTER who believed the conservative economic philosophy that cutting tax rates would in fact increase tax revenues.  He too cut taxes, and he too increased tax revenues.

So we get to Ronald Reagan, who famously cut taxes.  And again, we find that Reagan cut that godawful liberal tax rate during an incredibly godawful liberal-caused economic recession, and he increased tax revenue by 20.71 percent (with revenues increasing from $956 billion to $1.154 trillion).  And again, the taxes were paid primarily by the rich:

“The share of the income tax burden borne by the top 10 percent of taxpayers increased from 48.0 percent in 1981 to 57.2 percent in 1988. Meanwhile, the share of income taxes paid by the bottom 50 percent of taxpayers dropped from 7.5 percent in 1981 to 5.7 percent in 1988.”

So we get to George Bush and the Bush tax cuts that liberals and in particular Obama have just demonized up one side and demagogued down the other.  And I can simply quote the New York Times AT the time:

Sharp Rise in Tax Revenue to Pare U.S. Deficit By EDMUND L. ANDREWS Published: July 13, 2005

WASHINGTON, July 12 – For the first time since President Bush took office, an unexpected leap in tax revenue is about to shrink the federal budget deficit this year, by nearly $100 billion.

A Jump in Corporate Payments On Wednesday, White House officials plan to announce that the deficit for the 2005 fiscal year, which ends in September, will be far smaller than the $427 billion they estimated in February.

Mr. Bush plans to hail the improvement at a cabinet meeting and to cite it as validation of his argument that tax cuts would stimulate the economy and ultimately help pay for themselves.

Based on revenue and spending data through June, the budget deficit for the first nine months of the fiscal year was $251 billion, $76 billion lower than the $327 billion gap recorded at the corresponding point a year earlier.

The Congressional Budget Office estimated last week that the deficit for the full fiscal year, which reached $412 billion in 2004, could be “significantly less than $350 billion, perhaps below $325 billion.”

The big surprise has been in tax revenue, which is running nearly 15 percent higher than in 2004. Corporate tax revenue has soared about 40 percent, after languishing for four years, and individual tax revenue is up as well.

And of course the New York Times, as reliable liberals, use the adjective whenever something good happens under conservative policies and whenever something bad happens under liberal policies: ”unexpected.”   But it WASN’T ”unexpected.”  It was EXACTLY what Republicans had said would happen and in fact it was exactly what HAD IN FACT HAPPENED every single time we’ve EVER cut income tax rates.

The truth is that conservative tax policy has a perfect track record: every single time it has ever been tried, we have INCREASED tax revenues while not only exploding economic activity and creating more jobs, but encouraging the wealthy to pay more in taxes as well.  And liberals simply dishonestly refuse to acknowledge documented history.

Meanwhile, liberals also have a perfect record … of FAILURE.  They keep raising taxes and keep not understanding why they don’t get the revenues they predicted.

The following is a section from my article, “Tax Cuts INCREASE Revenues; They Have ALWAYS Increased Revenues“, where I document every single thing I said above:

The Falsehood That Tax Cuts Increase The Deficit

Now let’s take a look at the utterly fallacious view that tax cuts in general create higher deficits.

Let’s take a trip back in time, starting with the 1920s.  From Burton Folsom’s book, New Deal or Raw Deal?:

In 1921, President Harding asked the sixty-five-year-old [Andrew] Mellon to be secretary of the treasury; the national debt [resulting from WWI] had surpassed $20 billion and unemployment had reached 11.7 percent, one of the highest rates in U.S. history.  Harding invited Mellon to tinker with tax rates to encourage investment without incurring more debt. Mellon studied the problem carefully; his solution was what is today called “supply side economics,” the idea of cutting taxes to stimulate investment.  High income tax rates, Mellon argued, “inevitably put pressure upon the taxpayer to withdraw this capital from productive business and invest it in tax-exempt securities. . . . The result is that the sources of taxation are drying up, wealth is failing to carry its share of the tax burden; and capital is being diverted into channels which yield neither revenue to the Government nor profit to the people” (page 128).

Mellon wrote, “It seems difficult for some to understand that high rates of taxation do not necessarily mean large revenue to the Government, and that more revenue may often be obtained by lower taxes.”  And he compared the government setting tax rates on incomes to a businessman setting prices on products: “If a price is fixed too high, sales drop off and with them profits.”

And what happened?

“As secretary of the treasury, Mellon promoted, and Harding and Coolidge backed, a plan that eventually cut taxes on large incomes from 73 to 24 percent and on smaller incomes from 4 to 1/2 of 1 percent.  These tax cuts helped produce an outpouring of economic development – from air conditioning to refrigerators to zippers, Scotch tape to radios and talking movies.  Investors took more risks when they were allowed to keep more of their gains.  President Coolidge, during his six years in office, averaged only 3.3 percent unemployment and 1 percent inflation – the lowest misery index of any president in the twentieth century.

Furthermore, Mellon was also vindicated in his astonishing predictions that cutting taxes across the board would generate more revenue.  In the early 1920s, when the highest tax rate was 73 percent, the total income tax revenue to the U.S. government was a little over $700 million.  In 1928 and 1929, when the top tax rate was slashed to 25 and 24 percent, the total revenue topped the $1 billion mark.  Also remarkable, as Table 3 indicates, is that the burden of paying these taxes fell increasingly upon the wealthy” (page 129-130).

Now, that is incredible upon its face, but it becomes even more incredible when contrasted with FDR’s antibusiness and confiscatory tax policies, which both dramatically shrunk in terms of actual income tax revenues (from $1.096 billion in 1929 to $527 million in 1935), and dramatically shifted the tax burden to the backs of the poor by imposing huge new excise taxes (from $540 million in 1929 to $1.364 billion in 1935).  See Table 1 on page 125 of New Deal or Raw Deal for that information.

FDR both collected far less taxes from the rich, while imposing a far more onerous tax burden upon the poor.

It is simply a matter of empirical fact that tax cuts create increased revenue, and that those [Democrats] who have refused to pay attention to that fact have ended up reducing government revenues even as they increased the burdens on the poorest whom they falsely claim to help.

Let’s move on to John F. Kennedy, one of the most popular Democrat presidents ever.  Few realize that he was also a supply-side tax cutter.

Kennedy said:

“It is a paradoxical truth that tax rates are too high and tax revenues are too low and the soundest way to raise the revenues in the long run is to cut the rates now … Cutting taxes now is not to incur a budget deficit, but to achieve the more prosperous, expanding economy which can bring a budget surplus.”

– John F. Kennedy, Nov. 20, 1962, president’s news conference

“Lower rates of taxation will stimulate economic activity and so raise the levels of personal and corporate income as to yield within a few years an increased – not a reduced – flow of revenues to the federal government.”

– John F. Kennedy, Jan. 17, 1963, annual budget message to the Congress, fiscal year 1964

“In today’s economy, fiscal prudence and responsibility call for tax reduction even if it temporarily enlarges the federal deficit – why reducing taxes is the best way open to us to increase revenues.”

– John F. Kennedy, Jan. 21, 1963, annual message to the Congress: “The Economic Report Of The President”

“It is no contradiction – the most important single thing we can do to stimulate investment in today’s economy is to raise consumption by major reduction of individual income tax rates.”

– John F. Kennedy, Jan. 21, 1963, annual message to the Congress: “The Economic Report Of The President”

“Our tax system still siphons out of the private economy too large a share of personal and business purchasing power and reduces the incentive for risk, investment and effort – thereby aborting our recoveries and stifling our national growth rate.”

– John F. Kennedy, Jan. 24, 1963, message to Congress on tax reduction and reform, House Doc. 43, 88th Congress, 1st Session.

“A tax cut means higher family income and higher business profits and a balanced federal budget. Every taxpayer and his family will have more money left over after taxes for a new car, a new home, new conveniences, education and investment. Every businessman can keep a higher percentage of his profits in his cash register or put it to work expanding or improving his business, and as the national income grows, the federal government will ultimately end up with more revenues.”

– John F. Kennedy, Sept. 18, 1963, radio and television address to the nation on tax-reduction bill

Which is to say that modern Democrats are essentially calling one of their greatest presidents a liar when they demonize tax cuts as a means of increasing government revenues.

So let’s move on to Ronald Reagan.  Reagan had two major tax cutting policies implemented: the Economic Recovery Tax Act (ERTA) of 1981, which was retroactive to 1981, and the Tax Reform Act of 1986.

Did Reagan’s tax cuts decrease federal revenues?  Hardly:

We find that 8 of the following 10 years there was a surplus of revenue from 1980, prior to the Reagan tax cuts.  And, following the Tax Reform Act of 1986, there was a MASSIVE INCREASEof revenue.

So Reagan’s tax cuts increased revenue.  But who paid the increased tax revenue?  The poor?  Opponents of the Reagan tax cuts argued that his policy was a giveaway to the rich (ever heard that one before?) because their tax payments would fall.  But that was exactly wrong.  In reality:

“The share of the income tax burden borne by the top 10 percent of taxpayers increased from 48.0 percent in 1981 to 57.2 percent in 1988. Meanwhile, the share of income taxes paid by the bottom 50 percent of taxpayers dropped from 7.5 percent in 1981 to 5.7 percent in 1988.”

So Ronald Reagan a) collected more total revenue, b) collected more revenue from the rich, while c) reducing revenue collected by the bottom half of taxpayers, and d) generated an economic powerhouse that lasted – with only minor hiccups – for nearly three decades.  Pretty good achievement considering that his predecessor was forced to describe his own economy as a “malaise,” suffering due to a “crisis of confidence.” Pretty good considering that President Jimmy Carter responded to a reporter’s question as to what he would do about the problem of inflation by answering, “It would be misleading for me to tell any of you that there is a solution to it.”

Reagan whipped inflation.  Just as he whipped that malaise and that crisis of confidence.

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The Laffer Curve, Part III: Dynamic Scoring

By Everette Hatcher III | Also posted in Cato Institute, Ronald Reagan | Comments (0)

DAN MITCHELL: Blue-to-Red Tax Migration, Part V

December 27, 2023 – 8:30 pm

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Blue-to-Red Tax Migration, Part V

Time for the final segment of my five-part series for 2023 on blue-to-red tax migration (previous versions here, here, here, and here).

We’ll start with this table showing what has happened in America’s 10-largest states.

You should notice a pattern.

The table comes from a column for National Reviewwritten by Dan McLaughlin. He explains what these numbers mean.

The Census Bureau has announced its year-end estimates of state population changes… They once again show the continuing trend of America’s population shifting out of its bluest states and into red states… The biggest boom states in the past year?In terms of raw numbers, Texas and Florida dwarf everyone else, followed by North Carolina and Georgia… In percentage terms, South Carolina was the biggest winner… Eight states lost population. New York was by far the biggest loser, dropping over 100,000 people, 0.5 percent of its population in a single year. Five of the eight states have been governed by Democratic trifectas for this entire decade.

The Wall Street Journal editorialized a few days agoabout this internal migration. Here are some excerpts.

The U.S. population increased by 1.6 million between July 2022 and July 2023, with states in the South accounting for about 1.4 million of the growth. Leading the boom were Texas (473,453), Florida (365,205)… Eight states saw population declines, with the biggest in New York (-101,984), California (-75,423) and Illinois (-32,826). …what these states have in common: High taxes, burdensome business regulation and inflated energy and housing prices. ….An interesting natural experiment has been Washington state, which gained tens of thousands of people from other states on net each year in the last decade. But since enacting a 7% capital-gains tax on higher earners in 2021, Washington has been losing residents to other states at an accelerating pace—15,276 this past year. …A big problem for Democratic-run states is that their affluent residents are leading the exodus, and they pay the majority of income tax that supports their expansive welfare programs.

By the way, the WSJ‘s editorial explains that there are political implication of America’s internal migration.

State migration has long-tail political consequences. California, New York, Illinois, Minnesota and Rhode Island and Oregon on present trend would lose a combined 12 House seats in the 2030 reapportionment, which is as many as Florida, Georgia, Texas, Tennessee, North Carolina, Utah and Idaho would collectively gain.

And the National Review column includes a map for those of us who like visuals.

I’ll close by noting that blue states aren’t just losing political power. They’re also losing lots of taxable income.

P.S. I think taxes are a major factor in driving internal migration, but there are other factors as well (see here, here, here, here, and here).

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Lessons from the Texas Budget

I shared some data last month from the National Association of State Budget Officers to show that Texas lawmakers have been more fiscally responsible than California lawmakers over the past couple of years.

California politicians were more profligate in 2021 when politicians in Washington were sending lots of money to states because of the pandemic.

And California politicians also increased spending faster in 2022 when conditions (sort of) returned to normal.

These results are not a surprise given California’s reputation for profligacy.

What may be a surprise, however, is that (relative) frugality in Texas has only existed for a handful of years. Here are some excerpts from a report written for the Texas Public Policy Foundation by Vance Ginn and Daniel Sánchez-Piñol.

Over the last two decades, Texas’ total state biennial budget growth has had two different phases. The first phase had budget growth above the rate of population growth plus inflation for five of the six budgets from 2004–05 to 2014–15. The second phase…had budget growth below this rate… Figure 1 shows the average biennial growth rates for the six state budgets passed before 2015 and for the four since then.The average biennial budget growth rate in the former period was 12% compared with the rate of population growth plus inflation of 7.4%. In the latter period, the average biennial growth rate of the budget was cut by more than half to 5.2%, which was well below the estimated rate of population growth plus inflation of 9.4%. This improved budget picture must be maintained to correct for the excessive budget growth in the earlier period. …there could be a $27 billion GR surplus at the end of the current 2022–23 biennium. …the priority should be to effectively limit or, even better, freeze the state budget. Texas should use most, if not all, of the resulting surplus to reduce…property tax collections…these taxes could be cut substantially by restraining spending and using the surplus to reduce school district M&O property taxes to ultimately eliminate them over time.

The article has this chart, which is a good illustration of the shift to fiscal restraint in Texas.

For all intents and purposes, Texas in 2016 started abiding by fiscal policy’s Golden Rule.

And this means the burden of government is slowly but surely shrinking compared to the private sector.

That approach is paying big dividends. Spending restraint means there is now a big budget surplus, which is enabling a discussion of how to reduce property taxes (Texas has no income tax).

P.S. I shared data back in 2020 looking at the fiscal performance of Texas and Florida compared to New York and California.

Texas vs. California, Part VII

To begin the seventh edition of our series comparing policy in Texas and California (previous entries in March 2010, February 2013, April 2013, October 2018, June 2019, and December 2020), here’s a video from Prager University.

There will be a lot of information in today’s column, so if you’re pressed for time, here are three sentences that tell you what you need to know.

California has all sorts of natural advantages over Texas, especially endless sunshine and beautiful topography.

Texas has better government policy than California, most notably in areas such as taxation and regulation.

Since people are moving from the Golden State to the Lone Star State, public policy seems to matter more than natural beauty.

Now let’s look at a bunch of evidence to support those three sentences.

We’ll start with an article by Joel Kotkin of Chapman University.

If one were to explore the most blessed places on earth, California, my home for a half century, would surely be up there. …its salubrious climate, spectacular scenery, vast natural resources… President Biden recently suggested that he wants to “make America California again”. Yet…he should consider whether the California model may be better seen as a cautionary tale than a roadmap to a better future… California now suffers the highest cost-adjusted poverty rate in the country, and the widest gap between middle and upper-middle income earners. …the state has slowly morphed into a low wage economy. Over the past decade, 80% of the state’s jobs have paid under the median wage — half of which are paid less than $40,000…minorities do better today outside of California, enjoying far higher adjusted incomes and rates of homeownership in places like Atlanta and Dallas than in San Francisco and Los Angeles. Almost one-third of Hispanics, the state’s largest ethnic group, subsist below the poverty line, compared with 21% outside the state. …progressive…policies have not brought about greater racial harmony, enhanced upward mobility and widely based economic growth.

Next we have some business news from the San Francisco Chronicle.

Business leaders fear tech giant Oracle’s recent announcement that it is leaving the Bay Area for Austin, Texas, will lead to more exits unless some fundamental political and economic changes are made to keep the region attractive and competitive. “This is something that we have been warning people about for several years. California is not business friendly, we should be honest about it,” said Kenneth Rosen, chairman of the UC Berkeley Fisher Center for Real Estate and Urban Economics.Bay Area Council President Jim Wunderman said… “From consulting companies to tax lawyers to bankers and commercial real estate firms, every person I talk with who provides services to big Bay Area corporations are telling me that their clients are strategizing about leaving…” Charles Schwab, McKesson and Hewlett Packard Enterprise have all exited the high-cost, high-tax, high-regulation Bay Area for a less-expensive, less-regulated and business-friendlier political climate. All of them rode off to Texas. …the pace of the departures appears to be increasing. …A recent online survey of 2,325 California residents, taken between Nov. 4 and Nov. 23 by the Public Policy Institute of California, found 26% of residents have seriously considered moving out of state and that 58% say that the American Dream is harder to achieve in California than elsewhere.

Are California politicians trying to make things better, in hopes of stopping out-migration to places such as Texas?

Not according to this column by Hank Adler in the Wall Street Journal.

California’s Legislature is considering a wealth tax on residents, part-year residents, and any person who spends more than 60 days inside the state’s borders in a single year. Even those who move out of state would continue to be subject to the tax for a decade… Assembly Bill 2088 proposes calculating the wealth tax based on current world-wide net worth each Dec. 31. For part-year and temporary residents, the tax would be proportionate based on their number of days in California. The annual tax would be on current net worth and therefore would include wealth earned, inherited or obtained through gifts or estates long before and long after leaving the state. …The authors of the bill estimate the wealth tax will provide Sacramento $7.5 billion in additional revenue every year. Another proposal—to increase the top state income-tax rate to 16.8%—would annually raise another $6.8 billion. Today, California’s wealthiest 1% pay approximately 46% of total state income taxes. …the Legislature looks to the wealthiest Californians to fill funding gaps without considering the constitutionality of the proposals and the ability of people and companies to pick up and leave the state, which news reports suggest they are doing in large numbers. …As of this moment, there are no police roadblocks on the freeways trying to keep moving trucks from leaving California. If A.B. 2088 becomes law, the state may need to consider placing some.

The late (and great) Walter Williams actually joked back in 2012that California might set up East German-style border checkpoints. Let’s hope satire doesn’t become reality.

But what isn’t satire is that people are fleeing the state (along with other poorly governed jurisdictions).

Simply state, the blue state model of high taxes and big government is not working (just as it isn’t working in countries with high taxes and big government).

Interestingly, even the New York Times recognizes that there is a problem in the state that used to be a role model for folks on the left.

Opining for that outlet at the start of the month, Brett Stephens raised concerns about the Golden State.

…today’s Democratic leaders might look to the very Democratic state of California as a model for America’s future. You remember California: People used to want to move there, start businesses, raise families, live their American dream. These days, not so much. Between July 2019 and July 2020, more people — 135,400 to be precise — left the state than moved in… No. 1 destination: Texas, followed by Arizona, Nevada and Washington. Three of those states have no state income tax.

California, by contrast, has very high taxes. Not just an onerous income tax, but high taxes across the board.

Californians also pay some of the nation’s highest sales tax rates (8.66 percent) and corporate tax rates (8.84 percent), as well as the highest taxes on gasoline (63 cents on a gallon as of January, as compared with 20 cents in Texas).

Sadly, these high taxes don’t translate into good services from government.

The state ranks 21st in the country in terms of spending per public school pupil, but 27th in its K-12 educational outcomes. It ties Oregon for third place among states in terms of its per capita homeless rate. Infrastructure? As of 2019, the state had an estimated $70 billion in deferred maintenance backlog. Debt? The state’s unfunded pension liabilities in 2019 ran north of $1.1 trillion, …or $81,300 per household.

Makes you wonder whether the rest of the nation should copy that model?

Democrats hold both U.S. Senate seats, 42 of its 53 seats in the House, have lopsided majorities in the State Assembly and Senate, run nearly every big city and have controlled the governor’s mansion for a decade. If ever there was a perfect laboratory for liberal governance, this is it. So how do you explain these results? …If California is a vision of the sort of future the Biden administration wants for Americans, expect Americans to demur.

Some might be tempted to dismiss Stephens’ column because he is considered the token conservative at the New York Times.

But Ezra Klein also acknowledges that California has a problem, and nobody will accuse him of being on the right side of the spectrum.

Here’s some of what he wrote in his column earlier this month for the New York Times.

I love California. I was born and raised in Orange County. I was educated in the state’s public schools and graduated from the University of California system… But for that very reason, our failures of governance worry me. California has the highest poverty rate in the nation,when you factor in housing costs, and vies for the top spot in income inequality, too. …but there’s a reason 130,000 more people leave than enter each year. California is dominated by Democrats, but many of the people Democrats claim to care about most can’t afford to live there. …California, as the biggest state in the nation, and one where Democrats hold total control of the government, carries a special burden. If progressivism cannot work here, why should the country believe it can work anywhere else?

Kudos to Klein for admitting problems on his side (just like I praise the few GOPers who criticized Trump’s big-government policies).

But his column definitely had some quirky parts, such as when he wrote that, “There are bright spots in recent years…a deeply progressive plan to tax the wealthy.”

That’s actually a big reason for the state’s decline, not a “bright spot.”

I’m not the only one to recognize the limitations of his column.

Kevin Williamson wrote an entire rebuttal for National Review.

Who but Ezra Klein could survey the wreck left-wing Democrats have made of California and conclude that the state’s problem is its excessive conservatism? …Klein the rhetorician anticipates objections on this front and writes that he is not speaking of “the political conservatism that privatizes Medicare, but the temperamental conservatism that” — see if this formulation sounds at all familiar — “stands athwart change and yells ‘Stop!’”…California progressives have progressive policies and progressive power, and they like it that way. That is the substance of their conservatism. …Klein and others of his ilk like to present themselves as dispassionate pragmatists, enlightened empiricists who only want to do “what works.” …Klein mocks San Francisco for renaming schools (Begone, Abraham Lincoln!) while it has no plan to reopen them, but he cannot quite see that these are two aspects of a single phenomenon. …Klein…must eventually understand that the troubles he identifies in California are baked into the progressive cake. …That has real-world consequences, currently on display in California to such a spectacular degree that even Ezra Klein is able dimly to perceive them. Maybe he’ll learn something.

I especially appreciate this passage since it excoriates rich leftists for putting teacher unions ahead of disadvantaged children.

Intentions do not matter very much, and mere stated intentions matter even less. Klein is blind to that, which is why he is able to write, as though there were something unusual on display: “For all the city’s vaunted progressivism, [San Francisco] has some of the highest private school enrollment numbers in the country.” Rich progressives have always been in favor of school choice and private schools — for themselves. They only oppose choice for poor people, whose interests must for political reasons be subordinated to those of the public-sector unions from which Democrats in cities such as San Francisco derive their power.

Let’s conclude with some levity.

Here’s a meme that contemplates whether California emigrants bring bad voting habits with them.

Though that’s apparently more of a problem in Colorado rather than in Texas.

And here’s some clever humor from Genesius Times.

P.S. My favorite California-themed humor (not counting the state’s elected officials) can be found here, here, here, here, and here.

High-tax states are languishing but  zero-income-tax states such as Texas are growing rapidly!!!!

Texas Is Booming…but CNN Doesn’t Want You to Know Why

September 30, 2014 by Dan Mitchell

Much of my writing is focused on the real-world impact of government policy, and this is why I repeatedly look at the relative economic performance of big government jurisdictions and small government jurisdictions.

But I don’t just highlight differences between nations. Yes, it’s educational to look at North Korea vs. South Korea or Chile vs. Venezuela vs. Argentina, but I also think you can learn a lot by looking at what’s happening with different states in America.

So we’ve looked at high-tax states that are languishing, such as California and Illinois, and compared them to zero-income-tax states such as Texas.

With this in mind, you can understand that I was intrigued to see that even the establishment media is noticing that Texas is out-pacing the rest of the nation.

Here are some excerpts from a report by CNN Money on rapid population growth in Texas.

More Americans moved to Texas in recent years than any other state: A net gain of more than 387,000 in the latest Census for 2013. …Five Texas cities — Austin, Houston, San Antonio, Dallas and Fort Worth — were among the top 20 fastest growing large metro areas. Some smaller Texas metro areas grew even faster. In oil-rich Odessa, the population grew 3.3% and nearby Midland recorded a 3% gain.

But why is the population growing?

Well, CNN Money points out that low housing prices and jobs are big reasons.

And on the issue of housing, the article does acknowledge the role of “easy regulations” that enable new home construction.

But on the topic of jobs, the piece contains some good data on employment growth, but no mention of policy.

Jobs is the No. 1 reason for population moves, with affordable housing a close second. …Jobs are plentiful in Austin, where the unemployment rate is just 4.6%. Moody’s Analytics projects job growth to average 4% a year through 2015. Just as important, many jobs there are well paid: The median income of more than $75,000 is nearly 20% higher than the national median.

That’s it. Read the entire article if you don’t believe me, but the reporter was able to write a complete article about the booming economy in Texas without mentioning – not even once – that there’s no state income tax.

But that wasn’t the only omission.

The article doesn’t mention that Texas is the 4th-best state in the Tax Foundation’s ranking of state and local tax burdens.

The article doesn’t mention that Texas was the least oppressive state in the Texas Public Policy Foundation’s Soft Tyranny Index.

The article doesn’t mention that Texas was ranked #20 in a study of the overall fiscal condition of the 50 states.

The article doesn’t mention that Texas is in 4th place in a combined ranking of economic freedom in U.S. state and Canadian provinces.

The article doesn’t mention that Texas was ranked #11 in the Tax Foundation’s State Business Tax Climate Index.

The article doesn’t mention that Texas is in 14th place in the Mercatus ranking of overall freedom for the 50 states (and in 10th place for fiscal freedom).

By the way, I’m not trying to argue that Texas is the best state.

Indeed, it only got the top ranking in one of the measures cited above.

My point, instead, is simply to note that it takes willful blindness to write about the strong population growth and job performance of Texas without making at least a passing reference to the fact that it is a low-tax, pro-market state.

At least compared to other states. And especially compared to the high-tax states that are stagnating.

Such as California, as illustrated by this data and this data, as well as this Lisa Benson cartoon.

Such as Illinois, as illustrated by this data and this Eric Allie cartoon.

And I can’t resist adding this Steve Breen cartoon, if for no other reason that it reminds me of another one of his cartoons that I shared last year.

Speaking of humor, this Chuck Asay cartoon speculates on how future archaeologists will view California. And this joke about Texas, California, and a coyote is among my most-viewed blog posts.

All jokes aside, I want to reiterate what I wrote above. Texas is far from perfect. There’s too much government in the Lone Star state. It’s only a success story when compared to California.

P.S. Paul Krugman has tried to defend California, which has made him an easy target. I debunked him earlier this year, and I also linked to a superb Kevin Williamson takedown of Krugman at the bottom of this post.

P.P.S. Once again, I repeat the two-part challenge I’ve issued to the left. I’ll be happy if any statists can successfully respond to just one of the two questions I posed.

Related posts:

California is the Greece of the USA, but Texas is not perfect either!!!

July 9, 2013 – 12:00 pm

California is the Greece of the USA, but Texas is not perfect either!!! Just Because California Is Terrible, that Doesn’t Mean Texas Is Perfect January 21, 2013 by Dan Mitchell Texas is in much better shape than California. Taxes are lower, in part because Texas has no state income tax. No wonder the Lone Star State […]

By Everette Hatcher III | Posted in Economist Dan Mitchell | Edit | Comments (0)

Dan Mitchell on Texas v. California (includes editorial cartoon)

April 3, 2013 – 4:35 pm

We should lower federal taxes because jobs are going to states like Texas that have low taxes. (We should lower state taxes too!!) What Can We Learn by Comparing the Employment Situation in Texas vs. California? April 3, 2013 by Dan Mitchell One of the great things about federalism, above and beyond the fact that it […]

By Everette Hatcher III | Posted in Cato Institute, Economist Dan Mitchell, spending out of control, Taxes | Edit | Comments (0)

Ark Times blogger claims California is better than Texas but facts don’t bear that out (3 great political cartoons)

February 16, 2013 – 7:42 am

I got on the Arkansas Times Blog and noticed that a person on there was bragging about the high minimum wage law in San Francisco and how everything was going so well there. On 2-15-13 on the Arkansas Times Blog I posted: Couldn’t be better (the person using the username “Couldn’t be better)  is bragging […]

By Everette Hatcher III | Posted in Arkansas Times, Cato Institute, Current Events, Economist Dan Mitchell, President Obama, Taxes | Edit | Comments (0)

California burdensome government causing some of business community to leave for Texas

December 24, 2012 – 1:54 am

Does Government Have a Revenue or Spending Problem? People say the government has a debt problem. Debt is caused by deficits, which is the difference between what the government collects in tax revenue and the amount of government spending. Every time the government runs a deficit, the government debt increases. So what’s to blame: too […]

By Everette Hatcher III | Posted in Cato Institute, Economist Dan Mitchell, spending out of control, Taxes | Edit | Comments (0)

Arkansas Times blogger picks California business environment over Texas, proves liberals don’t live in real world(Part 2)

May 6, 2011 – 9:33 am

       Former California Governor Arnold Schwarzenegger with his family   I posted a portion of an article by John Fund of the Wall Street Journal that pointed out that many businesses are leaving California because of all of their government red tape and moving to Texas. My username is SalineRepublican and this is […]

By Everette Hatcher III | Posted in Arkansas Times | Edit | Comments (1)

John Fund’s talk in Little Rock 4-27-11(Part 4):Responding to liberals who criticize states like Texas that don’t have the red tape that California has

May 4, 2011 – 9:20 am

John Fund at Chamber Day, Part 1 Last week I got to attend the first ever “Conservative Lunch Series” presented by  KARN and Americans for Prosperity Foundation at the Little Rock Hilton on University Avenue. This monthly luncheon will be held the fourth Wednesday of every month. The speaker for today’s luncheon was John Fund. John […]

By Everette Hatcher III | Posted in President Obama | Edit | Comments (0)

California and France have raised taxes so much that it has hurt economic growth!!!

September 29, 2014 – 8:02 am

___________ California and France have raised taxes so much that it has hurt economic growth!!! Mirror, Mirror, on the Wall, which Nation and State Punish Success Most of All? September 25, 2014 by Dan Mitchell I’ve shared some interested rankings on tax policy, including a map from the Tax Foundation showing which states have the earliest […]

By Everette Hatcher III | Posted in Taxes | Edit | Comments (0)

Jerry Brown raised taxes in California and a rise in the minimum wage, but it won’t work like Krugman thinks!!!

July 26, 2014 – 3:22 pm

___________   Jerry Brown raised taxes in California and a rise in the minimum wage, but it won’t work like Krugman thinks!!!! This cartoon below shows what will eventually happen to California and any other state that keeps raising taxes higher and higher.   Krugman’s “Gotcha” Moment Leaves Something to Be Desired July 25, 2014 by […]

By Everette Hatcher III | Posted in Cato Institute, Economist Dan Mitchell | Edit | Comments (0)

Open letter to President Obama (Part 573) Are the states of Illinois and California going to join Detroit in Bankruptcy one day?

May 1, 2014 – 12:37 am

Open letter to President Obama (Part 573) (Emailed to White House on 7-29-13.) President Obama c/o The White House 1600 Pennsylvania Avenue NW Washington, DC 20500 Dear Mr. President, I know that you receive 20,000 letters a day and that you actually read 10 of them every day. I really do respect you for trying to get […]

By Everette Hatcher III | Posted in Cato Institute, Economist Dan Mitchell, President Obama | Edit| Comments (0)

Open letter to President Obama (Part 561) We should lower federal taxes because jobs are going to states like Texas that have low taxes

April 15, 2014 – 2:17 am

Open letter to President Obama (Part 561) (Emailed to White House on 6-25-13.) President Obama c/o The White House 1600 Pennsylvania Avenue NW Washington, DC 20500 Dear Mr. President, I know that you receive 20,000 letters a day and that you actually read 10 of them every day. I really do respect you for trying to get […]

By Everette Hatcher III | Posted in Cato Institute, President Obama | Edit | Comments (1)
By Everette Hatcher III | Comments (0)

Dan Mitchell: Red States vs. Blue States, Part V: Florida vs. California

December 27, 2023 – 8:28 pm

Red States vs. Blue States, Part V: Florida vs. California

I’ve written lots of columns comparing Texas and California (see here, here, here, here, here, here, hereand here), and also several columns comparing Florida and New York (see here, here, here, here, and here).

We’ll break from that pattern today because we’re going to compare Florida and California, motivated by tonight’s Fox TV debate between Gov. Ron DeSantis and Gov. Gavin Newsom.

We’ll start with this table put together by Peter Coy of the New York Times. If Florida won, I awarded a red star and if California won, I awarded a blue star (and no stars if there was a tie or the category was irrelevant).

Florida won the most categories, though California has higher income (but also a much-higher cost of living).

Here’s a table prepared by the Committee to Unleash Prosperity. No need to add any stars since Florida wins every category.

I’ll close with a few excerpts from an editorial by the Wall Street Journal.

Gavin Newsom and Ron DeSantis are set to square off…in a Fox News debate… Besides offering voters a look of the alternatives to Joe Biden and Donald Trump, the showdown between the California and Florida governors could provide a revealing policy contrast. Sacramento has rushed to the left in recent decades while Tallahassee has moved to the right.Since winning election in 2018, Messrs. Newsom and DeSantis have advanced sharply different policies on Covid lockdowns, taxes, school choice and climate regulation, among other things. …here is a scorecard of policy results. …Since January 2019, employment has increased by 1,031,030 in Florida while declining by 85,438 in California. …California’s 4.8% jobless rate is the second highest in the country and nearly twice as high as Florida’s (2.8%). …State and local taxes in California add up to $10,167 per capita versus $5,406 in Florida. …Despite its higher taxes, California boasted a $31.5 billion budget shortfall in May while Florida ran a $17.7 billion surplus.

Based on the data, DeSantis has already won the debate.

Though messaging and style matter in politics, so we’ll see what happens in tonight’s debate.

P.S. We’ll make this column Part V of our series on red states vs blue states (previous editions available here, here, here, and here).

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 here, here, here, here, 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.

By Everette Hatcher III | Also posted in Cato Institute, Economist Dan Mitchell, spending out of control | Comments (0)

DAN MITCHELL ARTICLE : Red States vs. Blue States, Part III

December 27, 2023 – 8:25 pm

___

Red States vs. Blue States, Part III

In Part I or our series comparing red states and blue states, we found that the former enjoyed better overall economic performance.

In Part II, we discovered that red states did much better with regards to unemployment.

But the unemployment rate does not fully capture the strength of the labor market. It’s also important to look at how many people are actually working. Especially in the economy’s productive sector.

So, for Part III of our series, here’s a fascinating visualshowing how quickly private sector employment rebounded after the pandemic.

It’s from John Phelan of Minnesota’s Center of the American Experiment, so he’s focusing on his state’s lagging performance, but if you look at the states with the best performance (fewest months before jobs recovered) and the states with the worst performance (states where private-sector jobs still haven’t recovered), red states are doing better.

It’s not a perfect relationship, of course, since some red-oriented, energy-producing red states are at, or near, the bottom. But those are exceptions to the general rule.

Vance Ginn and Erik Randolph discussed the gap between red states and blue states in a column last year for Real Clear Policy. Here are some of their findings.

Freer states that were more reluctant to shut down their economies due to COVID-19 are doing much better economically than states with severe shutdowns. Even a state like California is suffering — which was considered an American paradise for nearly a century, with its perfect weather and natural beauty.…Residents are fleeing California, New York, Illinois, and Pennsylvania for places like Georgia, Florida, Tennessee, and Texas. …the most important statistic is how Americans are voting with their feet. Forty-six million Americans changed zip codes in a 12-month period ending in February 2022. That’s the most moves since 2010. According to the U.S. Census Bureau, in 2021, California, New York, and Illinois had the highest domestic migration losses, and Florida, Texas, and Arizona gained the most.

The moral of the story is that people are “voting with their feet” against high taxes and excessive government.

And it’s not simply a matter of moving to places with better climate. If that was the case, California would be the nation’s top destination (and it was, prior to getting captured by the left).

P.S. Speaking of California, click here for my series comparing California and Texas. You can also click here for the comparisons between New York and Florida.

P.P.S. Sadly, some blue states want to accelerate the loss of jobs and investment.

__

____

Texas vs. California, Part VII

To begin the seventh edition of our series comparing policy in Texas and California (previous entries in March 2010, February 2013, April 2013, October 2018, June 2019, and December 2020), here’s a video from Prager University.

There will be a lot of information in today’s column, so if you’re pressed for time, here are three sentences that tell you what you need to know.

California has all sorts of natural advantages over Texas, especially endless sunshine and beautiful topography.

Texas has better government policy than California, most notably in areas such as taxation and regulation.

Since people are moving from the Golden State to the Lone Star State, public policy seems to matter more than natural beauty.

Now let’s look at a bunch of evidence to support those three sentences.

We’ll start with an article by Joel Kotkin of Chapman University.

If one were to explore the most blessed places on earth, California, my home for a half century, would surely be up there. …its salubrious climate, spectacular scenery, vast natural resources… President Biden recently suggested that he wants to “make America California again”. Yet…he should consider whether the California model may be better seen as a cautionary tale than a roadmap to a better future… California now suffers the highest cost-adjusted poverty rate in the country, and the widest gap between middle and upper-middle income earners. …the state has slowly morphed into a low wage economy. Over the past decade, 80% of the state’s jobs have paid under the median wage — half of which are paid less than $40,000…minorities do better today outside of California, enjoying far higher adjusted incomes and rates of homeownership in places like Atlanta and Dallas than in San Francisco and Los Angeles. Almost one-third of Hispanics, the state’s largest ethnic group, subsist below the poverty line, compared with 21% outside the state. …progressive…policies have not brought about greater racial harmony, enhanced upward mobility and widely based economic growth.

Next we have some business news from the San Francisco Chronicle.

Business leaders fear tech giant Oracle’s recent announcement that it is leaving the Bay Area for Austin, Texas, will lead to more exits unless some fundamental political and economic changes are made to keep the region attractive and competitive. “This is something that we have been warning people about for several years. California is not business friendly, we should be honest about it,” said Kenneth Rosen, chairman of the UC Berkeley Fisher Center for Real Estate and Urban Economics.Bay Area Council President Jim Wunderman said… “From consulting companies to tax lawyers to bankers and commercial real estate firms, every person I talk with who provides services to big Bay Area corporations are telling me that their clients are strategizing about leaving…” Charles Schwab, McKesson and Hewlett Packard Enterprise have all exited the high-cost, high-tax, high-regulation Bay Area for a less-expensive, less-regulated and business-friendlier political climate. All of them rode off to Texas. …the pace of the departures appears to be increasing. …A recent online survey of 2,325 California residents, taken between Nov. 4 and Nov. 23 by the Public Policy Institute of California, found 26% of residents have seriously considered moving out of state and that 58% say that the American Dream is harder to achieve in California than elsewhere.

Are California politicians trying to make things better, in hopes of stopping out-migration to places such as Texas?

Not according to this column by Hank Adler in the Wall Street Journal.

California’s Legislature is considering a wealth tax on residents, part-year residents, and any person who spends more than 60 days inside the state’s borders in a single year. Even those who move out of state would continue to be subject to the tax for a decade… Assembly Bill 2088 proposes calculating the wealth tax based on current world-wide net worth each Dec. 31. For part-year and temporary residents, the tax would be proportionate based on their number of days in California. The annual tax would be on current net worth and therefore would include wealth earned, inherited or obtained through gifts or estates long before and long after leaving the state. …The authors of the bill estimate the wealth tax will provide Sacramento $7.5 billion in additional revenue every year. Another proposal—to increase the top state income-tax rate to 16.8%—would annually raise another $6.8 billion. Today, California’s wealthiest 1% pay approximately 46% of total state income taxes. …the Legislature looks to the wealthiest Californians to fill funding gaps without considering the constitutionality of the proposals and the ability of people and companies to pick up and leave the state, which news reports suggest they are doing in large numbers. …As of this moment, there are no police roadblocks on the freeways trying to keep moving trucks from leaving California. If A.B. 2088 becomes law, the state may need to consider placing some.

The late (and great) Walter Williams actually joked back in 2012that California might set up East German-style border checkpoints. Let’s hope satire doesn’t become reality.

But what isn’t satire is that people are fleeing the state (along with other poorly governed jurisdictions).

Simply state, the blue state model of high taxes and big government is not working (just as it isn’t working in countries with high taxes and big government).

Interestingly, even the New York Times recognizes that there is a problem in the state that used to be a role model for folks on the left.

Opining for that outlet at the start of the month, Brett Stephens raised concerns about the Golden State.

…today’s Democratic leaders might look to the very Democratic state of California as a model for America’s future. You remember California: People used to want to move there, start businesses, raise families, live their American dream. These days, not so much. Between July 2019 and July 2020, more people — 135,400 to be precise — left the state than moved in… No. 1 destination: Texas, followed by Arizona, Nevada and Washington. Three of those states have no state income tax.

California, by contrast, has very high taxes. Not just an onerous income tax, but high taxes across the board.

Californians also pay some of the nation’s highest sales tax rates (8.66 percent) and corporate tax rates (8.84 percent), as well as the highest taxes on gasoline (63 cents on a gallon as of January, as compared with 20 cents in Texas).

Sadly, these high taxes don’t translate into good services from government.

The state ranks 21st in the country in terms of spending per public school pupil, but 27th in its K-12 educational outcomes. It ties Oregon for third place among states in terms of its per capita homeless rate. Infrastructure? As of 2019, the state had an estimated $70 billion in deferred maintenance backlog. Debt? The state’s unfunded pension liabilities in 2019 ran north of $1.1 trillion, …or $81,300 per household.

Makes you wonder whether the rest of the nation should copy that model?

Democrats hold both U.S. Senate seats, 42 of its 53 seats in the House, have lopsided majorities in the State Assembly and Senate, run nearly every big city and have controlled the governor’s mansion for a decade. If ever there was a perfect laboratory for liberal governance, this is it. So how do you explain these results? …If California is a vision of the sort of future the Biden administration wants for Americans, expect Americans to demur.

Some might be tempted to dismiss Stephens’ column because he is considered the token conservative at the New York Times.

But Ezra Klein also acknowledges that California has a problem, and nobody will accuse him of being on the right side of the spectrum.

Here’s some of what he wrote in his column earlier this month for the New York Times.

I love California. I was born and raised in Orange County. I was educated in the state’s public schools and graduated from the University of California system… But for that very reason, our failures of governance worry me. California has the highest poverty rate in the nation,when you factor in housing costs, and vies for the top spot in income inequality, too. …but there’s a reason 130,000 more people leave than enter each year. California is dominated by Democrats, but many of the people Democrats claim to care about most can’t afford to live there. …California, as the biggest state in the nation, and one where Democrats hold total control of the government, carries a special burden. If progressivism cannot work here, why should the country believe it can work anywhere else?

Kudos to Klein for admitting problems on his side (just like I praise the few GOPers who criticized Trump’s big-government policies).

But his column definitely had some quirky parts, such as when he wrote that, “There are bright spots in recent years…a deeply progressive plan to tax the wealthy.”

That’s actually a big reason for the state’s decline, not a “bright spot.”

I’m not the only one to recognize the limitations of his column.

Kevin Williamson wrote an entire rebuttal for National Review.

Who but Ezra Klein could survey the wreck left-wing Democrats have made of California and conclude that the state’s problem is its excessive conservatism? …Klein the rhetorician anticipates objections on this front and writes that he is not speaking of “the political conservatism that privatizes Medicare, but the temperamental conservatism that” — see if this formulation sounds at all familiar — “stands athwart change and yells ‘Stop!’”…California progressives have progressive policies and progressive power, and they like it that way. That is the substance of their conservatism. …Klein and others of his ilk like to present themselves as dispassionate pragmatists, enlightened empiricists who only want to do “what works.” …Klein mocks San Francisco for renaming schools (Begone, Abraham Lincoln!) while it has no plan to reopen them, but he cannot quite see that these are two aspects of a single phenomenon. …Klein…must eventually understand that the troubles he identifies in California are baked into the progressive cake. …That has real-world consequences, currently on display in California to such a spectacular degree that even Ezra Klein is able dimly to perceive them. Maybe he’ll learn something.

I especially appreciate this passage since it excoriates rich leftists for putting teacher unions ahead of disadvantaged children.

Intentions do not matter very much, and mere stated intentions matter even less. Klein is blind to that, which is why he is able to write, as though there were something unusual on display: “For all the city’s vaunted progressivism, [San Francisco] has some of the highest private school enrollment numbers in the country.” Rich progressives have always been in favor of school choice and private schools — for themselves. They only oppose choice for poor people, whose interests must for political reasons be subordinated to those of the public-sector unions from which Democrats in cities such as San Francisco derive their power.

Let’s conclude with some levity.

Here’s a meme that contemplates whether California emigrants bring bad voting habits with them.

Though that’s apparently more of a problem in Colorado rather than in Texas.

And here’s some clever humor from Genesius Times.

P.S. My favorite California-themed humor (not counting the state’s elected officials) can be found here, here, here, here, and here.

High-tax states are languishing but  zero-income-tax states such as Texas are growing rapidly!!!!

Texas Is Booming…but CNN Doesn’t Want You to Know Why

September 30, 2014 by Dan Mitchell

Much of my writing is focused on the real-world impact of government policy, and this is why I repeatedly look at the relative economic performance of big government jurisdictions and small government jurisdictions.

But I don’t just highlight differences between nations. Yes, it’s educational to look at North Korea vs. South Korea or Chile vs. Venezuela vs. Argentina, but I also think you can learn a lot by looking at what’s happening with different states in America.

So we’ve looked at high-tax states that are languishing, such as California and Illinois, and compared them to zero-income-tax states such as Texas.

With this in mind, you can understand that I was intrigued to see that even the establishment media is noticing that Texas is out-pacing the rest of the nation.

Here are some excerpts from a report by CNN Money on rapid population growth in Texas.

More Americans moved to Texas in recent years than any other state: A net gain of more than 387,000 in the latest Census for 2013. …Five Texas cities — Austin, Houston, San Antonio, Dallas and Fort Worth — were among the top 20 fastest growing large metro areas. Some smaller Texas metro areas grew even faster. In oil-rich Odessa, the population grew 3.3% and nearby Midland recorded a 3% gain.

But why is the population growing?

Well, CNN Money points out that low housing prices and jobs are big reasons.

And on the issue of housing, the article does acknowledge the role of “easy regulations” that enable new home construction.

But on the topic of jobs, the piece contains some good data on employment growth, but no mention of policy.

Jobs is the No. 1 reason for population moves, with affordable housing a close second. …Jobs are plentiful in Austin, where the unemployment rate is just 4.6%. Moody’s Analytics projects job growth to average 4% a year through 2015. Just as important, many jobs there are well paid: The median income of more than $75,000 is nearly 20% higher than the national median.

That’s it. Read the entire article if you don’t believe me, but the reporter was able to write a complete article about the booming economy in Texas without mentioning – not even once – that there’s no state income tax.

But that wasn’t the only omission.

The article doesn’t mention that Texas is the 4th-best state in the Tax Foundation’s ranking of state and local tax burdens.

The article doesn’t mention that Texas was the least oppressive state in the Texas Public Policy Foundation’s Soft Tyranny Index.

The article doesn’t mention that Texas was ranked #20 in a study of the overall fiscal condition of the 50 states.

The article doesn’t mention that Texas is in 4th place in a combined ranking of economic freedom in U.S. state and Canadian provinces.

The article doesn’t mention that Texas was ranked #11 in the Tax Foundation’s State Business Tax Climate Index.

The article doesn’t mention that Texas is in 14th place in the Mercatus ranking of overall freedom for the 50 states (and in 10th place for fiscal freedom).

By the way, I’m not trying to argue that Texas is the best state.

Indeed, it only got the top ranking in one of the measures cited above.

My point, instead, is simply to note that it takes willful blindness to write about the strong population growth and job performance of Texas without making at least a passing reference to the fact that it is a low-tax, pro-market state.

At least compared to other states. And especially compared to the high-tax states that are stagnating.

Such as California, as illustrated by this data and this data, as well as this Lisa Benson cartoon.

Such as Illinois, as illustrated by this data and this Eric Allie cartoon.

And I can’t resist adding this Steve Breen cartoon, if for no other reason that it reminds me of another one of his cartoons that I shared last year.

Speaking of humor, this Chuck Asay cartoon speculates on how future archaeologists will view California. And this joke about Texas, California, and a coyote is among my most-viewed blog posts.

All jokes aside, I want to reiterate what I wrote above. Texas is far from perfect. There’s too much government in the Lone Star state. It’s only a success story when compared to California.

P.S. Paul Krugman has tried to defend California, which has made him an easy target. I debunked him earlier this year, and I also linked to a superb Kevin Williamson takedown of Krugman at the bottom of this post.

P.P.S. Once again, I repeat the two-part challenge I’ve issued to the left. I’ll be happy if any statists can successfully respond to just one of the two questions I posed.

Related posts:

California is the Greece of the USA, but Texas is not perfect either!!!

July 9, 2013 – 12:00 pm

California is the Greece of the USA, but Texas is not perfect either!!! Just Because California Is Terrible, that Doesn’t Mean Texas Is Perfect January 21, 2013 by Dan Mitchell Texas is in much better shape than California. Taxes are lower, in part because Texas has no state income tax. No wonder the Lone Star State […]

By Everette Hatcher III | Posted in Economist Dan Mitchell | Edit | Comments (0)

Dan Mitchell on Texas v. California (includes editorial cartoon)

April 3, 2013 – 4:35 pm

We should lower federal taxes because jobs are going to states like Texas that have low taxes. (We should lower state taxes too!!) What Can We Learn by Comparing the Employment Situation in Texas vs. California? April 3, 2013 by Dan Mitchell One of the great things about federalism, above and beyond the fact that it […]

By Everette Hatcher III | Posted in Cato Institute, Economist Dan Mitchell, spending out of control, Taxes | Edit | Comments (0)

Ark Times blogger claims California is better than Texas but facts don’t bear that out (3 great political cartoons)

February 16, 2013 – 7:42 am

I got on the Arkansas Times Blog and noticed that a person on there was bragging about the high minimum wage law in San Francisco and how everything was going so well there. On 2-15-13 on the Arkansas Times Blog I posted: Couldn’t be better (the person using the username “Couldn’t be better)  is bragging […]

By Everette Hatcher III | Posted in Arkansas Times, Cato Institute, Current Events, Economist Dan Mitchell, President Obama, Taxes | Edit | Comments (0)

California burdensome government causing some of business community to leave for Texas

December 24, 2012 – 1:54 am

Does Government Have a Revenue or Spending Problem? People say the government has a debt problem. Debt is caused by deficits, which is the difference between what the government collects in tax revenue and the amount of government spending. Every time the government runs a deficit, the government debt increases. So what’s to blame: too […]

By Everette Hatcher III | Posted in Cato Institute, Economist Dan Mitchell, spending out of control, Taxes | Edit | Comments (0)

Arkansas Times blogger picks California business environment over Texas, proves liberals don’t live in real world(Part 2)

May 6, 2011 – 9:33 am

       Former California Governor Arnold Schwarzenegger with his family   I posted a portion of an article by John Fund of the Wall Street Journal that pointed out that many businesses are leaving California because of all of their government red tape and moving to Texas. My username is SalineRepublican and this is […]

By Everette Hatcher III | Posted in Arkansas Times | Edit | Comments (1)

John Fund’s talk in Little Rock 4-27-11(Part 4):Responding to liberals who criticize states like Texas that don’t have the red tape that California has

May 4, 2011 – 9:20 am

John Fund at Chamber Day, Part 1 Last week I got to attend the first ever “Conservative Lunch Series” presented by  KARN and Americans for Prosperity Foundation at the Little Rock Hilton on University Avenue. This monthly luncheon will be held the fourth Wednesday of every month. The speaker for today’s luncheon was John Fund. John […]

By Everette Hatcher III | Posted in President Obama | Edit | Comments (0)

California and France have raised taxes so much that it has hurt economic growth!!!

September 29, 2014 – 8:02 am

___________ California and France have raised taxes so much that it has hurt economic growth!!! Mirror, Mirror, on the Wall, which Nation and State Punish Success Most of All? September 25, 2014 by Dan Mitchell I’ve shared some interested rankings on tax policy, including a map from the Tax Foundation showing which states have the earliest […]

By Everette Hatcher III | Posted in Taxes | Edit | Comments (0)

Jerry Brown raised taxes in California and a rise in the minimum wage, but it won’t work like Krugman thinks!!!

July 26, 2014 – 3:22 pm

___________   Jerry Brown raised taxes in California and a rise in the minimum wage, but it won’t work like Krugman thinks!!!! This cartoon below shows what will eventually happen to California and any other state that keeps raising taxes higher and higher.   Krugman’s “Gotcha” Moment Leaves Something to Be Desired July 25, 2014 by […]

By Everette Hatcher III | Posted in Cato Institute, Economist Dan Mitchell | Edit | Comments (0)

Open letter to President Obama (Part 573) Are the states of Illinois and California going to join Detroit in Bankruptcy one day?

May 1, 2014 – 12:37 am

Open letter to President Obama (Part 573) (Emailed to White House on 7-29-13.) President Obama c/o The White House 1600 Pennsylvania Avenue NW Washington, DC 20500 Dear Mr. President, I know that you receive 20,000 letters a day and that you actually read 10 of them every day. I really do respect you for trying to get […]

By Everette Hatcher III | Posted in Cato Institute, Economist Dan Mitchell, President Obama | Edit| Comments (0)

Open letter to President Obama (Part 561) We should lower federal taxes because jobs are going to states like Texas that have low taxes

April 15, 2014 – 2:17 am

Open letter to President Obama (Part 561) (Emailed to White House on 6-25-13.) President Obama c/o The White House 1600 Pennsylvania Avenue NW Washington, DC 20500 Dear Mr. President, I know that you receive 20,000 letters a day and that you actually read 10 of them every day. I really do respect you for trying to get […]

By Everette Hatcher III | Posted in Cato Institute, President Obama | Edit | Comments (1)
By Everette Hatcher III | Comments (0)

DAN MITCHELL: Red States vs. Blue States, Part I

December 27, 2023 – 8:20 pm

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Red States vs. Blue States, Part I

I’ve written favorably about the pro-growth policies of low-tax states such as Texas, Florida, and Tennessee, while criticizing the anti-growth policies of high-tax states such as Illinois, California, and New York.

Does that mean we should conclude that “red states” are better than “blue states”? In this video for Prager University, Steve Moore says the answer is yes.

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The most persuasive part of the video is the data on people “voting with their feet” against the blue states.

There’s lots of data showing a clear relationship between the tax burden and migration patterns. Presumably for two reasons:

  1. People don’t like being overtaxed and thus move from high-tax states to low-tax states.
  2. More jobs are created in low-tax states, and people move for those employment opportunities.

There’s a debate about whether people also move because they want better weather.

I’m sure that’s somewhat true, but Steve points out in the video that California has the nation’s best climate yet also is losing taxpayers to other states.

Since we’re discussing red states vs blue states, let’s look at some excerpts from a column by Nihal Krishan of the Washington Examiner.

States run by Republican governors on average have economically outperformed states run by Democratic governors in recent months. …Overall, Democratic-run states, particularly those in the Northeast and Midwest, had larger contractions in gross domestic product than Republican-run states in the Plains and the South,according to the latest state GDP data for the second quarter of 2020, released by the Commerce Department on Friday. Of the 20 states with the smallest decrease in state GDP, 13 were run by Republican governors, while the bottom 25 states with the highest decrease in state GDP were predominantly Democratic-run states. …Republican-controlled Utah had the second-lowest unemployment rate in the country in August at 4.1%, and the second-lowest GDP drop, at just over 18% in the second quarter. Nevada, run by Democrats, had the highest unemployment rate, at 13.2%. It was closely followed by Democratic-run Rhode Island, 12.8%, and New York, 12.5%.

Krishan notes that this short-run data is heavily impacted by the coronavirus and the shutdown policies adopted by various states, so it presumably doesn’t tell us much about the overall quality (or lack thereof) of economic policy.

I wrote about some multi-year data last year (before coronavirus was a problem) and found that low-tax states were creating jobs at a significantly faster rate than high-tax states.

But even that data only covered a bit more than three years.

I prefer policy comparisons over a longer period of time since that presumably removes randomness. Indeed, when comparing California, Texas, and Kansasa few years ago, I pointed out how a five-year set of data can yield different results (and presumably less-robust and less-accurate results) than a fifteen-year set of data.

P.S. What would be best is if we had several decades of data that could be matched with rigorous long-run measures of economic freedom in various states – similar to the data I use for my convergence/divergence articles that compare nations. Sadly, we have the former, but don’t have the latter (there are very good measures of economic freedom in the various states today, but we don’t have good historical estimates).

Lessons from the Texas Budget

I shared some data last month from the National Association of State Budget Officers to show that Texas lawmakers have been more fiscally responsible than California lawmakers over the past couple of years.

California politicians were more profligate in 2021 when politicians in Washington were sending lots of money to states because of the pandemic.

And California politicians also increased spending faster in 2022 when conditions (sort of) returned to normal.

These results are not a surprise given California’s reputation for profligacy.

What may be a surprise, however, is that (relative) frugality in Texas has only existed for a handful of years. Here are some excerpts from a report written for the Texas Public Policy Foundation by Vance Ginn and Daniel Sánchez-Piñol.

Over the last two decades, Texas’ total state biennial budget growth has had two different phases. The first phase had budget growth above the rate of population growth plus inflation for five of the six budgets from 2004–05 to 2014–15. The second phase…had budget growth below this rate… Figure 1 shows the average biennial growth rates for the six state budgets passed before 2015 and for the four since then.The average biennial budget growth rate in the former period was 12% compared with the rate of population growth plus inflation of 7.4%. In the latter period, the average biennial growth rate of the budget was cut by more than half to 5.2%, which was well below the estimated rate of population growth plus inflation of 9.4%. This improved budget picture must be maintained to correct for the excessive budget growth in the earlier period. …there could be a $27 billion GR surplus at the end of the current 2022–23 biennium. …the priority should be to effectively limit or, even better, freeze the state budget. Texas should use most, if not all, of the resulting surplus to reduce…property tax collections…these taxes could be cut substantially by restraining spending and using the surplus to reduce school district M&O property taxes to ultimately eliminate them over time.

The article has this chart, which is a good illustration of the shift to fiscal restraint in Texas.

For all intents and purposes, Texas in 2016 started abiding by fiscal policy’s Golden Rule.

And this means the burden of government is slowly but surely shrinking compared to the private sector.

That approach is paying big dividends. Spending restraint means there is now a big budget surplus, which is enabling a discussion of how to reduce property taxes (Texas has no income tax).

P.S. I shared data back in 2020 looking at the fiscal performance of Texas and Florida compared to New York and California.

Texas vs. California, Part VII

To begin the seventh edition of our series comparing policy in Texas and California (previous entries in March 2010, February 2013, April 2013, October 2018, June 2019, and December 2020), here’s a video from Prager University.

There will be a lot of information in today’s column, so if you’re pressed for time, here are three sentences that tell you what you need to know.

California has all sorts of natural advantages over Texas, especially endless sunshine and beautiful topography.

Texas has better government policy than California, most notably in areas such as taxation and regulation.

Since people are moving from the Golden State to the Lone Star State, public policy seems to matter more than natural beauty.

Now let’s look at a bunch of evidence to support those three sentences.

We’ll start with an article by Joel Kotkin of Chapman University.

If one were to explore the most blessed places on earth, California, my home for a half century, would surely be up there. …its salubrious climate, spectacular scenery, vast natural resources… President Biden recently suggested that he wants to “make America California again”. Yet…he should consider whether the California model may be better seen as a cautionary tale than a roadmap to a better future… California now suffers the highest cost-adjusted poverty rate in the country, and the widest gap between middle and upper-middle income earners. …the state has slowly morphed into a low wage economy. Over the past decade, 80% of the state’s jobs have paid under the median wage — half of which are paid less than $40,000…minorities do better today outside of California, enjoying far higher adjusted incomes and rates of homeownership in places like Atlanta and Dallas than in San Francisco and Los Angeles. Almost one-third of Hispanics, the state’s largest ethnic group, subsist below the poverty line, compared with 21% outside the state. …progressive…policies have not brought about greater racial harmony, enhanced upward mobility and widely based economic growth.

Next we have some business news from the San Francisco Chronicle.

Business leaders fear tech giant Oracle’s recent announcement that it is leaving the Bay Area for Austin, Texas, will lead to more exits unless some fundamental political and economic changes are made to keep the region attractive and competitive. “This is something that we have been warning people about for several years. California is not business friendly, we should be honest about it,” said Kenneth Rosen, chairman of the UC Berkeley Fisher Center for Real Estate and Urban Economics.Bay Area Council President Jim Wunderman said… “From consulting companies to tax lawyers to bankers and commercial real estate firms, every person I talk with who provides services to big Bay Area corporations are telling me that their clients are strategizing about leaving…” Charles Schwab, McKesson and Hewlett Packard Enterprise have all exited the high-cost, high-tax, high-regulation Bay Area for a less-expensive, less-regulated and business-friendlier political climate. All of them rode off to Texas. …the pace of the departures appears to be increasing. …A recent online survey of 2,325 California residents, taken between Nov. 4 and Nov. 23 by the Public Policy Institute of California, found 26% of residents have seriously considered moving out of state and that 58% say that the American Dream is harder to achieve in California than elsewhere.

Are California politicians trying to make things better, in hopes of stopping out-migration to places such as Texas?

Not according to this column by Hank Adler in the Wall Street Journal.

California’s Legislature is considering a wealth tax on residents, part-year residents, and any person who spends more than 60 days inside the state’s borders in a single year. Even those who move out of state would continue to be subject to the tax for a decade… Assembly Bill 2088 proposes calculating the wealth tax based on current world-wide net worth each Dec. 31. For part-year and temporary residents, the tax would be proportionate based on their number of days in California. The annual tax would be on current net worth and therefore would include wealth earned, inherited or obtained through gifts or estates long before and long after leaving the state. …The authors of the bill estimate the wealth tax will provide Sacramento $7.5 billion in additional revenue every year. Another proposal—to increase the top state income-tax rate to 16.8%—would annually raise another $6.8 billion. Today, California’s wealthiest 1% pay approximately 46% of total state income taxes. …the Legislature looks to the wealthiest Californians to fill funding gaps without considering the constitutionality of the proposals and the ability of people and companies to pick up and leave the state, which news reports suggest they are doing in large numbers. …As of this moment, there are no police roadblocks on the freeways trying to keep moving trucks from leaving California. If A.B. 2088 becomes law, the state may need to consider placing some.

The late (and great) Walter Williams actually joked back in 2012that California might set up East German-style border checkpoints. Let’s hope satire doesn’t become reality.

But what isn’t satire is that people are fleeing the state (along with other poorly governed jurisdictions).

Simply state, the blue state model of high taxes and big government is not working (just as it isn’t working in countries with high taxes and big government).

Interestingly, even the New York Times recognizes that there is a problem in the state that used to be a role model for folks on the left.

Opining for that outlet at the start of the month, Brett Stephens raised concerns about the Golden State.

…today’s Democratic leaders might look to the very Democratic state of California as a model for America’s future. You remember California: People used to want to move there, start businesses, raise families, live their American dream. These days, not so much. Between July 2019 and July 2020, more people — 135,400 to be precise — left the state than moved in… No. 1 destination: Texas, followed by Arizona, Nevada and Washington. Three of those states have no state income tax.

California, by contrast, has very high taxes. Not just an onerous income tax, but high taxes across the board.

Californians also pay some of the nation’s highest sales tax rates (8.66 percent) and corporate tax rates (8.84 percent), as well as the highest taxes on gasoline (63 cents on a gallon as of January, as compared with 20 cents in Texas).

Sadly, these high taxes don’t translate into good services from government.

The state ranks 21st in the country in terms of spending per public school pupil, but 27th in its K-12 educational outcomes. It ties Oregon for third place among states in terms of its per capita homeless rate. Infrastructure? As of 2019, the state had an estimated $70 billion in deferred maintenance backlog. Debt? The state’s unfunded pension liabilities in 2019 ran north of $1.1 trillion, …or $81,300 per household.

Makes you wonder whether the rest of the nation should copy that model?

Democrats hold both U.S. Senate seats, 42 of its 53 seats in the House, have lopsided majorities in the State Assembly and Senate, run nearly every big city and have controlled the governor’s mansion for a decade. If ever there was a perfect laboratory for liberal governance, this is it. So how do you explain these results? …If California is a vision of the sort of future the Biden administration wants for Americans, expect Americans to demur.

Some might be tempted to dismiss Stephens’ column because he is considered the token conservative at the New York Times.

But Ezra Klein also acknowledges that California has a problem, and nobody will accuse him of being on the right side of the spectrum.

Here’s some of what he wrote in his column earlier this month for the New York Times.

I love California. I was born and raised in Orange County. I was educated in the state’s public schools and graduated from the University of California system… But for that very reason, our failures of governance worry me. California has the highest poverty rate in the nation,when you factor in housing costs, and vies for the top spot in income inequality, too. …but there’s a reason 130,000 more people leave than enter each year. California is dominated by Democrats, but many of the people Democrats claim to care about most can’t afford to live there. …California, as the biggest state in the nation, and one where Democrats hold total control of the government, carries a special burden. If progressivism cannot work here, why should the country believe it can work anywhere else?

Kudos to Klein for admitting problems on his side (just like I praise the few GOPers who criticized Trump’s big-government policies).

But his column definitely had some quirky parts, such as when he wrote that, “There are bright spots in recent years…a deeply progressive plan to tax the wealthy.”

That’s actually a big reason for the state’s decline, not a “bright spot.”

I’m not the only one to recognize the limitations of his column.

Kevin Williamson wrote an entire rebuttal for National Review.

Who but Ezra Klein could survey the wreck left-wing Democrats have made of California and conclude that the state’s problem is its excessive conservatism? …Klein the rhetorician anticipates objections on this front and writes that he is not speaking of “the political conservatism that privatizes Medicare, but the temperamental conservatism that” — see if this formulation sounds at all familiar — “stands athwart change and yells ‘Stop!’”…California progressives have progressive policies and progressive power, and they like it that way. That is the substance of their conservatism. …Klein and others of his ilk like to present themselves as dispassionate pragmatists, enlightened empiricists who only want to do “what works.” …Klein mocks San Francisco for renaming schools (Begone, Abraham Lincoln!) while it has no plan to reopen them, but he cannot quite see that these are two aspects of a single phenomenon. …Klein…must eventually understand that the troubles he identifies in California are baked into the progressive cake. …That has real-world consequences, currently on display in California to such a spectacular degree that even Ezra Klein is able dimly to perceive them. Maybe he’ll learn something.

I especially appreciate this passage since it excoriates rich leftists for putting teacher unions ahead of disadvantaged children.

Intentions do not matter very much, and mere stated intentions matter even less. Klein is blind to that, which is why he is able to write, as though there were something unusual on display: “For all the city’s vaunted progressivism, [San Francisco] has some of the highest private school enrollment numbers in the country.” Rich progressives have always been in favor of school choice and private schools — for themselves. They only oppose choice for poor people, whose interests must for political reasons be subordinated to those of the public-sector unions from which Democrats in cities such as San Francisco derive their power.

Let’s conclude with some levity.

Here’s a meme that contemplates whether California emigrants bring bad voting habits with them.

Though that’s apparently more of a problem in Colorado rather than in Texas.

And here’s some clever humor from Genesius Times.

P.S. My favorite California-themed humor (not counting the state’s elected officials) can be found here, here, here, here, and here.

High-tax states are languishing but  zero-income-tax states such as Texas are growing rapidly!!!!

Texas Is Booming…but CNN Doesn’t Want You to Know Why

September 30, 2014 by Dan Mitchell

Much of my writing is focused on the real-world impact of government policy, and this is why I repeatedly look at the relative economic performance of big government jurisdictions and small government jurisdictions.

But I don’t just highlight differences between nations. Yes, it’s educational to look at North Korea vs. South Korea or Chile vs. Venezuela vs. Argentina, but I also think you can learn a lot by looking at what’s happening with different states in America.

So we’ve looked at high-tax states that are languishing, such as California and Illinois, and compared them to zero-income-tax states such as Texas.

With this in mind, you can understand that I was intrigued to see that even the establishment media is noticing that Texas is out-pacing the rest of the nation.

Here are some excerpts from a report by CNN Money on rapid population growth in Texas.

More Americans moved to Texas in recent years than any other state: A net gain of more than 387,000 in the latest Census for 2013. …Five Texas cities — Austin, Houston, San Antonio, Dallas and Fort Worth — were among the top 20 fastest growing large metro areas. Some smaller Texas metro areas grew even faster. In oil-rich Odessa, the population grew 3.3% and nearby Midland recorded a 3% gain.

But why is the population growing?

Well, CNN Money points out that low housing prices and jobs are big reasons.

And on the issue of housing, the article does acknowledge the role of “easy regulations” that enable new home construction.

But on the topic of jobs, the piece contains some good data on employment growth, but no mention of policy.

Jobs is the No. 1 reason for population moves, with affordable housing a close second. …Jobs are plentiful in Austin, where the unemployment rate is just 4.6%. Moody’s Analytics projects job growth to average 4% a year through 2015. Just as important, many jobs there are well paid: The median income of more than $75,000 is nearly 20% higher than the national median.

That’s it. Read the entire article if you don’t believe me, but the reporter was able to write a complete article about the booming economy in Texas without mentioning – not even once – that there’s no state income tax.

But that wasn’t the only omission.

The article doesn’t mention that Texas is the 4th-best state in the Tax Foundation’s ranking of state and local tax burdens.

The article doesn’t mention that Texas was the least oppressive state in the Texas Public Policy Foundation’s Soft Tyranny Index.

The article doesn’t mention that Texas was ranked #20 in a study of the overall fiscal condition of the 50 states.

The article doesn’t mention that Texas is in 4th place in a combined ranking of economic freedom in U.S. state and Canadian provinces.

The article doesn’t mention that Texas was ranked #11 in the Tax Foundation’s State Business Tax Climate Index.

The article doesn’t mention that Texas is in 14th place in the Mercatus ranking of overall freedom for the 50 states (and in 10th place for fiscal freedom).

By the way, I’m not trying to argue that Texas is the best state.

Indeed, it only got the top ranking in one of the measures cited above.

My point, instead, is simply to note that it takes willful blindness to write about the strong population growth and job performance of Texas without making at least a passing reference to the fact that it is a low-tax, pro-market state.

At least compared to other states. And especially compared to the high-tax states that are stagnating.

Such as California, as illustrated by this data and this data, as well as this Lisa Benson cartoon.

Such as Illinois, as illustrated by this data and this Eric Allie cartoon.

And I can’t resist adding this Steve Breen cartoon, if for no other reason that it reminds me of another one of his cartoons that I shared last year.

Speaking of humor, this Chuck Asay cartoon speculates on how future archaeologists will view California. And this joke about Texas, California, and a coyote is among my most-viewed blog posts.

All jokes aside, I want to reiterate what I wrote above. Texas is far from perfect. There’s too much government in the Lone Star state. It’s only a success story when compared to California.

P.S. Paul Krugman has tried to defend California, which has made him an easy target. I debunked him earlier this year, and I also linked to a superb Kevin Williamson takedown of Krugman at the bottom of this post.

P.P.S. Once again, I repeat the two-part challenge I’ve issued to the left. I’ll be happy if any statists can successfully respond to just one of the two questions I posed.

Related posts:

California is the Greece of the USA, but Texas is not perfect either!!!

July 9, 2013 – 12:00 pm

California is the Greece of the USA, but Texas is not perfect either!!! Just Because California Is Terrible, that Doesn’t Mean Texas Is Perfect January 21, 2013 by Dan Mitchell Texas is in much better shape than California. Taxes are lower, in part because Texas has no state income tax. No wonder the Lone Star State […]

By Everette Hatcher III | Posted in Economist Dan Mitchell | Edit | Comments (0)

Dan Mitchell on Texas v. California (includes editorial cartoon)

April 3, 2013 – 4:35 pm

We should lower federal taxes because jobs are going to states like Texas that have low taxes. (We should lower state taxes too!!) What Can We Learn by Comparing the Employment Situation in Texas vs. California? April 3, 2013 by Dan Mitchell One of the great things about federalism, above and beyond the fact that it […]

By Everette Hatcher III | Posted in Cato Institute, Economist Dan Mitchell, spending out of control, Taxes | Edit | Comments (0)

Ark Times blogger claims California is better than Texas but facts don’t bear that out (3 great political cartoons)

February 16, 2013 – 7:42 am

I got on the Arkansas Times Blog and noticed that a person on there was bragging about the high minimum wage law in San Francisco and how everything was going so well there. On 2-15-13 on the Arkansas Times Blog I posted: Couldn’t be better (the person using the username “Couldn’t be better)  is bragging […]

By Everette Hatcher III | Posted in Arkansas Times, Cato Institute, Current Events, Economist Dan Mitchell, President Obama, Taxes | Edit | Comments (0)

California burdensome government causing some of business community to leave for Texas

December 24, 2012 – 1:54 am

Does Government Have a Revenue or Spending Problem? People say the government has a debt problem. Debt is caused by deficits, which is the difference between what the government collects in tax revenue and the amount of government spending. Every time the government runs a deficit, the government debt increases. So what’s to blame: too […]

By Everette Hatcher III | Posted in Cato Institute, Economist Dan Mitchell, spending out of control, Taxes | Edit | Comments (0)

Arkansas Times blogger picks California business environment over Texas, proves liberals don’t live in real world(Part 2)

May 6, 2011 – 9:33 am

       Former California Governor Arnold Schwarzenegger with his family   I posted a portion of an article by John Fund of the Wall Street Journal that pointed out that many businesses are leaving California because of all of their government red tape and moving to Texas. My username is SalineRepublican and this is […]

By Everette Hatcher III | Posted in Arkansas Times | Edit | Comments (1)

John Fund’s talk in Little Rock 4-27-11(Part 4):Responding to liberals who criticize states like Texas that don’t have the red tape that California has

May 4, 2011 – 9:20 am

John Fund at Chamber Day, Part 1 Last week I got to attend the first ever “Conservative Lunch Series” presented by  KARN and Americans for Prosperity Foundation at the Little Rock Hilton on University Avenue. This monthly luncheon will be held the fourth Wednesday of every month. The speaker for today’s luncheon was John Fund. John […]

By Everette Hatcher III | Posted in President Obama | Edit | Comments (0)

California and France have raised taxes so much that it has hurt economic growth!!!

September 29, 2014 – 8:02 am

___________ California and France have raised taxes so much that it has hurt economic growth!!! Mirror, Mirror, on the Wall, which Nation and State Punish Success Most of All? September 25, 2014 by Dan Mitchell I’ve shared some interested rankings on tax policy, including a map from the Tax Foundation showing which states have the earliest […]

By Everette Hatcher III | Posted in Taxes | Edit | Comments (0)

Jerry Brown raised taxes in California and a rise in the minimum wage, but it won’t work like Krugman thinks!!!

July 26, 2014 – 3:22 pm

___________   Jerry Brown raised taxes in California and a rise in the minimum wage, but it won’t work like Krugman thinks!!!! This cartoon below shows what will eventually happen to California and any other state that keeps raising taxes higher and higher.   Krugman’s “Gotcha” Moment Leaves Something to Be Desired July 25, 2014 by […]

By Everette Hatcher III | Posted in Cato Institute, Economist Dan Mitchell | Edit | Comments (0)

Open letter to President Obama (Part 573) Are the states of Illinois and California going to join Detroit in Bankruptcy one day?

May 1, 2014 – 12:37 am

Open letter to President Obama (Part 573) (Emailed to White House on 7-29-13.) President Obama c/o The White House 1600 Pennsylvania Avenue NW Washington, DC 20500 Dear Mr. President, I know that you receive 20,000 letters a day and that you actually read 10 of them every day. I really do respect you for trying to get […]

By Everette Hatcher III | Posted in Cato Institute, Economist Dan Mitchell, President Obama | Edit| Comments (0)

Open letter to President Obama (Part 561) We should lower federal taxes because jobs are going to states like Texas that have low taxes

April 15, 2014 – 2:17 am

Open letter to President Obama (Part 561) (Emailed to White House on 6-25-13.) President Obama c/o The White House 1600 Pennsylvania Avenue NW Washington, DC 20500 Dear Mr. President, I know that you receive 20,000 letters a day and that you actually read 10 of them every day. I really do respect you for trying to get […]

By Everette Hatcher III | Posted in Cato Institute, President Obama | Edit | Comments (1)
By Everette Hatcher III | Comments (0)

Dan Mitchell article : Lessons from Reaganomics for the 21st Century, Part IV

December 27, 2023 – 12:36 pm

Lessons from Reaganomics for the 21st Century, Part IV

When Reagan campaigned for the White House, his economic plan was based on four pillars. I wrote a study about those policies for the Club for Growth Foundation and I wanted to answer two questions.

First, was Reaganomics successful? Second, should similar policies be pursued today?

Today’s column is Part IV of a five-part series.

  • In Part I, we reviewed Reagan’s successful record of spending restraint and explained why the same approach is needed today, particularly to control entitlements.
  • In Part II, we examined Reagan’s much-needed supply-side tax reforms and said the same insights are needed today to address the problem of double taxation.
  • In Part III, we looked at Reagan’s track record on red tape, noting that he arrested the growth of regulatory restrictions and regulatory budgets and urged the same policies today.

For Part IV, let’s look at Reagan’s approach to inflation.

We’ll start with Figure 14 from the study, which shows how inflation dramatically increased during the 1970s.

That was the problem Reagan faced when he took office.

Here’s some of what I wrote in the study.

The United States was plagued by double-digit inflation when Reagan was elected. Rising prices were a problem throughout the 1970s, and the problem became particularly acute during the Carter Administration (see Figure 14), with prices climbing by nearly 50 percent in just four years.…The Federal Reserve deserved the blame for the surge in prices. The central bank created too much liquidity, motivated in part by a belief in Keynesian monetary policy and in part by a desire to appease politicians who like the sugar high of easy money. To make a bad situation worse, prices were increasing faster than income, which meant that the average household was falling behind. According to the Census Bureau, when Reagan took office in 1981, both median and mean household income was several hundred dollars lower than when Carter took office in 1977.

Here’s what Reagan achieved.

Unlike other presidents, who favored the sugar high of easy money, Reagan understood that the Federal Reserve needed a restrictive policy to bring inflation under control. He supported Chair Paul Volcker’s efforts to slow monetary growth even when it became politically unpopular. He courageously did what was best for the nation, even though it hurt his party in the 1982 mid-term elections. …Reagan’s courage paid dividends. The inflation rate came down very quickly. As shown Figure 15 below, inflation was down to about 4 percent in 1988:

Here’s the chart showing what Reagan achieved.

As I did with Part I, Part II, and Part III, let’s now consider whether Reagan’s policies are still relevant today.

In the case of monetary policy, the answer clearly is yes. The Federal Reserve (and other central banks) recklessly expanded their balance sheets during the pandemic. In effect, they repeated the mistakes of the 1970s, albeit for a different reason.

Regardless of the reason for bad policy, the solution is the same. Replicate Reagan’s courage and bring inflation under control.

The bottom line is that Reaganism was the right approach in the 1980s and it is the right approach today

Tax Cartels Mean Ever-Higher Tax Rates

When President Biden proposed a “global minimum tax” for businesses, I immediately warned that would lead to ever-increasing tax rates.

Ross Kaminsky of KHOW and I discussed how this is already happening.

I hate being right, but it’s always safe to predict that politicians and bureaucrats will embrace policies that give more power to government.

Especially when they are very anxious to stifle tax competition.

For decades, people in government have been upset that the tax cuts implemented by Ronald Reagan and Margaret Thatchertriggered a four-decade trend of lower tax rates and pro-growth tax reform.

That’s the reason Biden and his Treasury Secretary proposed a 15 percent minimum tax rate for businesses.

And it’s the reason they now want the rate to be even higher.

Though even I’m surprised that they’re already pushing for that outcome when the original pact hasn’t even been approved or implemented.

Here are some passages from a report by Reuters.

Treasury Secretary Janet Yellen will press G20 counterparts this week for a global minimum corporate tax rate above the 15% floor agreed by 130 countries last week…the global minimum tax rate…is tied to the outcome of legislation to raise the U.S. minimum tax rate, a Treasury official said.The Biden administration has proposed doubling the U.S. minimum tax on corporations overseas intangible income to 21% along with a new companion “enforcement” tax that would deny deductions to companies for tax payments to countries that fail to adopt the new global minimum rate. The officials said several countries were pushing for a rate above 15%, along with the United States.

Other kleptocratic governments naturally want the same thing.

A G7 proposal for a global minimum tax rate of 15% is too low and a rate of at least 21% is needed, Argentina’s finance minister said on Monday, leading a push by some developing countries… “The 15% rate is way too low,” Argentine Finance Minister Martin Guzman told an online panel hosted by the Independent Commission for the Reform of International Corporate Taxation. …”The minimum rate being proposed would not do much to countries in Africa…,” Mathew Gbonjubola, Nigeria’s tax policy director, told the same conference.

Needless to say, I’m not surprised that Argentina is on the wrong side.

And supporters of class warfare also are agitating for a higher minimum rate. Here are some excerpts from a column in the New York Times by Gabriel Zucman and Gus Wezerek.

In the decades after World War II, close to 50 percent of American companies’ earnings went to state and federal taxes. …it was a golden period. …President Biden should be applauded for trying to end the race to the bottom on corporate tax rates. But even if Congress approves the 15 percent global minimum corporate tax, it won’t be enough. …the Biden administration to give working families a real leg up, it should push Congress to enact a 25 percent minimum tax, which would bring in about $200 billion in additional revenue each year. …With a 25 percent minimum corporate tax, the Biden administration would begin to reverse decades of growing inequality. And it would encourage other countries to do the same, replacing a race to the bottom with a sprint to the top.

I can’t resist making two observations about this ideological screed.

  1. Even the IMF and OECD agree that the so-called race to the bottom has not led to a decline in corporate tax revenues, even when measured as a share of economic output.
  2. Since companies legally avoid rather than illegally evade taxes, the headline of the column is utterly dishonest – but it’s what we’ve learned to expect from the New York Times.

The only good thing about the Zucman-Wezerek column is that it includes this chart showing how corporate tax rates have dramatically declined since 1980.

P.S. For those interested, the horizontal line at the bottom is for Bermuda, though other jurisdictions (such as Monaco and the Cayman Islands) also deserve credit for having no corporate income taxes.

P.P.S. If you want to know why high corporate tax rates are misguided, click here. And if you want to know why Biden’s plan to raise the U.S. corporate tax rate is misguided, click here. Or here. Or here.

P.P.P.S. And if you want more information about why Biden’s global tax cartel is bad, click here, here, and here.

I enjoyed this article below because it demonstrates that the Laffer Curve has been working for almost 100 years now when it is put to the test in the USA. I actually got to hear Arthur Laffer speak in person in 1981 and he told us in advance what was going to happen the 1980’s and it all came about as he said it would when Ronald Reagan’s tax cuts took place. I wish we would lower taxes now instead of looking for more revenue through raised taxes. We have to grow the economy:

What Mitt Romney Said Last Night About Tax Cuts And The Deficit Was Absolutely Right. And What Obama Said Was Absolutely Wrong.

Mitt Romney repeatedly said last night that he would not allow tax cuts to add to the deficit.  He repeatedly said it because over and over again Obama blathered the liberal talking point that cutting taxes necessarily increased deficits.

Romney’s exact words: “I want to underline that — no tax cut that adds to the deficit.”

Meanwhile, Obama has promised to cut the deficit in half during his first four years – but instead gave America the highest deficits in the history of the entire human race.

I’ve written about this before.  Let’s replay what has happened every single time we’ve ever cut the income tax rate.

The fact of the matter is that we can go back to Calvin Coolidge who said very nearly THE EXACT SAME THING to his treasury secretary: he too would not allow any tax cuts that added to the debt.  Andrew Mellon – quite possibly the most brilliant economic mind of his day – did a great deal of research and determined what he believed was the best tax rate.  And the Coolidge administration DID cut income taxes and MASSIVELY increased revenues.  Coolidge and Mellon cut the income tax rate 67.12 percent (from 73 to 24 percent); and revenues not only did not go down, but they went UP by at least 42.86 percent (from $700 billion to over $1 billion).

That’s something called a documented fact.  But that wasn’t all that happened: another incredible thing was that the taxes and percentage of taxes paid actually went UP for the rich.  Because as they were allowed to keep more of the profits that they earned by investing in successful business, they significantly increased their investments and therefore paid more in taxes than they otherwise would have had they continued sheltering their money to protect themselves from the higher tax rates.  Liberals ignore reality, but it is simply true.  It is a fact.  It happened.

Then FDR came along and raised the tax rates again and the opposite happened: we collected less and less revenue while the burden of taxation fell increasingly on the poor and middle class again.  Which is exactly what Obama wants to do.

People don’t realize that John F. Kennedy, one of the greatest Democrat presidents, was a TAX CUTTER who believed the conservative economic philosophy that cutting tax rates would in fact increase tax revenues.  He too cut taxes, and he too increased tax revenues.

So we get to Ronald Reagan, who famously cut taxes.  And again, we find that Reagan cut that godawful liberal tax rate during an incredibly godawful liberal-caused economic recession, and he increased tax revenue by 20.71 percent (with revenues increasing from $956 billion to $1.154 trillion).  And again, the taxes were paid primarily by the rich:

“The share of the income tax burden borne by the top 10 percent of taxpayers increased from 48.0 percent in 1981 to 57.2 percent in 1988. Meanwhile, the share of income taxes paid by the bottom 50 percent of taxpayers dropped from 7.5 percent in 1981 to 5.7 percent in 1988.”

So we get to George Bush and the Bush tax cuts that liberals and in particular Obama have just demonized up one side and demagogued down the other.  And I can simply quote the New York Times AT the time:

Sharp Rise in Tax Revenue to Pare U.S. Deficit By EDMUND L. ANDREWS Published: July 13, 2005

WASHINGTON, July 12 – For the first time since President Bush took office, an unexpected leap in tax revenue is about to shrink the federal budget deficit this year, by nearly $100 billion.

A Jump in Corporate Payments On Wednesday, White House officials plan to announce that the deficit for the 2005 fiscal year, which ends in September, will be far smaller than the $427 billion they estimated in February.

Mr. Bush plans to hail the improvement at a cabinet meeting and to cite it as validation of his argument that tax cuts would stimulate the economy and ultimately help pay for themselves.

Based on revenue and spending data through June, the budget deficit for the first nine months of the fiscal year was $251 billion, $76 billion lower than the $327 billion gap recorded at the corresponding point a year earlier.

The Congressional Budget Office estimated last week that the deficit for the full fiscal year, which reached $412 billion in 2004, could be “significantly less than $350 billion, perhaps below $325 billion.”

The big surprise has been in tax revenue, which is running nearly 15 percent higher than in 2004. Corporate tax revenue has soared about 40 percent, after languishing for four years, and individual tax revenue is up as well.

And of course the New York Times, as reliable liberals, use the adjective whenever something good happens under conservative policies and whenever something bad happens under liberal policies: ”unexpected.”   But it WASN’T ”unexpected.”  It was EXACTLY what Republicans had said would happen and in fact it was exactly what HAD IN FACT HAPPENED every single time we’ve EVER cut income tax rates.

The truth is that conservative tax policy has a perfect track record: every single time it has ever been tried, we have INCREASED tax revenues while not only exploding economic activity and creating more jobs, but encouraging the wealthy to pay more in taxes as well.  And liberals simply dishonestly refuse to acknowledge documented history.

Meanwhile, liberals also have a perfect record … of FAILURE.  They keep raising taxes and keep not understanding why they don’t get the revenues they predicted.

The following is a section from my article, “Tax Cuts INCREASE Revenues; They Have ALWAYS Increased Revenues“, where I document every single thing I said above:

The Falsehood That Tax Cuts Increase The Deficit

Now let’s take a look at the utterly fallacious view that tax cuts in general create higher deficits.

Let’s take a trip back in time, starting with the 1920s.  From Burton Folsom’s book, New Deal or Raw Deal?:

In 1921, President Harding asked the sixty-five-year-old [Andrew] Mellon to be secretary of the treasury; the national debt [resulting from WWI] had surpassed $20 billion and unemployment had reached 11.7 percent, one of the highest rates in U.S. history.  Harding invited Mellon to tinker with tax rates to encourage investment without incurring more debt. Mellon studied the problem carefully; his solution was what is today called “supply side economics,” the idea of cutting taxes to stimulate investment.  High income tax rates, Mellon argued, “inevitably put pressure upon the taxpayer to withdraw this capital from productive business and invest it in tax-exempt securities. . . . The result is that the sources of taxation are drying up, wealth is failing to carry its share of the tax burden; and capital is being diverted into channels which yield neither revenue to the Government nor profit to the people” (page 128).

Mellon wrote, “It seems difficult for some to understand that high rates of taxation do not necessarily mean large revenue to the Government, and that more revenue may often be obtained by lower taxes.”  And he compared the government setting tax rates on incomes to a businessman setting prices on products: “If a price is fixed too high, sales drop off and with them profits.”

And what happened?

“As secretary of the treasury, Mellon promoted, and Harding and Coolidge backed, a plan that eventually cut taxes on large incomes from 73 to 24 percent and on smaller incomes from 4 to 1/2 of 1 percent.  These tax cuts helped produce an outpouring of economic development – from air conditioning to refrigerators to zippers, Scotch tape to radios and talking movies.  Investors took more risks when they were allowed to keep more of their gains.  President Coolidge, during his six years in office, averaged only 3.3 percent unemployment and 1 percent inflation – the lowest misery index of any president in the twentieth century.

Furthermore, Mellon was also vindicated in his astonishing predictions that cutting taxes across the board would generate more revenue.  In the early 1920s, when the highest tax rate was 73 percent, the total income tax revenue to the U.S. government was a little over $700 million.  In 1928 and 1929, when the top tax rate was slashed to 25 and 24 percent, the total revenue topped the $1 billion mark.  Also remarkable, as Table 3 indicates, is that the burden of paying these taxes fell increasingly upon the wealthy” (page 129-130).

Now, that is incredible upon its face, but it becomes even more incredible when contrasted with FDR’s antibusiness and confiscatory tax policies, which both dramatically shrunk in terms of actual income tax revenues (from $1.096 billion in 1929 to $527 million in 1935), and dramatically shifted the tax burden to the backs of the poor by imposing huge new excise taxes (from $540 million in 1929 to $1.364 billion in 1935).  See Table 1 on page 125 of New Deal or Raw Deal for that information.

FDR both collected far less taxes from the rich, while imposing a far more onerous tax burden upon the poor.

It is simply a matter of empirical fact that tax cuts create increased revenue, and that those [Democrats] who have refused to pay attention to that fact have ended up reducing government revenues even as they increased the burdens on the poorest whom they falsely claim to help.

Let’s move on to John F. Kennedy, one of the most popular Democrat presidents ever.  Few realize that he was also a supply-side tax cutter.

Kennedy said:

“It is a paradoxical truth that tax rates are too high and tax revenues are too low and the soundest way to raise the revenues in the long run is to cut the rates now … Cutting taxes now is not to incur a budget deficit, but to achieve the more prosperous, expanding economy which can bring a budget surplus.”

– John F. Kennedy, Nov. 20, 1962, president’s news conference

“Lower rates of taxation will stimulate economic activity and so raise the levels of personal and corporate income as to yield within a few years an increased – not a reduced – flow of revenues to the federal government.”

– John F. Kennedy, Jan. 17, 1963, annual budget message to the Congress, fiscal year 1964

“In today’s economy, fiscal prudence and responsibility call for tax reduction even if it temporarily enlarges the federal deficit – why reducing taxes is the best way open to us to increase revenues.”

– John F. Kennedy, Jan. 21, 1963, annual message to the Congress: “The Economic Report Of The President”

“It is no contradiction – the most important single thing we can do to stimulate investment in today’s economy is to raise consumption by major reduction of individual income tax rates.”

– John F. Kennedy, Jan. 21, 1963, annual message to the Congress: “The Economic Report Of The President”

“Our tax system still siphons out of the private economy too large a share of personal and business purchasing power and reduces the incentive for risk, investment and effort – thereby aborting our recoveries and stifling our national growth rate.”

– John F. Kennedy, Jan. 24, 1963, message to Congress on tax reduction and reform, House Doc. 43, 88th Congress, 1st Session.

“A tax cut means higher family income and higher business profits and a balanced federal budget. Every taxpayer and his family will have more money left over after taxes for a new car, a new home, new conveniences, education and investment. Every businessman can keep a higher percentage of his profits in his cash register or put it to work expanding or improving his business, and as the national income grows, the federal government will ultimately end up with more revenues.”

– John F. Kennedy, Sept. 18, 1963, radio and television address to the nation on tax-reduction bill

Which is to say that modern Democrats are essentially calling one of their greatest presidents a liar when they demonize tax cuts as a means of increasing government revenues.

So let’s move on to Ronald Reagan.  Reagan had two major tax cutting policies implemented: the Economic Recovery Tax Act (ERTA) of 1981, which was retroactive to 1981, and the Tax Reform Act of 1986.

Did Reagan’s tax cuts decrease federal revenues?  Hardly:

We find that 8 of the following 10 years there was a surplus of revenue from 1980, prior to the Reagan tax cuts.  And, following the Tax Reform Act of 1986, there was a MASSIVE INCREASEof revenue.

So Reagan’s tax cuts increased revenue.  But who paid the increased tax revenue?  The poor?  Opponents of the Reagan tax cuts argued that his policy was a giveaway to the rich (ever heard that one before?) because their tax payments would fall.  But that was exactly wrong.  In reality:

“The share of the income tax burden borne by the top 10 percent of taxpayers increased from 48.0 percent in 1981 to 57.2 percent in 1988. Meanwhile, the share of income taxes paid by the bottom 50 percent of taxpayers dropped from 7.5 percent in 1981 to 5.7 percent in 1988.”

So Ronald Reagan a) collected more total revenue, b) collected more revenue from the rich, while c) reducing revenue collected by the bottom half of taxpayers, and d) generated an economic powerhouse that lasted – with only minor hiccups – for nearly three decades.  Pretty good achievement considering that his predecessor was forced to describe his own economy as a “malaise,” suffering due to a “crisis of confidence.” Pretty good considering that President Jimmy Carter responded to a reporter’s question as to what he would do about the problem of inflation by answering, “It would be misleading for me to tell any of you that there is a solution to it.”

Reagan whipped inflation.  Just as he whipped that malaise and that crisis of confidence.

________

The Laffer Curve, Part III: Dynamic Scoring

By Everette Hatcher III | Also posted in Cato Institute, Ronald Reagan | Comments (0)

Dan Mitchell: Lessons from Reaganomics for the 21st Century, Part II

November 15, 2023 – 10:29 pm

—

Lessons from Reaganomics for the 21st Century, Part II

In Part I of this series, I looked at Ronald Reagan’s reasonably successful track record on government spending (which could be characterized as fantastically successful when compared to other Republican presidents) and explained why we need Reaganomics 2.0 to deal with today’s federal leviathan that is far too big and projected to get even bigger.

In Part II, let’s look at Reagan’s track record on tax policy and ask whether we need another dose of “supply-side economics.”

When he took office, one of Reagan’s main goals was to lower marginal tax rates on American households. This was necessary for two reasons.

  • First, tax rates were too high, including a staggering 70-percent top rate for the personal income tax.
  • Second, more and more Americans were being hit by punitive tax rates because of “bracket creep.”

Since I’ve already written a lot about the problem of high tax rates, let’s address the second point.

During the 1970s, when inflation was high, there was understandable pressure to increase wages and salaries so that workers did not fall behind.

But when employees got pay raises to keep pace with inflation, that often meant they had to pay higher tax rates even though their inflation-adjusted incomes stayed constant.

This was not a trivial problem. Here’s a table from the study I recently wrote for the Club for Growth Foundation. As you can see, middle class households wound up paying much higher marginal tax rates as the 1970s came to a close.

President Reagan recognized this problem and he did two things to help American families.

  • First, he lowered tax rates across board as part of his 1981 tax cut and his 1986 tax reform, with the top tax rate dropping from 70 percent in 1980 to 28 percent in 1988.
  • Second, he “indexed” the personal income tax for inflation, meaning households no longer would be pushed into higher tax brackets because of bad monetary policy.

These reforms helped produce an economic boom.

Here’s some of what I wrote in the study.

In 1981, Reagan convinced Congress to enact the Economic Recovery Tax Act, which phased in lower income tax rates for all taxpayers. …Equally important, Reagan got Congress to adopt “indexing,” which meant that tax brackets were automatically adjusted for inflation. That reform ensured that government no longer profited from inflation. During his second term, Reagan then worked with Congress to approve the Tax Reform Act of 1986. That legislation further lowered tax rates for all taxpayers. …the Reagan tax cuts helped trigger an economic boom. The United States experienced a record economic expansion, with millions of jobs being created and family incomes rising to record levels after the malaise and stagnation of the Carter years. Households earned more money, and they got to keep a greater share of their earnings. Net worth also increased substantially, putting America’s middle class in a very strong position.

By the way, even though my left-leaning friends are viscerally opposed to lower tax rates for upper-income taxpayers, it’s worth noting that the IRS wound up collecting more money from the rich after Reagan slashed tax rates. A lot more money.

All things considered, the Reagan tax cuts were a smashing success (notwithstanding Paul Krugman’s protestations).

But is Reagan’s supply-side tax policy still relevant today?

Some people think tax policy is no longer a problem because individual income tax rates are lower than they were when Reagan took office and indexing is still protecting people from inflation (which has recently been a problem).

For what it’s worth, I think personal income tax rates are still far too high.

But the main reason that we need Reaganomics 2.0 is that the United States faces a major problem with double taxation. To be more specific, the IRS imposes very harsh tax rates on income that is saved and invested.

Here’s Figure 9 from the paper. You can see on the left that America’s personal income tax rate is only slightly higher than the average of other rich nations and the corporate tax rate is only somewhat higher.

But you can see on the right where America really lags, with significantly higher tax burdens on capital gainsand dividend income.

Incidentally, the chart also shows that the United States would be wildly uncompetitive if Biden’s tax proposals were enacted.

So the obvious takeaway is that Biden’s class-warfare plan should never be resuscitated and that lawmakers instead should lower (or ideally eliminate) the capital gains tax and to reduce (or hopefully eliminate) the double tax on dividends.

P.S. The capital gains tax is not indexed for inflation, so people often are hit by that tax even when they lose money on an investment. That’s obviously another area where we need Reaganomics 2.0.

Remarks at a Rally Supporting the Proposed Constitutional Amendment for a Balanced Federal Budget

For more information on the ongoing works of President Reagan’s Foundation, please visit http://www.reaganfoundation.org

_______________

Ronald Reagan was a firm believer in the Balanced Budget Amendment and Milton Friedman was a key advisor to Reagan. Friedman’s 1980 film series taught the lesson of restraining growth of the federal budget.

UHLER: A better balanced budget amendment

Vital changes needed to keep road to further reforms open

There is a problem brewing in the House of Representatives of which most conservatives in and outside Congress are largely unaware. It has to do with H.J. Res. 1 – the balanced budget amendment – soon to be voted on per the debt-ceiling “deal” struck by Congress and the president. While H.J. Res. 1 is a solid first effort – and we have urged support for it as a symbolic vote – it is possibly fatally flawed and should be revised.

After years of indifference to constitutional fiscal discipline, Congress is once again stirring. In 1982, then-President Ronald Reagan, convened a federal amendment drafting committee led by Milton Friedman, Jim Buchanan, Bill Niskanen, Walter Williams and many others, and fashioned Senate Joint Resolution 58, a tax limitation-balanced budget amendment, which garnered 67 votes in the Senate under the able leadership of Sen. Orrin G. Hatch, Utah Republican. After a successful discharge petition forced a House vote, the amendment failed to achieve the two-thirds vote necessary in a Tip O’Neill-Jim Wright-controlled House. In 1996, Newt Gingrich and company came within one vote of passing a fiscal amendment in the House.

Currently, H.J. Res. 1 is designed as a classic balanced budget amendment in which outlays can be as great as, but no more than, receipts for that year. However, it requires an estimate of receipts, which is notoriously faulty, and it does not necessarily produce surpluses with which to pay down our massive debt. Furthermore, it contains a second limit on outlays – “not more than 18 percent of the economic output of the United States” – without defining such output or resolving the inevitable conflict between the outlay calculations in the two provisions.

This could be fixed by restructuring the amendment as a spending or outlay limit based on prior year receipts or outlays (known numbers), adjusted only for inflation and population changes. This will produce surpluses in most years with which to pay down debts and will reduce government spending as a share of gross domestic product over time, right-sizing government and increasing the rate of economic growth for the benefit of all citizens, especially those least able to compete.

Section 4 of H.J. Res. 1 might best be described as a supreme example of the law of unintended consequences. This section imposes on the president a constitutional responsibility to present a balanced budget. Surely, the drafters were saying to themselves “We’ll fix that guy in the White House. Now he will have to fess up and either propose specific tax increases or specific spending cuts. He won’t be able to duck reality any longer.” The only problem is that this section is at odds with our Constitution in that it gives the president a constitutional power over fiscal matters never intended by the Founders.

For much of our history, the president did not propose a budget. In the Budget and Accounting Act of 1921, which established the Bureau of the Budget, now the Office of Management and Budget and the General Accounting Office, the president was statutorily authorized to propose a budget. Presidents have always shaped the budget and spending using their negotiating opportunities and veto pen. Wearing their chief administrator hat, earlier presidents sought to save money from the amounts appropriated by Congress, getting things done for less, impounding funds they did not think essential to spend. Congress‘ ceiling on an appropriation was not also the spending floor for the president, as it is now.

Section 4 appears to give the president co-equal power with Congress not only to present a budget but to shape it, in conflict with congressional budget authority. At a minimum, it is likely to create a conflict over the amount of allowed annual spending. The president surely will be guided by his own Office of Management and Budget, whose budget and receipts calculations will undoubtedly differ from the Congressional Budget Office’s numbers that will direct Congress. We should not start the budget process each year with this kind of conflict.

It would be better to restore the historic role of the president to impound and otherwise reduce expenditures by repealing and revising appropriate portions of the Congressional Budget and Impoundment Control Act of 1974 so a fiscally conservative president is a revitalized partner in cutting the size of government.

Section 5 requires a supermajority vote for “a bill to increase revenues.” Whether one agrees or disagrees with making tax increases more difficult, this language is troublesome because it requires some government bureaucrat or bureaucracy to make a calculation or estimate of the effect of tax law changes on revenues. Proponents of a bill to increase cash flow to the government will argue that their tax law changes are “revenue neutral” and will likely persuade the Joint Committee on Taxation or Congressional Budget Office to back them up. Once again, estimators would be in control.

If we ever expect to convert our income-based tax system to a consumption tax, better not to require a two-thirds vote as liberals will use such a supermajority voting rule to stymie tax system reform.

There are other issues, as well, with debt limit and national emergency supermajority votes and definitions. While this balanced budget amendment – H.J. Res. 1 – has deserved a “yes” vote as a demonstration of commitment to constitutional fiscal discipline, it can and must be revised before the showdown vote in the House this fall.

Lewis K. Uhler is president of the National Tax Limitation Committee.

By Everette Hatcher III | Also posted in Milton Friedman, Ronald Reagan, spending out of control | Comments (0)

Dan Mitchell: The Link Between Spending Restraint and Good Tax Policy

October 17, 2023 – 7:12 pm

The Link Between Spending Restraint and Good Tax Policy

Late last year, I praised lawmakers in Georgia and North Carolina for being fiscally responsible.

The burden of government spending in those states was constrained between 2020 and 2022, even though that was a period when handouts from Washington were leading other states to squander money recklessly.

In that column, however, I did not mention Iowa.

And that was probably an oversight because “the Florida of the north” deserves more attention.

To be more specific, the Hawkeye state is pursuing good tax policy and good spending policy, and that superior combination recently led the Wall Street Journal to opine on Iowa’s success.

Kim Reynolds…has made her state a model of good tax policy… Iowa wrapped up its fiscal year with a surplus of $1.83 billion. …the third surplus in a row in the Governor’s tenure. These results have followed significant tax cuts that have helped the state’s economy. …The top rate has dropped to 6% from 8.53% since 2022, and it is scheduled to drop to a flat 3.9% rate by 2026. Iowa’s top corporate tax rate next year will drop to 7.1% from 9.8% in 2022, and it is scheduled to fall to 5.5% if the state keeps hitting its revenue targets. …Crucially, state spending has grown modestly since 2021… Now the Governor wants to raise her bet on this winning formula. “My goal is to get to zero individual income-tax rate by the end of this second term” in 2027, she said. …The Iowa tax experience belies the claims of the left that cutting taxes produces deficits. In Iowa the tax cuts have helped to produce record surpluses that then can be used to cut income-tax rates further.

The most important part of the above excerpt is “state spending has grown modestly since 2021.”

Was Iowa as prudent as Georgia and North Carolina between 2020 and 2022? Not quite, but data from the National Association of State Budget Officers shows that Iowa easily beat the national average.

And it appears that Iowa will do even better when there is final data for 2023 and 2024.

John Hendrickson of the Iowans for Tax Relief Foundation recently wrote that, “During this past legislative session, the legislature enacted an $8.5 billion budget for fiscal year 2024… This was only a slight increase from the $8.2 billion fiscal year 2023 budget.” And six months ago he and Vance Ginn notedthat, “The $8.2 billion budget for fiscal year 2023 represented a mere 1 percent increase from the prior year.”

The moral of the story is Governor Reynolds has the right formula. Because she has been restraining spending, it has been feasible to enact pro-growth tax reform. And because of continuing spending restraint, her goal of having no state income tax is very achievable.

Too bad Republicans in DC are not copying that formula.

P.S. Speaking of copying, other states should learn from Iowa’s enactment of universal school choice.

P.P.S. I’ve previously cited North Carolina as an example of a state that has restrained spending and lowered tax burdens.

I enjoyed this article below because it demonstrates that the Laffer Curve has been working for almost 100 years now when it is put to the test in the USA. I actually got to hear Arthur Laffer speak in person in 1981 and he told us in advance what was going to happen the 1980’s and it all came about as he said it would when Ronald Reagan’s tax cuts took place. I wish we would lower taxes now instead of looking for more revenue through raised taxes. We have to grow the economy:

What Mitt Romney Said Last Night About Tax Cuts And The Deficit Was Absolutely Right. And What Obama Said Was Absolutely Wrong.

Mitt Romney repeatedly said last night that he would not allow tax cuts to add to the deficit.  He repeatedly said it because over and over again Obama blathered the liberal talking point that cutting taxes necessarily increased deficits.

Romney’s exact words: “I want to underline that — no tax cut that adds to the deficit.”

Meanwhile, Obama has promised to cut the deficit in half during his first four years – but instead gave America the highest deficits in the history of the entire human race.

I’ve written about this before.  Let’s replay what has happened every single time we’ve ever cut the income tax rate.

The fact of the matter is that we can go back to Calvin Coolidge who said very nearly THE EXACT SAME THING to his treasury secretary: he too would not allow any tax cuts that added to the debt.  Andrew Mellon – quite possibly the most brilliant economic mind of his day – did a great deal of research and determined what he believed was the best tax rate.  And the Coolidge administration DID cut income taxes and MASSIVELY increased revenues.  Coolidge and Mellon cut the income tax rate 67.12 percent (from 73 to 24 percent); and revenues not only did not go down, but they went UP by at least 42.86 percent (from $700 billion to over $1 billion).

That’s something called a documented fact.  But that wasn’t all that happened: another incredible thing was that the taxes and percentage of taxes paid actually went UP for the rich.  Because as they were allowed to keep more of the profits that they earned by investing in successful business, they significantly increased their investments and therefore paid more in taxes than they otherwise would have had they continued sheltering their money to protect themselves from the higher tax rates.  Liberals ignore reality, but it is simply true.  It is a fact.  It happened.

Then FDR came along and raised the tax rates again and the opposite happened: we collected less and less revenue while the burden of taxation fell increasingly on the poor and middle class again.  Which is exactly what Obama wants to do.

People don’t realize that John F. Kennedy, one of the greatest Democrat presidents, was a TAX CUTTER who believed the conservative economic philosophy that cutting tax rates would in fact increase tax revenues.  He too cut taxes, and he too increased tax revenues.

So we get to Ronald Reagan, who famously cut taxes.  And again, we find that Reagan cut that godawful liberal tax rate during an incredibly godawful liberal-caused economic recession, and he increased tax revenue by 20.71 percent (with revenues increasing from $956 billion to $1.154 trillion).  And again, the taxes were paid primarily by the rich:

“The share of the income tax burden borne by the top 10 percent of taxpayers increased from 48.0 percent in 1981 to 57.2 percent in 1988. Meanwhile, the share of income taxes paid by the bottom 50 percent of taxpayers dropped from 7.5 percent in 1981 to 5.7 percent in 1988.”

So we get to George Bush and the Bush tax cuts that liberals and in particular Obama have just demonized up one side and demagogued down the other.  And I can simply quote the New York Times AT the time:

Sharp Rise in Tax Revenue to Pare U.S. Deficit By EDMUND L. ANDREWS Published: July 13, 2005

WASHINGTON, July 12 – For the first time since President Bush took office, an unexpected leap in tax revenue is about to shrink the federal budget deficit this year, by nearly $100 billion.

A Jump in Corporate Payments On Wednesday, White House officials plan to announce that the deficit for the 2005 fiscal year, which ends in September, will be far smaller than the $427 billion they estimated in February.

Mr. Bush plans to hail the improvement at a cabinet meeting and to cite it as validation of his argument that tax cuts would stimulate the economy and ultimately help pay for themselves.

Based on revenue and spending data through June, the budget deficit for the first nine months of the fiscal year was $251 billion, $76 billion lower than the $327 billion gap recorded at the corresponding point a year earlier.

The Congressional Budget Office estimated last week that the deficit for the full fiscal year, which reached $412 billion in 2004, could be “significantly less than $350 billion, perhaps below $325 billion.”

The big surprise has been in tax revenue, which is running nearly 15 percent higher than in 2004. Corporate tax revenue has soared about 40 percent, after languishing for four years, and individual tax revenue is up as well.

And of course the New York Times, as reliable liberals, use the adjective whenever something good happens under conservative policies and whenever something bad happens under liberal policies: ”unexpected.”   But it WASN’T ”unexpected.”  It was EXACTLY what Republicans had said would happen and in fact it was exactly what HAD IN FACT HAPPENED every single time we’ve EVER cut income tax rates.

The truth is that conservative tax policy has a perfect track record: every single time it has ever been tried, we have INCREASED tax revenues while not only exploding economic activity and creating more jobs, but encouraging the wealthy to pay more in taxes as well.  And liberals simply dishonestly refuse to acknowledge documented history.

Meanwhile, liberals also have a perfect record … of FAILURE.  They keep raising taxes and keep not understanding why they don’t get the revenues they predicted.

The following is a section from my article, “Tax Cuts INCREASE Revenues; They Have ALWAYS Increased Revenues“, where I document every single thing I said above:

The Falsehood That Tax Cuts Increase The Deficit

Now let’s take a look at the utterly fallacious view that tax cuts in general create higher deficits.

Let’s take a trip back in time, starting with the 1920s.  From Burton Folsom’s book, New Deal or Raw Deal?:

In 1921, President Harding asked the sixty-five-year-old [Andrew] Mellon to be secretary of the treasury; the national debt [resulting from WWI] had surpassed $20 billion and unemployment had reached 11.7 percent, one of the highest rates in U.S. history.  Harding invited Mellon to tinker with tax rates to encourage investment without incurring more debt. Mellon studied the problem carefully; his solution was what is today called “supply side economics,” the idea of cutting taxes to stimulate investment.  High income tax rates, Mellon argued, “inevitably put pressure upon the taxpayer to withdraw this capital from productive business and invest it in tax-exempt securities. . . . The result is that the sources of taxation are drying up, wealth is failing to carry its share of the tax burden; and capital is being diverted into channels which yield neither revenue to the Government nor profit to the people” (page 128).

Mellon wrote, “It seems difficult for some to understand that high rates of taxation do not necessarily mean large revenue to the Government, and that more revenue may often be obtained by lower taxes.”  And he compared the government setting tax rates on incomes to a businessman setting prices on products: “If a price is fixed too high, sales drop off and with them profits.”

And what happened?

“As secretary of the treasury, Mellon promoted, and Harding and Coolidge backed, a plan that eventually cut taxes on large incomes from 73 to 24 percent and on smaller incomes from 4 to 1/2 of 1 percent.  These tax cuts helped produce an outpouring of economic development – from air conditioning to refrigerators to zippers, Scotch tape to radios and talking movies.  Investors took more risks when they were allowed to keep more of their gains.  President Coolidge, during his six years in office, averaged only 3.3 percent unemployment and 1 percent inflation – the lowest misery index of any president in the twentieth century.

Furthermore, Mellon was also vindicated in his astonishing predictions that cutting taxes across the board would generate more revenue.  In the early 1920s, when the highest tax rate was 73 percent, the total income tax revenue to the U.S. government was a little over $700 million.  In 1928 and 1929, when the top tax rate was slashed to 25 and 24 percent, the total revenue topped the $1 billion mark.  Also remarkable, as Table 3 indicates, is that the burden of paying these taxes fell increasingly upon the wealthy” (page 129-130).

Now, that is incredible upon its face, but it becomes even more incredible when contrasted with FDR’s antibusiness and confiscatory tax policies, which both dramatically shrunk in terms of actual income tax revenues (from $1.096 billion in 1929 to $527 million in 1935), and dramatically shifted the tax burden to the backs of the poor by imposing huge new excise taxes (from $540 million in 1929 to $1.364 billion in 1935).  See Table 1 on page 125 of New Deal or Raw Deal for that information.

FDR both collected far less taxes from the rich, while imposing a far more onerous tax burden upon the poor.

It is simply a matter of empirical fact that tax cuts create increased revenue, and that those [Democrats] who have refused to pay attention to that fact have ended up reducing government revenues even as they increased the burdens on the poorest whom they falsely claim to help.

Let’s move on to John F. Kennedy, one of the most popular Democrat presidents ever.  Few realize that he was also a supply-side tax cutter.

Kennedy said:

“It is a paradoxical truth that tax rates are too high and tax revenues are too low and the soundest way to raise the revenues in the long run is to cut the rates now … Cutting taxes now is not to incur a budget deficit, but to achieve the more prosperous, expanding economy which can bring a budget surplus.”

– John F. Kennedy, Nov. 20, 1962, president’s news conference

“Lower rates of taxation will stimulate economic activity and so raise the levels of personal and corporate income as to yield within a few years an increased – not a reduced – flow of revenues to the federal government.”

– John F. Kennedy, Jan. 17, 1963, annual budget message to the Congress, fiscal year 1964

“In today’s economy, fiscal prudence and responsibility call for tax reduction even if it temporarily enlarges the federal deficit – why reducing taxes is the best way open to us to increase revenues.”

– John F. Kennedy, Jan. 21, 1963, annual message to the Congress: “The Economic Report Of The President”

“It is no contradiction – the most important single thing we can do to stimulate investment in today’s economy is to raise consumption by major reduction of individual income tax rates.”

– John F. Kennedy, Jan. 21, 1963, annual message to the Congress: “The Economic Report Of The President”

“Our tax system still siphons out of the private economy too large a share of personal and business purchasing power and reduces the incentive for risk, investment and effort – thereby aborting our recoveries and stifling our national growth rate.”

– John F. Kennedy, Jan. 24, 1963, message to Congress on tax reduction and reform, House Doc. 43, 88th Congress, 1st Session.

“A tax cut means higher family income and higher business profits and a balanced federal budget. Every taxpayer and his family will have more money left over after taxes for a new car, a new home, new conveniences, education and investment. Every businessman can keep a higher percentage of his profits in his cash register or put it to work expanding or improving his business, and as the national income grows, the federal government will ultimately end up with more revenues.”

– John F. Kennedy, Sept. 18, 1963, radio and television address to the nation on tax-reduction bill

Which is to say that modern Democrats are essentially calling one of their greatest presidents a liar when they demonize tax cuts as a means of increasing government revenues.

So let’s move on to Ronald Reagan.  Reagan had two major tax cutting policies implemented: the Economic Recovery Tax Act (ERTA) of 1981, which was retroactive to 1981, and the Tax Reform Act of 1986.

Did Reagan’s tax cuts decrease federal revenues?  Hardly:

We find that 8 of the following 10 years there was a surplus of revenue from 1980, prior to the Reagan tax cuts.  And, following the Tax Reform Act of 1986, there was a MASSIVE INCREASEof revenue.

So Reagan’s tax cuts increased revenue.  But who paid the increased tax revenue?  The poor?  Opponents of the Reagan tax cuts argued that his policy was a giveaway to the rich (ever heard that one before?) because their tax payments would fall.  But that was exactly wrong.  In reality:

“The share of the income tax burden borne by the top 10 percent of taxpayers increased from 48.0 percent in 1981 to 57.2 percent in 1988. Meanwhile, the share of income taxes paid by the bottom 50 percent of taxpayers dropped from 7.5 percent in 1981 to 5.7 percent in 1988.”

So Ronald Reagan a) collected more total revenue, b) collected more revenue from the rich, while c) reducing revenue collected by the bottom half of taxpayers, and d) generated an economic powerhouse that lasted – with only minor hiccups – for nearly three decades.  Pretty good achievement considering that his predecessor was forced to describe his own economy as a “malaise,” suffering due to a “crisis of confidence.” Pretty good considering that President Jimmy Carter responded to a reporter’s question as to what he would do about the problem of inflation by answering, “It would be misleading for me to tell any of you that there is a solution to it.”

Reagan whipped inflation.  Just as he whipped that malaise and that crisis of confidence.

________

The Laffer Curve, Part III: Dynamic Scoring

By Everette Hatcher III | Also posted in Cato Institute, Ronald Reagan | Comments (0)

Dan Mitchell: Mirror, Mirror, on the Wall, Which State Provides the Most Handouts of All?

October 17, 2023 – 7:00 pm

Mirror, Mirror, on the Wall, Which State Provides the Most Handouts of All?

Back in 2010, I put together a “Moocher Index” based on the percentage of non-poor people in each state getting government handouts.

Based on that back-of-the-envelope calculation, Vermont, Mississippi, and Maine were the biggest moocher states and Nevada, Colorado, and Arizona were the most self-reliant states.

Then, in 2013, I shared some data looking at the value of welfare benefits in each state, compared to both the median wage and to the federal poverty rate.

Sadly, those numbers showed it was more lucrative in many states (especially in the Northeast and Hawaii) to live off the government rather than work.

Today, let’s look at which states are the most generous with handouts. The Committee to Unleash Prosperity shared this table yesterday, which ranks states based on the level of per-capita spending on public welfare.

The folks at CTUP highlighted California and Florida. Since I usually do New York-vs-Florida and California-vs-Texas comparisons, I added a couple more numbers.

P.S. Looking at the above numbers, keep in mind that there is a Laffer Curve-type relationship between redistribution spending and the poverty rate. So states like Florida and Texas presumably are reducing poverty while states such as New York and California are subsidizing it.

P.P.S. Compared to other industrialized nations, the United States has a relatively low level of welfare spending.

The best way to destroy the welfare trap is to put in Milton Friedman’s negative income tax.

A Picture of How Redistribution Programs Trap the Less Fortunate in Lives of Dependency

I wrote last year about the way in which welfare programs lead to very high implicit marginal tax rates on low-income people. More specifically, they lose handouts when they earn income. As such, it is not very advantageous for them to climb the economic ladder because hard work is comparatively unrewarding.

Thanks to the American Enterprise Institute, we now have a much more detailed picture showing the impact of redistribution programs on the incentive to earn more money.

It’s not a perfect analogy since people presumably prefer cash to in-kind handouts, but the vertical bars basically represent living standards for any given level of income that is earned (on the horizontal axis).

Needless to say, there’s not much reason to earn more income when living standards don’t improve. May as well stay home and good off rather than work hard and produce.

This is why income redistribution is so destructive, not just to taxpayers, but also to the people who get trapped into dependency. Which is exactly the point made in this video.

P.S. Most of you know that I’m not a fan of the Organization for Economic Cooperation and Development because the Paris-based bureaucracy has such statist impulses. But even the OECD has written about the negative impact of overly generous welfare programs on incentives for productive behavior.

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In the last few years the number of people receiving Food Stamps has skyrocketed. President Obama has not cut any federal welfare programs but has increased them, and he  has used class warfare over and over the last few months and according to him equality at the finish line is the equality that we should […]

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By Everette Hatcher III | Also posted in Cato Institute, Milton Friedman, spending out of control | Comments (0)

Dan Mitchell: The drip, drip, drip of the finance industry’s exit from New York and California has been measured anecdotally… Elliott Management decamped to West Palm Beach. AllianceBernstein to Nashville. Charles Schwab moved to suburban Dallas. Now, for the first time, there are hard numbers quantifying the exact scope of the exodus

August 30, 2023 – 6:18 am

_________

The Slow-Motion Suicide of New York and California

Two of the worst states for tax policy are Californiaand New York.

They have punitive income tax rates, high sales taxes, and myriad other ways of diverting money from the productive sector of the economy to finance bloated public sectors.

I’ve written several time that greedy politicians in these states are driving away taxpayers. Simply stated, successful people are “voting with their feet” and choosing to move to states with lower tax burdens.

Especially states with no income taxes.

But it’s not just people that are moving. As shown by these maps, money is also escaping from California and New York.

The above map comes from Linly Lin and Tom Maloney, who wrote a column for Bloomberg about money-management firms fleeing high-tax states.

Here are some excerpts from their report.

The drip, drip, drip of the finance industry’s exit from New York and California has been measured anecdotally… Elliott Management decamped to West Palm Beach. AllianceBernstein to Nashville. Charles Schwab moved to suburban Dallas. Now, for the first time, there are hard numbers quantifying the exact scope of the exodus.Both states have in the past three years lost firms that managed close to $1 trillion of assets…The exodus from the Northeast and West Coast has meant the loss of thousands of high-paying jobs, straining city and state finances by sapping tax revenue. …The moves, often born out of a desire for lower taxes, …spurring plenty of angst in the places left behind… From the start of 2020 through the end of March 2023, more than 370 investment companies — about 2.5% of the US total, and managing $2.7 trillion in assets — moved their headquarters to a new state. The vast majority of the migration was out of high-cost-of-living locales in the Northeast and on the West Coast and into Florida, Texas and other Sun Belt refuges.

Here’s another map from the column.

In this case, the authors look at how Texas and Florida are the main beneficiaries of America’s internal money migration.

By the way, I think taxes play a much bigger role than weather.

Nobody moves from California to Texas for the climate. Meanwhile, it’s possible that weather helps to explain the big shift from New York to Florida, but keep in mind that most people find Florida summers just as unpleasant as New York winters.

I’ll close by noting that red states have been outperforming blue states, and this Bloomberg data is another piece of powerful evidence to add to our collection.

P.S. My series on Texas vs California and Florida vs New York  also show the superiority of low taxes compared to higher taxes. Maybe, just maybe, there’s a lesson to be learned.

Lessons from the Texas Budget

I shared some data last month from the National Association of State Budget Officers to show that Texas lawmakers have been more fiscally responsible than California lawmakers over the past couple of years.

California politicians were more profligate in 2021 when politicians in Washington were sending lots of money to states because of the pandemic.

And California politicians also increased spending faster in 2022 when conditions (sort of) returned to normal.

These results are not a surprise given California’s reputation for profligacy.

What may be a surprise, however, is that (relative) frugality in Texas has only existed for a handful of years. Here are some excerpts from a report written for the Texas Public Policy Foundation by Vance Ginn and Daniel Sánchez-Piñol.

Over the last two decades, Texas’ total state biennial budget growth has had two different phases. The first phase had budget growth above the rate of population growth plus inflation for five of the six budgets from 2004–05 to 2014–15. The second phase…had budget growth below this rate… Figure 1 shows the average biennial growth rates for the six state budgets passed before 2015 and for the four since then.The average biennial budget growth rate in the former period was 12% compared with the rate of population growth plus inflation of 7.4%. In the latter period, the average biennial growth rate of the budget was cut by more than half to 5.2%, which was well below the estimated rate of population growth plus inflation of 9.4%. This improved budget picture must be maintained to correct for the excessive budget growth in the earlier period. …there could be a $27 billion GR surplus at the end of the current 2022–23 biennium. …the priority should be to effectively limit or, even better, freeze the state budget. Texas should use most, if not all, of the resulting surplus to reduce…property tax collections…these taxes could be cut substantially by restraining spending and using the surplus to reduce school district M&O property taxes to ultimately eliminate them over time.

The article has this chart, which is a good illustration of the shift to fiscal restraint in Texas.

For all intents and purposes, Texas in 2016 started abiding by fiscal policy’s Golden Rule.

And this means the burden of government is slowly but surely shrinking compared to the private sector.

That approach is paying big dividends. Spending restraint means there is now a big budget surplus, which is enabling a discussion of how to reduce property taxes (Texas has no income tax).

P.S. I shared data back in 2020 looking at the fiscal performance of Texas and Florida compared to New York and California.

Texas vs. California, Part VII

To begin the seventh edition of our series comparing policy in Texas and California (previous entries in March 2010, February 2013, April 2013, October 2018, June 2019, and December 2020), here’s a video from Prager University.

There will be a lot of information in today’s column, so if you’re pressed for time, here are three sentences that tell you what you need to know.

California has all sorts of natural advantages over Texas, especially endless sunshine and beautiful topography.

Texas has better government policy than California, most notably in areas such as taxation and regulation.

Since people are moving from the Golden State to the Lone Star State, public policy seems to matter more than natural beauty.

Now let’s look at a bunch of evidence to support those three sentences.

We’ll start with an article by Joel Kotkin of Chapman University.

If one were to explore the most blessed places on earth, California, my home for a half century, would surely be up there. …its salubrious climate, spectacular scenery, vast natural resources… President Biden recently suggested that he wants to “make America California again”. Yet…he should consider whether the California model may be better seen as a cautionary tale than a roadmap to a better future… California now suffers the highest cost-adjusted poverty rate in the country, and the widest gap between middle and upper-middle income earners. …the state has slowly morphed into a low wage economy. Over the past decade, 80% of the state’s jobs have paid under the median wage — half of which are paid less than $40,000…minorities do better today outside of California, enjoying far higher adjusted incomes and rates of homeownership in places like Atlanta and Dallas than in San Francisco and Los Angeles. Almost one-third of Hispanics, the state’s largest ethnic group, subsist below the poverty line, compared with 21% outside the state. …progressive…policies have not brought about greater racial harmony, enhanced upward mobility and widely based economic growth.

Next we have some business news from the San Francisco Chronicle.

Business leaders fear tech giant Oracle’s recent announcement that it is leaving the Bay Area for Austin, Texas, will lead to more exits unless some fundamental political and economic changes are made to keep the region attractive and competitive. “This is something that we have been warning people about for several years. California is not business friendly, we should be honest about it,” said Kenneth Rosen, chairman of the UC Berkeley Fisher Center for Real Estate and Urban Economics.Bay Area Council President Jim Wunderman said… “From consulting companies to tax lawyers to bankers and commercial real estate firms, every person I talk with who provides services to big Bay Area corporations are telling me that their clients are strategizing about leaving…” Charles Schwab, McKesson and Hewlett Packard Enterprise have all exited the high-cost, high-tax, high-regulation Bay Area for a less-expensive, less-regulated and business-friendlier political climate. All of them rode off to Texas. …the pace of the departures appears to be increasing. …A recent online survey of 2,325 California residents, taken between Nov. 4 and Nov. 23 by the Public Policy Institute of California, found 26% of residents have seriously considered moving out of state and that 58% say that the American Dream is harder to achieve in California than elsewhere.

Are California politicians trying to make things better, in hopes of stopping out-migration to places such as Texas?

Not according to this column by Hank Adler in the Wall Street Journal.

California’s Legislature is considering a wealth tax on residents, part-year residents, and any person who spends more than 60 days inside the state’s borders in a single year. Even those who move out of state would continue to be subject to the tax for a decade… Assembly Bill 2088 proposes calculating the wealth tax based on current world-wide net worth each Dec. 31. For part-year and temporary residents, the tax would be proportionate based on their number of days in California. The annual tax would be on current net worth and therefore would include wealth earned, inherited or obtained through gifts or estates long before and long after leaving the state. …The authors of the bill estimate the wealth tax will provide Sacramento $7.5 billion in additional revenue every year. Another proposal—to increase the top state income-tax rate to 16.8%—would annually raise another $6.8 billion. Today, California’s wealthiest 1% pay approximately 46% of total state income taxes. …the Legislature looks to the wealthiest Californians to fill funding gaps without considering the constitutionality of the proposals and the ability of people and companies to pick up and leave the state, which news reports suggest they are doing in large numbers. …As of this moment, there are no police roadblocks on the freeways trying to keep moving trucks from leaving California. If A.B. 2088 becomes law, the state may need to consider placing some.

The late (and great) Walter Williams actually joked back in 2012that California might set up East German-style border checkpoints. Let’s hope satire doesn’t become reality.

But what isn’t satire is that people are fleeing the state (along with other poorly governed jurisdictions).

Simply state, the blue state model of high taxes and big government is not working (just as it isn’t working in countries with high taxes and big government).

Interestingly, even the New York Times recognizes that there is a problem in the state that used to be a role model for folks on the left.

Opining for that outlet at the start of the month, Brett Stephens raised concerns about the Golden State.

…today’s Democratic leaders might look to the very Democratic state of California as a model for America’s future. You remember California: People used to want to move there, start businesses, raise families, live their American dream. These days, not so much. Between July 2019 and July 2020, more people — 135,400 to be precise — left the state than moved in… No. 1 destination: Texas, followed by Arizona, Nevada and Washington. Three of those states have no state income tax.

California, by contrast, has very high taxes. Not just an onerous income tax, but high taxes across the board.

Californians also pay some of the nation’s highest sales tax rates (8.66 percent) and corporate tax rates (8.84 percent), as well as the highest taxes on gasoline (63 cents on a gallon as of January, as compared with 20 cents in Texas).

Sadly, these high taxes don’t translate into good services from government.

The state ranks 21st in the country in terms of spending per public school pupil, but 27th in its K-12 educational outcomes. It ties Oregon for third place among states in terms of its per capita homeless rate. Infrastructure? As of 2019, the state had an estimated $70 billion in deferred maintenance backlog. Debt? The state’s unfunded pension liabilities in 2019 ran north of $1.1 trillion, …or $81,300 per household.

Makes you wonder whether the rest of the nation should copy that model?

Democrats hold both U.S. Senate seats, 42 of its 53 seats in the House, have lopsided majorities in the State Assembly and Senate, run nearly every big city and have controlled the governor’s mansion for a decade. If ever there was a perfect laboratory for liberal governance, this is it. So how do you explain these results? …If California is a vision of the sort of future the Biden administration wants for Americans, expect Americans to demur.

Some might be tempted to dismiss Stephens’ column because he is considered the token conservative at the New York Times.

But Ezra Klein also acknowledges that California has a problem, and nobody will accuse him of being on the right side of the spectrum.

Here’s some of what he wrote in his column earlier this month for the New York Times.

I love California. I was born and raised in Orange County. I was educated in the state’s public schools and graduated from the University of California system… But for that very reason, our failures of governance worry me. California has the highest poverty rate in the nation,when you factor in housing costs, and vies for the top spot in income inequality, too. …but there’s a reason 130,000 more people leave than enter each year. California is dominated by Democrats, but many of the people Democrats claim to care about most can’t afford to live there. …California, as the biggest state in the nation, and one where Democrats hold total control of the government, carries a special burden. If progressivism cannot work here, why should the country believe it can work anywhere else?

Kudos to Klein for admitting problems on his side (just like I praise the few GOPers who criticized Trump’s big-government policies).

But his column definitely had some quirky parts, such as when he wrote that, “There are bright spots in recent years…a deeply progressive plan to tax the wealthy.”

That’s actually a big reason for the state’s decline, not a “bright spot.”

I’m not the only one to recognize the limitations of his column.

Kevin Williamson wrote an entire rebuttal for National Review.

Who but Ezra Klein could survey the wreck left-wing Democrats have made of California and conclude that the state’s problem is its excessive conservatism? …Klein the rhetorician anticipates objections on this front and writes that he is not speaking of “the political conservatism that privatizes Medicare, but the temperamental conservatism that” — see if this formulation sounds at all familiar — “stands athwart change and yells ‘Stop!’”…California progressives have progressive policies and progressive power, and they like it that way. That is the substance of their conservatism. …Klein and others of his ilk like to present themselves as dispassionate pragmatists, enlightened empiricists who only want to do “what works.” …Klein mocks San Francisco for renaming schools (Begone, Abraham Lincoln!) while it has no plan to reopen them, but he cannot quite see that these are two aspects of a single phenomenon. …Klein…must eventually understand that the troubles he identifies in California are baked into the progressive cake. …That has real-world consequences, currently on display in California to such a spectacular degree that even Ezra Klein is able dimly to perceive them. Maybe he’ll learn something.

I especially appreciate this passage since it excoriates rich leftists for putting teacher unions ahead of disadvantaged children.

Intentions do not matter very much, and mere stated intentions matter even less. Klein is blind to that, which is why he is able to write, as though there were something unusual on display: “For all the city’s vaunted progressivism, [San Francisco] has some of the highest private school enrollment numbers in the country.” Rich progressives have always been in favor of school choice and private schools — for themselves. They only oppose choice for poor people, whose interests must for political reasons be subordinated to those of the public-sector unions from which Democrats in cities such as San Francisco derive their power.

Let’s conclude with some levity.

Here’s a meme that contemplates whether California emigrants bring bad voting habits with them.

Though that’s apparently more of a problem in Colorado rather than in Texas.

And here’s some clever humor from Genesius Times.

P.S. My favorite California-themed humor (not counting the state’s elected officials) can be found here, here, here, here, and here.

High-tax states are languishing but  zero-income-tax states such as Texas are growing rapidly!!!!

Texas Is Booming…but CNN Doesn’t Want You to Know Why

September 30, 2014 by Dan Mitchell

Much of my writing is focused on the real-world impact of government policy, and this is why I repeatedly look at the relative economic performance of big government jurisdictions and small government jurisdictions.

But I don’t just highlight differences between nations. Yes, it’s educational to look at North Korea vs. South Korea or Chile vs. Venezuela vs. Argentina, but I also think you can learn a lot by looking at what’s happening with different states in America.

So we’ve looked at high-tax states that are languishing, such as California and Illinois, and compared them to zero-income-tax states such as Texas.

With this in mind, you can understand that I was intrigued to see that even the establishment media is noticing that Texas is out-pacing the rest of the nation.

Here are some excerpts from a report by CNN Money on rapid population growth in Texas.

More Americans moved to Texas in recent years than any other state: A net gain of more than 387,000 in the latest Census for 2013. …Five Texas cities — Austin, Houston, San Antonio, Dallas and Fort Worth — were among the top 20 fastest growing large metro areas. Some smaller Texas metro areas grew even faster. In oil-rich Odessa, the population grew 3.3% and nearby Midland recorded a 3% gain.

But why is the population growing?

Well, CNN Money points out that low housing prices and jobs are big reasons.

And on the issue of housing, the article does acknowledge the role of “easy regulations” that enable new home construction.

But on the topic of jobs, the piece contains some good data on employment growth, but no mention of policy.

Jobs is the No. 1 reason for population moves, with affordable housing a close second. …Jobs are plentiful in Austin, where the unemployment rate is just 4.6%. Moody’s Analytics projects job growth to average 4% a year through 2015. Just as important, many jobs there are well paid: The median income of more than $75,000 is nearly 20% higher than the national median.

That’s it. Read the entire article if you don’t believe me, but the reporter was able to write a complete article about the booming economy in Texas without mentioning – not even once – that there’s no state income tax.

But that wasn’t the only omission.

The article doesn’t mention that Texas is the 4th-best state in the Tax Foundation’s ranking of state and local tax burdens.

The article doesn’t mention that Texas was the least oppressive state in the Texas Public Policy Foundation’s Soft Tyranny Index.

The article doesn’t mention that Texas was ranked #20 in a study of the overall fiscal condition of the 50 states.

The article doesn’t mention that Texas is in 4th place in a combined ranking of economic freedom in U.S. state and Canadian provinces.

The article doesn’t mention that Texas was ranked #11 in the Tax Foundation’s State Business Tax Climate Index.

The article doesn’t mention that Texas is in 14th place in the Mercatus ranking of overall freedom for the 50 states (and in 10th place for fiscal freedom).

By the way, I’m not trying to argue that Texas is the best state.

Indeed, it only got the top ranking in one of the measures cited above.

My point, instead, is simply to note that it takes willful blindness to write about the strong population growth and job performance of Texas without making at least a passing reference to the fact that it is a low-tax, pro-market state.

At least compared to other states. And especially compared to the high-tax states that are stagnating.

Such as California, as illustrated by this data and this data, as well as this Lisa Benson cartoon.

Such as Illinois, as illustrated by this data and this Eric Allie cartoon.

And I can’t resist adding this Steve Breen cartoon, if for no other reason that it reminds me of another one of his cartoons that I shared last year.

Speaking of humor, this Chuck Asay cartoon speculates on how future archaeologists will view California. And this joke about Texas, California, and a coyote is among my most-viewed blog posts.

All jokes aside, I want to reiterate what I wrote above. Texas is far from perfect. There’s too much government in the Lone Star state. It’s only a success story when compared to California.

P.S. Paul Krugman has tried to defend California, which has made him an easy target. I debunked him earlier this year, and I also linked to a superb Kevin Williamson takedown of Krugman at the bottom of this post.

P.P.S. Once again, I repeat the two-part challenge I’ve issued to the left. I’ll be happy if any statists can successfully respond to just one of the two questions I posed.

Related posts:

California is the Greece of the USA, but Texas is not perfect either!!!

July 9, 2013 – 12:00 pm

California is the Greece of the USA, but Texas is not perfect either!!! Just Because California Is Terrible, that Doesn’t Mean Texas Is Perfect January 21, 2013 by Dan Mitchell Texas is in much better shape than California. Taxes are lower, in part because Texas has no state income tax. No wonder the Lone Star State […]

By Everette Hatcher III | Posted in Economist Dan Mitchell | Edit | Comments (0)

Dan Mitchell on Texas v. California (includes editorial cartoon)

April 3, 2013 – 4:35 pm

We should lower federal taxes because jobs are going to states like Texas that have low taxes. (We should lower state taxes too!!) What Can We Learn by Comparing the Employment Situation in Texas vs. California? April 3, 2013 by Dan Mitchell One of the great things about federalism, above and beyond the fact that it […]

By Everette Hatcher III | Posted in Cato Institute, Economist Dan Mitchell, spending out of control, Taxes | Edit | Comments (0)

Ark Times blogger claims California is better than Texas but facts don’t bear that out (3 great political cartoons)

February 16, 2013 – 7:42 am

I got on the Arkansas Times Blog and noticed that a person on there was bragging about the high minimum wage law in San Francisco and how everything was going so well there. On 2-15-13 on the Arkansas Times Blog I posted: Couldn’t be better (the person using the username “Couldn’t be better)  is bragging […]

By Everette Hatcher III | Posted in Arkansas Times, Cato Institute, Current Events, Economist Dan Mitchell, President Obama, Taxes | Edit | Comments (0)

California burdensome government causing some of business community to leave for Texas

December 24, 2012 – 1:54 am

Does Government Have a Revenue or Spending Problem? People say the government has a debt problem. Debt is caused by deficits, which is the difference between what the government collects in tax revenue and the amount of government spending. Every time the government runs a deficit, the government debt increases. So what’s to blame: too […]

By Everette Hatcher III | Posted in Cato Institute, Economist Dan Mitchell, spending out of control, Taxes | Edit | Comments (0)

Arkansas Times blogger picks California business environment over Texas, proves liberals don’t live in real world(Part 2)

May 6, 2011 – 9:33 am

       Former California Governor Arnold Schwarzenegger with his family   I posted a portion of an article by John Fund of the Wall Street Journal that pointed out that many businesses are leaving California because of all of their government red tape and moving to Texas. My username is SalineRepublican and this is […]

By Everette Hatcher III | Posted in Arkansas Times | Edit | Comments (1)

John Fund’s talk in Little Rock 4-27-11(Part 4):Responding to liberals who criticize states like Texas that don’t have the red tape that California has

May 4, 2011 – 9:20 am

John Fund at Chamber Day, Part 1 Last week I got to attend the first ever “Conservative Lunch Series” presented by  KARN and Americans for Prosperity Foundation at the Little Rock Hilton on University Avenue. This monthly luncheon will be held the fourth Wednesday of every month. The speaker for today’s luncheon was John Fund. John […]

By Everette Hatcher III | Posted in President Obama | Edit | Comments (0)

California and France have raised taxes so much that it has hurt economic growth!!!

September 29, 2014 – 8:02 am

___________ California and France have raised taxes so much that it has hurt economic growth!!! Mirror, Mirror, on the Wall, which Nation and State Punish Success Most of All? September 25, 2014 by Dan Mitchell I’ve shared some interested rankings on tax policy, including a map from the Tax Foundation showing which states have the earliest […]

By Everette Hatcher III | Posted in Taxes | Edit | Comments (0)

Jerry Brown raised taxes in California and a rise in the minimum wage, but it won’t work like Krugman thinks!!!

July 26, 2014 – 3:22 pm

___________   Jerry Brown raised taxes in California and a rise in the minimum wage, but it won’t work like Krugman thinks!!!! This cartoon below shows what will eventually happen to California and any other state that keeps raising taxes higher and higher.   Krugman’s “Gotcha” Moment Leaves Something to Be Desired July 25, 2014 by […]

By Everette Hatcher III | Posted in Cato Institute, Economist Dan Mitchell | Edit | Comments (0)

Open letter to President Obama (Part 573) Are the states of Illinois and California going to join Detroit in Bankruptcy one day?

May 1, 2014 – 12:37 am

Open letter to President Obama (Part 573) (Emailed to White House on 7-29-13.) President Obama c/o The White House 1600 Pennsylvania Avenue NW Washington, DC 20500 Dear Mr. President, I know that you receive 20,000 letters a day and that you actually read 10 of them every day. I really do respect you for trying to get […]

By Everette Hatcher III | Posted in Cato Institute, Economist Dan Mitchell, President Obama | Edit| Comments (0)

Open letter to President Obama (Part 561) We should lower federal taxes because jobs are going to states like Texas that have low taxes

April 15, 2014 – 2:17 am

Open letter to President Obama (Part 561) (Emailed to White House on 6-25-13.) President Obama c/o The White House 1600 Pennsylvania Avenue NW Washington, DC 20500 Dear Mr. President, I know that you receive 20,000 letters a day and that you actually read 10 of them every day. I really do respect you for trying to get […]

By Everette Hatcher III | Posted in Cato Institute, President Obama | Edit | Comments (1)
By Everette Hatcher III | Comments (0)