I & I Editorial BoardThe Wall Street Journal recently reported on the growing divide between blue and red states when it comes to income taxes. What it failed to mention is that this shows the genius of the nation’s founders.
“Republican-led states are racing each other to flatten, cut, and eliminate individual income taxes, with 23 states lowering their top income-tax rates since 2021,” Richard Rubin and Jeanne Whalen write.
And, indeed, this year, nine states – all Republican – either cut their top marginal tax rate or lowered their flat tax rate. Ohio became the 14th state to adopt a flat tax.
“Democratic-controlled states are moving the opposite way,” notes the Journal, “pushing to increase taxes on top earners to combat inequality and plug budget holes expected from Republicans’ cuts to federal health and nutrition assistance programs.”
(We will leave aside the fact that these reporters fail to explain why only Democratic states are expecting “budget holes” caused by supposed federal spending cuts. The truth is that these states have been spending like there’s no tomorrow.)
Related: “The Great Divorce Continues“
Washington state is one of those tax-hiking states. Lawmakers approved a bill that will start taxing income for the first time – but only incomes above $1 million (see “The Middle Class Will Pay For Washington’s ‘Millionaire Tax’”). California could very well impose a retroactive 5% wealth tax. New York City’s socialist mayor is trying to force the state to raise its top rate. Virginia, Michigan, and Rhode Island Democrats want to raise their top rates
The Journal notes that the number of states with top rates below 5% and above 10% have both been increasing.
“The middle ground is quickly disappearing.”
So how is this a good thing? After all, we’ve written many times in this space about the folly of playing the “tax the rich” game.
It’s good news because this is exactly how our system of government is supposed to work. States are free to experiment with their taxing, spending, and regulating policies – and suffer the consequences.
And that’s just what we’ve been seeing. Millions of middle-class Americans are voting with their feet – leaving high-tax “progressive” states for those that keep their government spending in check, regulations to a minimum, and their taxes low.
California, New York, Massachusetts, Illinois, Maryland, Washington, and Oregon are all losing population to states such as Arizona, Texas, Florida, North Carolina, South Carolina, and Tennessee. These refugees are taking their tax dollars with them, as the two charts, courtesy of Unleash Prosperity, show.
You’d think this would wake up leaders in those blue states. But no.
Instead of calling for tax cuts, New York Gov. Kathy Hochul was recently seen begging rich ex-New Yorkers to come back to the Empire State, do their patriotic duty, and “support the generous social programs that we want to have in our state.”
“We are in competition with other states that have less of a tax burden on their corporations and their individuals,” she said.
The left hates this kind of competition because they fear it will lead to a smaller, less intrusive government. That’s why they call it a “race to the bottom.” It’s why they want a powerful central government free of constitutional limits. It’s why they constantly push for federal rules and regulations that supersede what states can do.
When billionaires started fleeing California at the prospect of an unprecedented, retroactive wealth tax, California Rep. Ro Khanna teamed up with socialist Sen. Bernie Sanders to propose taking the wealth tax national, so it would be harder to avoid.
For the republic to survive and thrive, we need more competition among states, not less. We should drastically cut the size and scope of the federal government and shift the burden of taxing and spending back to the states.
This would free them up to conduct even bolder experiments in how they tax, spend, and regulate.
– Written by the I&I Editorial Board
I’m waiting for the time when some leading Democrat promotes an Amendment to the Constitution whereby those who want to move out of a state are either financially penalized or threatened with jail time.
The freedom and right to move anywhere in the US by a US citizen will eventually be endangered. This is the only way Blue States can prosper.
As the Supreme Court said in it’s 1966 ruling, US vs Guest: “Interstate movement is a fundamental right protected by the constitution. United States v. Guest, 383 U.S. 745, 767 (1966). The freedom of movement “is the very essence of our free society, setting us apart.”
Let’s hope that Democratic politicians are both literate and less tyrannical (and power hungry) then they have recently appeared.
There is not a single thing in the US Constitution that will not eventually be under assault from the progressive left.
crap headline for not mentioning it’s state income tax
After reading your comment, we agreed that the headline could be better (we wouldn’t call the original version crap, however) and added “state.”
Only 2 problems:
1. When these states experience economic collapse, they will come running to the federal government for bailouts, and likely would get them from a Democratic regime.
2. Their remaining populations will become even bluer, making it more likely as well that they will run up large Democratic majorities that will affect national representation.
True enough, but won’t the population decline? That would mean fewer congressional representatives. Moreover, a stigma will arise throwing those states into national shade, the facts of the case undermining Democrat propaganda (i.e. “talking points”).
How do retroactive taxes stand up against the “ex post facto” language in the constitution?
the only problem is, a state will never truly fail. the fed will end up bailing them out so in essence, yes they still win. yes you still pay for their failed psychopathical ideas.
The current Democrats either do not understand, or they never learned in the first place, that a government, state or otherwise, cannot tax themselves into prosperity. In order for people to prosper, they need their taxes cut.
The more money common people keep in their pockets, the more they spend locally, generating local bottom line taxes. The more they can spend, the more they generate. But if you take too much in the beginning, right out of their paycheck, they spend less and generate far less bottom line taxes. Thus starts a downward spiral the State can’t seem to get out of.
Those blue states are doing things backwards. They keep taking with dollar signs flashing in their eyeballs, thinking they will solve taxation problems, without realizing they are contributing to their taxation issues.
This is proof positive that you can’t fix stupid.
I believe your error consists in a widely shared premise that Democrats seek prosperity for the people. As you have pointed out, Democrat policies do not, and cannot, promote the general welfare. Democrat policies are frankly designed to appeal to the particular constituencies that form their base, and thereby solidify and even expand their hold on power.
This assembling together of disparate interest groups (“factions”) was essentially institutionalized for the party during the administration of FDR, who frankly set about the task of demonizing some people (“malefactors of great wealth”,”economic royalists”, “plutocrats”, and such), to bond himself to those constituencies through a brilliant use of new communication forms (the “fireside chat”), and this approach has worked extremely well for at least the next sixty years or so. JFK was a master of the TV format. It was only in the 1990s that Republicans gained the House of Representatives.
That playbook is still in use, primarily by Democrats, to divide the public and manipulate its base through such contemporary slanders as calling one’s opponents a “basket of deplorables.” Politics in their hands becomes a form of war by other means.
If a state can’t (or won’t) eliminate its income tax, another rational approach might be to reduce or simplify what they tax. Get rid of “sin taxes” for example; all the various nickel-and-dime stuff that accumulated over the years, all implemented with good intentions. Internet sales and purchase taxes. Reduce gasoline taxes. Reconsider toll roads (haven’t they paid for themselves yet?).
There can be savings in the small stuff.