Random Points

Today is a historic day.  It’s been 43 years since Teddy Kennedy swam off abandoning Mary Jo Kopechne and leaving her to drown.

1969: After a party on Chappaquiddick Island, Senator Ted Kennedy drives off a wooden bridge into a tide-swept pond and his passenger, Mary Jo Kopechne, dies.


It’s the Primary season here in Missouri.  The primary will arrive on August 7th, less than a month away.  Here in Cass County ‘Pub yard signs are sprouting like mushrooms — or toadstools if you’re a democrat.  If you’ve been observant, you won’t see many, if any, democrat signs.  Why? Because they have tightly controlled their members to insure there is no primary opposition.  Like a swarm of lemmings, the dems are in lockstep with their party.  That right there says a lot about them.  Mindless robots operating according to their party’s programming.

The following article is for the ‘Pub winners. I know the dems won’t read it. They’ll follow orders blindly. At least the ‘Pubs show more independence…usually.

Keeping Taxes Low At State Level Is Key To Growth


 Posted 07/17/2012 05:45 PM ET

State taxes impact economic performance more than most people imagine. While the majority of attention is paid to the federal tax code, the evidence suggests that state taxes are just as important in determining economic competitiveness and often mean the difference between economic success and failure.

The level and form of state taxation varies greatly, from no-income-tax states such as Florida and Texas to states like Hawaii and Oregon, which have the highest personal income tax rates in the nation (11%).

Similarly, economic performance over the last decade has varied dramatically among the 50 states, with Illinois, California and New York performing very poorly, while Texas flourishes. Differences in state tax policies help explain this record.

The U.S. economy, in the words of Federal Reserve Chairman Ben Bernanke, is heading for a massive tax cliff. The expiration of the 2001-2003 tax cuts, the expiration of the payroll tax cut and new taxes enacted as part of ObamaCare will completely upend the existing federal tax code.

Given this state of affairs and the political gridlock in Washington, D.C., the best one can hope for is the extension of some of the existing tax rates and the avoidance of a disastrous, massive tax increase in January 2013.

The chances for substantive tax reform that would make the U.S. more competitive are slim, given the administration’s preoccupation with tax “fairness” and demonizing the rich. On the other hand, state taxes are ripe for reform, and many governors around the country are leading the charge to reduce or do away with their state income taxes all together.

Tax reforms happening at the state level are much more likely to succeed than anything coming out of Washington D.C., and the evidence shows that cutting state personal income taxes can have a dramatic impact on economic performance. State tax reform is, therefore, the best chance to improve the competitiveness of the United States in this global race for jobs and prosperity.

If you have read any of my writings, you know that I am not a fan of replacing the income tax with a sales tax.  After conversations with a number of folks, I’m modifying my view…somewhat: I am not supporting replacing the income tax with a sales tax—at the federal level.

We don’t have the conservative strength to implement the concept at the federal level. What we will have is both a national sales tax—morphing into a VAT tax the next time the libs gain control of Congress—as well as an income tax.  However, I now believe the concept, replacing the income tax with a sales tax, can be done correctly at the state level.

There is ample evidence of the impact that state income taxes have on economic performance. Taxpayer data from the IRS Division of Statistics shows that during the last 15 years, Texas and Florida have gained $20.7 billion and $84.3 billion in annual adjusted gross income (AGI) due to migration, respectively. During the same time period, New York, California and Illinois have lost $58.6 billion, $32 billion and $26.3 billion of annual AGI, respectively.

Nine states today do not levy a broad personal income tax, while two of those nine tax only dividends and interest. Altogether, the nine states without a personal income tax have gained $146 billion in annual AGI, while the nine states with the highest income taxes have lost $124 billion. This translates to $26.7 million gained per day for the no income tax states, and $22.6 million lost per day for the highest tax states.

Critics claim that migration has nothing to do with taxes, that it occurs for other reasons such as climate or “long established migration patterns.” Yet great weather hasn’t helped Hawaii, which has lost almost $300 million in AGI over the last 15 years. Similarly, if “migration patterns” are responsible, why is Nevada, which has no income tax, gaining wealth, while its neighbor California, which has some of the highest taxes, losing wealth?

The correlation between wealth migration and tax policy can even be seen in the Dakotas, with North Dakota (which has an income tax) consistently losing wealth to South Dakota (which does not impose a state income tax). The differences in economic performance between the states are profound and cannot be explained by anecdotes. — Investor’s Business Daily.

For those of you unfamiliar with wealth migration, it’s more popularly known as “voting with their feet.” One of my continuing concerns about any sales tax is that it taxes behavior and consumption.  Like anything being taxed, when you tax something, you get less of it. 

That is true with consumption taxes as well. A decade or so ago, the feds decided to tax “luxury” items. Items like personal aircraft, yachts and other items.  The Law of Unintended Consequences kicked in.  The Yacht industry was destroyed. At my last look, there are still no US owned yacht builders in the US. Most went out of business or moved off-shore. (Thank you, democrats.)

The private aircraft industry fared little better. Historic aircraft companies like Cessna, Piper, Beechcraft filed for bankruptcy. None of them are now US owned.  In fact Beechcraft, now known as Hawker-Beechcraft, was just sold to a Chinese company. It is a lesson to be remembered. Taxing consumption kills businesses.

Wealth lost by a state is wealth lost forever. Individuals pay not only state income taxes, but also sales taxes, property taxes and various other government fees. When taxpayers leave, they take with them not only this year’s income but also the present value of all future income and taxes, not to mention the impact that their consumer spending would have on the local economy.

Similarly, when businesses decide to leave, they take jobs with them. Over the last 15 years, New York State lost $58.6 billion in annual AGI. When using a 5% discount rate, the present value of this lost income is over $1.1 trillion, while New York City’s entire operating budget in 2011 was only $65.8 billion, according to its budget office.

While in any given year the gains or losses due to taxpayer migration may seem small, this impact becomes huge when compounded over time.

There are lessons to be learned here that our state representatives and senators should—must understand. Per capita spending in Missouri is surprisingly high. Higher than all our neighbors, even Illinois. We’re fortunate that the port fees on our rivers provide a significant portion of our state revenues. That can change quickly, however, if we, as a state, aren’t observant and proactive to preserve our non-tax sources of income.

I urge you to read the entire article. There’s much more than I’ve quoted here. It is an education.