Mike Kole had an interesting statement in a recent post:
Any time the Daniels Administration wants to turn Indiana into a jobs, wealth, and population magnet, it can take some very simple steps.
1. Cut or eliminate the state income tax. Seven other states have no income tax. Indiana should become the 8th.
2. Cut or eliminate the corporate taxes. Business go off-shore or to other states to flee the tax burden. Eliminate that burden, and they will flock here instead.
The seven states that have no state income tax are Alaska, Florida, Nevada, South Dakota, Texas, Washington and Wyoming. According to this chart, these states have the following ranks for household median income: Alaska – 6, Washington – 13, Nevada – 18, Wyoming – 33, Texas – 35, Florida – 39, South Dakota – 41.
I don’t think Alaska is representative since its citizens are greatly subsidized by oil checks from the government. The remaining state rankings do not give me great confidence that eliminating state income taxes is very helpful in attracting high paying jobs for working families.
Instead, perhaps we should look at what the top ranked states are doing: Connecticut, New Jersey, Maryland, Massachusetts, and New Hampshire. My guess is that the tax structures there are distasteful to libertarian ideology and yet somehow their citizens, on average, do better than citizens in more ideologically palatable states.
If Mayor Daley wants business to move in, he has city council give targeted tax breaks. I was reading recently about Plainfield ( just west of Indianapolis) which has a huge corporate presence because of tax policy. I dont remember details ,but maybe this is the best way to go to attract business.I think corporate thinking specifies location rather than looking at the state as a whole.
Also dont high tax states almost always have have high and rising real estate? Its easier to minimize a tax burden if your house just doubled in value.
Out of the “tripod” of sales, income and property taxes that provide the bulk of state and local tax revenues, I would look at the property tax and reforming public funding of schools first. I can think of no tax more subject to abuse, and potential for corruption, than the property tax. I’d rather see the income tax was raised, and the revenues shared with local government and schools, with an eye to eliminating the property tax and its assessment and collection system.
Funding of public schools by local real estate taxes greatly adds to the differing level of education among richer and poor districts, so equal funding of schools,and equal education opportunities can never come about easily unless we fund them other than primarily through local real estate tax.A town such as Plainfield,mentioned above, has a great advantage with its corporate tax base .Pity the mostly residential school districts that support schools from primarily residential property taxes.
Doug,
Actually New Hampshire is generally regarded as an attractive state by most Libertarian Party types. For instance, the members of the Free State Project chose NH above all other candidate states as a destination for their activist enterprise.
But I think this supports your point rather than undermining it. It may be that your metric, household median income, is simply decorrelated from Libertarian policies.
Doug,
Thanks for the citation and linkage!
Of course every state has its circumstances, and the rankings are relative. As you point out, Alaskans are heavily subsidized. Floridians have a fair percentage of retirees who have little income. Etc. And by relative, I mean that incomes are high in the east coast in response to high costs of living and high tax burdens.
Indiana has low cost of living, so I think that substantially lowering the tax burdens here would have a great and favorable.
There are always trade-offs in life. I’d take the high tax burden (as a Libertarian!) of New York City in exchange for the incredible cultural offerings. Indiana doesn’t have the favorable weather of states like California, the ocean views of high-tax coastal states, the mountains of so many states, or even the kind of city that Chicago is, so it has to look for ways to draw people in ways our “geography” fails to.
The converse of my idea is what we have, where without such natural draws, taxes serve as one more incentive to leave, so people with the means and the interest in more dynamic places to call home do leave. I believe public policy should always serve to make the state more attractive, not less.
Branden- As for the Free State Project and New Hampshire, it is a utopian project that leaves many of us partisan Libertarians in Indiana shaking our heads. We believe the best way to move policy in our direction is not to create an isolated utopian community, but to be part of the community where we live, work to show the merits of our ideas, and to live by example by giving to private charity and supporting the rights of individuals. I regard Indiana as the best place to bring Libertarian ideals to the people. Compare the number of candidates in HN and IN, and see who did more in 2004, and who will do more in 2006.
Your data is interesting Doug.
I would suggest you look at how fast those states are growing. People are rapidly FLEEING from high tax states to low tax state EVERY DAY. The only reason Texas and Florida are not MUCH higher on the list is the HUGE number of illegal aliens that are driving the median income down in those states.
Your chart does not take into account many things; including the cost of living. It does not matter if you have a higher median income if you have to pay $600,000 for your house…
I work for a Public Accounting firm in Indiana. One of our clients runs a high technology company. He moved here from Texas a couple of years ago.
He has a Company that could well become a multi-million dollar a year Company. This year is the first year he has had to pay all of the various taxes he has to pay in Indiana.
He and I have had two conversations in the last three months about whether he should leave Indiana. He hates the taxes he has to pay and he is very upset. He may move…
If people who own small and highly profitable companies are considering leaving (and some are) we are in big trouble.
The median income in Indiana has dropped the last several years when compared to inflation. Our higher paying manufacturing jobs are leaving. Our economy is changing. We need to change to allow us to grow.
Unfortunately our politicians do not want to change how we operate. Out tax abatement system is ancient and completely fails to help us grow Indiana…
We need to LOWER TAX RATES and stop giving large companies tax breaks. Small Businesses create 70% of the new jobs in Indiana. Small Businesses receive less then 1% of the total value of tax abatements in Indiana.
It does not take an Accountant or a Libertarian to see the problem with this, does it?
Here is what I think we need to do:
1. Cut all levels of Government by 1% EVERY year.
2. Abolish personal property taxes on business owners. They are confusing, not enforceable, and penalize small businesses. I have several rants about Personal Property Taxes for business owners on my blog. This is a TERRIBLE tax.
3. Modify the tax abatement system so that it does not all go to large businesses. I would be for eliminating it entirely. At the least should we not make it so 70% of the total value of tax abatements goes to small businesses since they are creating 70% of the new jobs?
4. I would then lower taxes at the same rate that we are cutting wasteful government spending… Rather then lower the overall tax rates I would instead abolish the taxes that are hard to enforce and make no sense…
Mike Sylvester
Fort Wayne Libertarian
Where in the Libertarian world is there a promotion of the arts, of opera, theatre,art, museums?The arts teach us about ourselves as human beings ,and how we put human kind into perspective with ourselves. I have come to realize that the ability of corporations to write-off the taxes they have to pay by contributing to arts and civic projects is the best way to promote ‘the finer things’ in life.If not for Sears, United Airlines,and many others, Chicago would not be the cultural center that it is.Indianapolis does have a 4-opera season, and I’m sure it’s due in large part to corporate donations.Thats just one example.
That would be the horror of a flat tax,or severaly cut taxes with no tax write-offs( which many propose).There would be no incentive except ‘art for art’s sake’ for Corporations to support the arts.
I’m not going to do it myself, but it would be interesting and informative to normalize the state wage data by the average cost of living in the states. That would tell you which states are REALLY doing well.
For example, I just entered the Connecticut average wage of $56409 into one of those cost-of-living calculators, and found that a person making $56409 in Bridgeport, Connecticut would have the same standard of living on $41528 in Seattle. Since the average wage in Washington is $48185, I would say we folks in no-income-tax Washington are doing better than the folks in Connecticut.
So the top states are all “blue” states… hmmm(ok, some might call new Hampshire purple, but still…)
Even ‘red states’ have ‘blue’ areas and ‘blue’ people.And thats usually where the ‘culture’ is.
Evidently,red-thinking people are happy with low taxes and big yards, and a close-by Wal Mart.But how do they make a living? They cant possibly be ‘on salary’,can they?