By PG Veer | Watchdog Arena
As we hit the middle of 2015, have you evaluated whether your governor’s State of the State address at the beginning of the year is measuring up?
The American Legislative Exchange Council recently released its annual State of the States report, which looks at the fiscal outlook of all 50 states with a critical eye on gubernatorial records. This year, Kansas and Maine were seen as the rising stars as they both project to phase out their income taxes entirely.
In Kansas, despite shouting from left-leaning editorial sites like Salon, Republican Gov. Sam Brownback’s performance is actually respectable. The unemployment rate stands at 4.3 percent, the same as it was in early 2007, and yet there are more people in the labor force.
In comparison, New York State, under Democratic Gov. Andrew Cuomo, is back to mid-2008 unemployment levels, but with 100,000 fewer people in the work force. So much for those “ruinous tax cuts,” as bemoaned by The New York Times’ Editorial Board, who resides in a state with the highest marginal tax rate is at 8.84 percent.
In Maine, Republican Gov. Paul LePage wants to go as far as making an amendment to his state’s constitution in order to permanently ban the income tax. To compensate for the revenue shortfall – which also includes repealing the estate tax and lower corporate tax – LePage proposes to increase the sales tax since it’s less destructive to wealth creation than the income tax. He also wants to give local governments more freedom to increase their own taxes. But they will have to watch out since neighboring New Hampshire has neither income nor sales taxes.
For New Hampshire, under Democratic Gov. Maggie Hassan, having no income tax has given the state a great edge for growth. ALEC’s report shows that the nine states with no income tax outperformed not only the 50-states average in population and GDP growth, but also in local government revenues. Between 2003 and 2013, these states have increased, on average, their GDP by 61.9 percent (compared to 47 percent for the nine states with the highest income taxes) and their local governments’ revenues by 82 percent (versus 54.3 percent for the highly-taxed).
If the report is any indication, Pennsylvania’s new Gov. Tom Wolf, a Democrat, is not getting off to a good start, with his budget proposal to increase the state’s income tax. While the increase looks minor, from 3.07 percent to 3.7 percent, it still represents a 23-percent increase, taking away $378 from a household earning $60,000. That’s just for income; Wolf also increased the sales tax from 6 percent to 6.6 percent (a 10-percent increase) and broadened the tax base. Only the future will tell if the halving of corporate tax and the $3.8-billion property tax relief will be enough to compensate the increases.
This article was written by a contributor of Watchdog Arena, Franklin Center’s network of writers, bloggers, and citizen journalists.