Low-tax economists say taxpayers won major legislative battles in 2016

Johnny Kampis
Posted: Feb 13, 2017 8:48 PM
Low-tax economists say taxpayers won major legislative battles in 2016

In a midterm update of the “Rich States, Poor States” measure of economic competitiveness, economists for the American Legislative Exchange Council said taxpayers won some significant policy battles — while losing some others — in 2016 legislative sessions.

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COOKIE JAR: Overall, state lawmakers promoted better taxation policies in 2016.

Authors Arthur Laffer, Stephen Moore and Jonathan Williams argue that states that adopt free-market-friendly policies tend to experience more growth and a rosier economic outlook. In the ninth edition of “Rich States, Poor States,” Utah, North Carolina and North Dakota topped the list, while New Jersey, Vermont and New York found themselves at the bottom.

An update released Friday points to recent wins in lowering taxes and removing forced unionism policies in the months since the report was released. Last week, Missouri became the 28th state to adopt a right-to-work law, following Kentucky’s passage earlier this year, with New Hampshire seriously considering a similar statute.

RELATED: Missouri becomes 28th right-to-work state

Mississippi received high marks in the ALEC update for its “Taxpayer Pay Raise Act,” which reformed the state’s tax system while also promising $415 million in tax relief over the next decade. The changes to state law include the phase-out of the 3 percent personal income tax bracket and the Mississippi franchise tax, as well as the creation of a tax deduction for a portion of the federal self-employment tax.

“While some of the benefits of this significant reform will take a few years for taxpayers to feel, the steps Mississippi has taken to make it a more attractive home for businesses are sure to aid in growing the state’s economy,” the authors wrote.

North Carolina also got high marks for continuing to implement tax reforms that have saved state taxpayers an estimated $2 billion since 2011. The Tar Heel State has jumped in the economic outlook rankings from 26th to second during that span.

The authors also pointed to Tennessee, where a bipartisan coalition of legislators passed a bill to eliminate a tax that is assessed on all income earned from investments, capital gains and savings. ALEC notes many payers of this tax include “hopeful entrepreneurs, working-class families, retirees and soon-to-be retirees who especially depend on their savings and investments for retirement.” This levy, known as the Hall Income Tax, will be phased out over six years.

Some states are headed the other direction. The authors point to Louisiana’s $1.5 billion in tax hikes in 2016, which followed an additional $720 million in taxes approved in 2015, in an effort to shore up a budget shortfall. Meanwhile, employment is tanking, with 18,000 fewer people with jobs in the state in September 2016 compared to 12 months earlier.

“Jobs, and therefore taxpayers, are not fleeing Louisiana for lack of taxpayer investment in social programs and infrastructure as some insinuate — but rather, because the tax burdens for such programs continue to worsen,” the authors wrote.

Meanwhile, Alaskan taxpayers dodged a big tax increase. Gov. Bill Walker wanted to reinstate the state’s personal income tax, but lawmakers rebuffed his goals. Although the authors commended Walker for pushing fiscal reform in a state with an estimated $4 billion deficit, they said bringing back the personal income tax is not the answer.