A remarkable 18 states cut taxes this year, with 24 percent of the cuts coming in personal income taxes as governors and state legislatures moved to jumpstart their economies and get around Washington's gridlock, according to a new report card on the nation's legislative action.
The bulk of states that cut taxes were in the Midwest, where President Obama did poorly in his re-election.
“With the federal government locked in seemingly endless gridlock, it is up to the states to jump start their own economies and allow private sector entrepreneurs to be the drivers of economic growth. It is encouraging to see so many pro-growth proposals from just the last legislative session,” said the State Tax Cut Roundup report from the American Legislative Exchange Council's Center for State Fiscal Reform, which was provided to Secrets.
The 18 states are: Alaska, Arkansas, Florida, Idaho, Indiana, Iowa, Kansas, Mississippi, Montana, Nebraska, New Mexico, North Carolina, North Dakota, Ohio, Oklahoma, Tennessee, Texas and Wisconsin.
Not all states, however, made big changes to their tax landscape. The report said that some enacted fundamental tax reform and others only slightly modified their tax code.
The report also reviewed the impact of taxes and found that each 1 percent increase in taxation lowers GDP by 2 to 3 percent.
“There is growing consensus that taxes discourage competitiveness and economic growth, with taxes on income being among the worst,” said Jonathan Williams, a co-author of the report.
The report also revealed that states with no personal income tax grew revenue as people flocked there from high-tax areas.
“Over the past ten years, the nine states with no personal income tax grew their population by 150 percent and saw their gross state product grow by 40 percent more than their high-tax counterparts,” said Ben Wilterdink, another co-author of the report. “The data shows states that do not levy a personal income tax are outperforming their high-tax counterparts in just about every way.”
The report lists the taxes in each of the 18 states.Paul Bedard, the Washington Examiner's "Washington Secrets" columnist, can be contacted at firstname.lastname@example.org.