A new report by the Center for State Fiscal Reform at the American Legislative Exchange Council (ALEC) highlights states that are spurring economic growth by cutting taxes.
The report highlights a number of states that have qualified for all three editions of ALEC’s “State Tax Cut Roundup.” These four states — Florida, Indiana, Ohio and Wisconsin — have cut taxes consistently year after year.
Most of the states that cut taxes in 2015 were states with the highest tax burdens, the ALEC study found. This suggests there may be a larger trend at play — even the most tax-heavy states are recognizing the value of returning money to the people who create jobs. Even California, the state with the highest personal income tax, managed to make this year’s report by passing a new earned income tax credit.
And New York, a state known for high taxes at every level of government, took a few small steps to reduce unnecessary fees. The Associated Press reported that New York eliminated 57 “nuisance fees” for “such random things as potato inspections, ski lifts and workers’ compensation disputes involving podiatrists.” Though it’s a small step (the changes only save taxpayers about $3 million), the state may finally be recognizing how unnecessary red tape and fees can cause more complexity than they are worth.
Florida, a state attracting significant attention during this election cycle, also made moves to reduce taxes. The biggest accomplishment: reducing the state tax on wireless service, which was one of the highest in the nation. (Still, some U.S. consumers pay state, local, and federal taxes of almost 25 percent on wireless phone service.)
Indiana is also a success story. Though ranked 24th in ALEC’s “Rich States, Poor States” economic outlook rankings in 2012, the passage of right-to-work legislation and continued tax cuts have lifted the state to third place on the list.
Jonathan Williams, vice president of the Center for State Fiscal Reform, told Opportunity Lives that the evidence shows overwhelmingly that lower taxes and more economic competitiveness bring about greater economic opportunity.
“Lower tax burdens provide a real economic boost for working families, small businesses and even enhance charitable giving across states,” he explained.
Fortunately, it seems that many states are again realizing the relationship between low taxes and economic competitiveness. According to the ALEC report, 10 states reduced their personal income tax rates in 2015 and eight reduced the tax burden for businesses.
“It is not surprising that states continue to lead the way for comprehensive tax reform, since the competition for jobs is more critical than ever across states,” said Williams.