The Tax Bowl
November 21 | Posted by mrossol | Democrat Party, Tax IssuesWSJ 11/19/2015
The College Football Playoff rankings are intensely contested by teams and their fans. This week the Tax Foundation released its tax policy equivalent, which ought to be a major embarrassment for the blue state conference.
Leading the Tax Foundation’s annual business tax climate index are traditional low-tax powerhouses Wyoming, South Dakota, Alaska, Florida and Nevada. A major reason for their perennial dominance is their lack of a personal income tax and low corporate tax burdens. Their sales and property taxes are also relatively modest.
At the back of the pack are, in ascending order from the bottom, New Jersey, New York, California, Minnesota, Vermont, Rhode Island, Connecticut, Wisconsin, Ohio and Maryland. The only state to recently break out of this hall of tax shame is North Carolina, which in 2013 slashed its top 7.75% income tax to a flat 5.75% and its corporate rate to 5% from 6.9%. The former 44th is now ranked 15th.
By contrast, Connecticut Governor Dan Malloy earlier this year quarterbacked a major corporate tax hike and bumped the top income tax rate to 6.99% from 6.7%. Fairfield-based General Electric is now threatening to sign with another state. As Governor of Maryland from 2007 to 2015, Democrat Martin O’Malley increased some 40 taxes including the corporate rate to 8.25% from 7% and the sales tax to 6% from 5%. This may be one reason he’s warming the bench in the Democratic primaries.
In fairness, some high-tax states are trying to improve. New York last year trimmed its corporate rate to 6.5% from 7.1% while zeroing it out for upstate manufacturers. The reform catapulted the Empire State 12 spots in the corporate tax ranking to 12th, but its sky-high state and local income taxes are still second only to California.
Republicans in Wisconsin last year cut income taxes for low earners, but the Badger State’s 7.65% top rate still ranks as the 10th highest. Governor John Kasich this summer reduced the Buckeye State’s income tax to 4.997% from 5.33%, though the cut occurred too late to affect its ranking (ninth).
The trophy for most-improved this year goes to Illinois, which jumped to 23rd from 31st—no thanks to Democrats in Springfield. The Tax Foundation notes that the leap occurred “due to the sunset of corporate and individual income tax increases” that Democrats “first imposed in 2011 as temporary levies to address the state’s backlog of unpaid bills.” First-year Republican Governor Bruce Rauner has let the income-tax rate lapse to 3.75% from 5% and the corporate rate to 7.75% from 9.5%, though Democrats are trying to push them back up.
Keeping taxes low is critical to turning around the Prairie State, which trails its neighbors in economic growth. Would that liberal state politicians cared as much about their tax ranking as colleges do about their football standings.
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