March 29, 2017

The predictable backlash against allowing the people to vote on a Constitutional Amendment putting a cap on how high politicians can raise income tax at no more than our current 5.5% has begun.

Just like the pigs in George Orwell’s Animal Farm book-summary thought some animals were more equal than others, the News & Observer is angry everyone now pays the same low 5.5% tax rate.

But isn’t treating everyone the same the essence of fairness? Of course, it is.

And nothing in the Constitutional Amendment says there can’t be multiple tax rates lower than 5.5%. The 5.5% rate is just a limit on how high politicians can go. The News & Observer’s straw man is a waste of straw.

The Constitutional Amendment for low taxes is really about jobs and growth because low taxes are good for economic growth. Especially low income taxes.

Read these facts from George Mason University.

“A higher average tax burden reduces state economic growth. Dividing total tax revenue by gross state product (GSP) shows that a 1 percent increase in a state’s average tax rate is associated with a decrease of 1.9 percent in the growth rate of its GSP.

  • Taxes impact migration patterns. If higher state taxes lead to lower economic activity and employment, it is conceivable that people will move to states with better economic pro­spects. Of the nine states with no personal income tax, four—Florida, Nevada, Washington, and Tennessee—are among the states with the highest population growth rates in the country in recent decades. Also, data show that a higher personal income tax rate is associ­ated with a higher probability of residents migrating to a state with a lower tax rates.
  • Income tax progressivity affects the number of new firms. The number of new firms open­ing in a state is a key indicator of beneficial creative destruction and innovation that will improve living standards for the state’s residents over time. Other studies have found that new firm entry accounts for 20–50 percent of a state’s overall productivity growth. The lat­est economic data show that the rate of start-up creation is sensitive to personal income tax progressivity. A 1 percent increase in personal income tax progressivity is associated with a reduction of 1.2 percent in the growth rate of the number of firms.
  • While the data show an important relationship between GSP growth and average tax rates, the impact of average tax rates on per capita income is less clear. A 1 percent increase in a state’s average tax rate can be expected to decrease per capita income by 0.07 percent.
  • As previous studies have also noted, these findings can be sensitive to the time period, statisti­cal methods, and variables used. Nevertheless, the results still lead to a general con­clusion: not all tax variables exhibit a significant correlation with the selected measures of economic activity, but when they do, the relationship is usually negative”

But liberalism never has been about growth or opportunity or happiness. It’s about shared misery.