in every issue // csg senior fellows
by Katherine Barrett and Richard Greene At least a dozen states—including Arizona, Florida, New York, Ohio and Wisconsin—have plans to cut taxes in the coming year. There are lots of perfectly valid reasons to cut taxes, and we’re not claiming we have some kind of magic formula available for states to set the most equitable, and economically sensible, rates possible. That said, we worry about the oft-cited theory that cutting taxes is an immutable route to economic dynamism. This idea reminds us of the turn-of-the-century immigrants who came to the United States confident that they would find the streets paved with gold. In fact, they mostly found cobblestone. We know this is a controversial topic and includes a number of powerful and intelligent public officials who have ridden to office on a steed made of tax cuts. As The Washington Times warranted around the beginning of the year, “tax cuts … will not only make life easier for the taxpayers, lowering their burdens in the struggle to survive and prosper, but the states will see stronger economies, with more employed workers to pay more taxes.” But let’s take a look at some fascinating state-specific statistics. First we looked at the Tax Foundation’s list of state-local tax burdens as a percentage of state income for 2011, the most recent available ranking. Then we went through the 2014 State New Economy Index, which looks at 25 indicators representing variables that make it most likely that a state will enjoy economic health in years to come. The New Economy Index is assembled by the Information Technology and Innovation Foundation. Of the 20 states with the highest state-local tax burdens, six of them are in the top 10 of the New Economy Index. The three states that did best in the Index—Massachusetts, Delaware and California—all were among those with the
26 CAPITOL IDEAS | MAR/APR 2015
