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TAX AND SPENDING REDUCTION: There’s more than one way to vote

Bluegrass Institute For Public Policy Solutions

Anti-tax votes are not confined to hands pulling levers in booths. Voters are increasingly using their feet to abandon states with income taxes.

Between 1990 and 2003, more than three million people abandoned the 41 states that collect personal income taxes and moved to the nine states that do not punish productive citizens. Research indicates that states without a personal income tax have clearly benefited from higher employment, more job creation and increased productivity.

Rich Vedder, an economics professor at Ohio University, told a Louisville audience recently that taxes which punish production of goods and services affect a state’s per capita income and competitiveness.

Kentucky is a poor state with a per capita income that is 16 percent below the national average, which is lower than all other neighboring states except West Virginia. Our state trails Tennessee by $2,213 in average per capita income.

Since Kentucky’s marginal tax rate is about 8 percent, it forces our state’s businesses to pay substantially more to attract good workers compared to a state like Tennessee that has no income tax.

Vedder says a similar situation is developing in Ohio, which was one of only 11 states with net out-migration during the 1990s when a net 7.5 million people moved to the United States from abroad.

That’s not surprising considering Ohio ranked a dismal 46th in the Small Business Survival Index 2000, including having personal income taxes that were among the highest in the nation. By contrast, residents in the neighboring states of Indiana, Michigan, Illinois and Pennsylvania enjoyed relatively low flat rate taxes of 4.2 percent or less.

While states like Tennessee and Indiana with low tax rates are flourishing, others such as Kentucky and Ohio are being left behind as a mobile population shows there’s more than one way to vote.

Sources:

“Economist Richard Vedder tells Kentucky how to improve its economy” by Theresa Fritz Camoriano, Jefferson Review

“Small Business Survival Index 2000,” Small Business Survival Committee

“Is Ohio committing economic suicide?” by Richard Vedder, Buckeye Institute for Public Policy Solutions

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