The Cost of Income Taxes

by Ashley Muchow Arthur Laffer addressed a core issue regarding the economic impact of state income taxes in the WSJ today. Laffer addressed the often ignored negative impact income taxes have on state economies. Illinois’s personal income per capita decreased from 133 percent of the U.S. prior to its 1969 income tax levy,  to just 106 percent...

by Ashley Muchow

Arthur Laffer addressed a core issue regarding the economic impact of state income taxes in the WSJ today.

Laffer addressed the often ignored negative impact income taxes have on state economies.

Illinois’s personal income per capita decreased from 133 percent of the U.S. prior to its 1969 income tax levy,  to just 106 percent this past year.  The 11 states that adopted a state income tax in the past 50 years saw their share of U.S. output decline.

Not to be held in isolation, Laffer also compares the jump in economic performance of those state’s without income tax burdens.

In the past decade, the nine states with the highest personal income tax rates have seen gross state product increase by 59.8%, personal income grow by 51%, and population increase by 6.1%. The nine states with no personal income tax have seen gross state product increase by 86.3%, personal income grow by 64.1%, and population increase by 15.5%.

Consider this:

The states that have high income tax rates or have adopted a state income tax over the past 50 years haven’t even gotten the money they hoped for. They haven’t avoided budget crises, nor have they provided better lives for the poor. The ongoing financial travails of California, New Jersey, Ohio, Michigan and New York are cases in point.

I will place Illinois in that lot for Mr. Laffer, as we certainly have made an impression on analysts this past year.

Hmm, and our Governor wants to increase this burden to “handle” the state’s $13 billion budget deficit.