Skip to comments.Three Cheers for Governor Bobby Jindalís Plan to Abolish the Income Tax
Posted on 03/15/2013 9:53:07 AM PDT by Kaslin
Two months ago exactly, I appeared on TV to talk about the concept of eliminating the personal and corporate income tax in Louisiana.
Now Governor Jindal has unveiled a specific proposal.
The plan will eliminate two major tax types: personal income tax and corporate income and franchise tax. Eliminating income taxes in a revenue-neutral manner and improving sales tax administration will dramatically simplify Louisianas tax system and reduce administrative problems for families and small businesses. The effective start date of the program is January 1, 2014. The plan will ensure revenue neutrality by [b]roadening the state sales tax base and raising the state rate to 5.88%.
This is a superb plan.
Of all the possible ways for a state to generate revenue, the income tax is the most destructive.
Thats why researchers consistently have found that states without this punitive levy grow faster and create more jobs.
Its also worth noting that jurisdictions such as Monaco, Bermuda, and the Cayman Islands manage to be very prosperous in the absence of an income tax, though the incredible wealth of these places is partly a function of bad policy elsewhere, so the comparison isnt perfect.
Anyhow, Gov. Jindal expands on this research with some very powerful data.
Over the last ten years, more than 60 percent of the three million new jobs in American were created by the nine states without an income tax. Every year for the past 40 years, states without an income tax had faster growth than states with the highest income taxes. Economic growth in the nine states without income taxes was 50 percent faster than in the nine states with the highest top income tax rates. Over the past decade, states without income taxes have seen nearly 60 percent higher population growth than the national average. While we have reversed the more than two-decade problem of out-migration, we can do more to keep people here. Here are a couple of staggering statistics. Between 1995 and 2010, according to IRS data, Louisiana lost $3 billion in adjusted gross income to Texas.
I particularly like that he recognizes the power of tax competition as an argument for better tax policy. Taxpayers win when Texas and Louisiana compete to have less oppressive tax systems.
Indeed, this should help explain why I am so fixated on the importance of making governments compete with each other. Simply stated, governments are very prone to over-tax and over-spend if they think taxpayers have no escape options.
So lets keep our fingers crossed that Gov. Jindals proposal gets a friendly reception from the state legislature.
If he succeeds, I imagine he will vault himself to the top tier of Republicans looking to replace Obama.
And, who knows, maybe he can reinvigorate the argument that we can replace the corrupt internal revenue code with a national sales tax?
P.S. Jindal is good on more than just tax policy. Hes already implemented some good school choice reform, notwithstanding wretched and predictable opposition from the states teachers union.
Just do not replace it with a sales tax, or especially a VAT.
I’ve lived and worked in VAT tax economies. The rates are pushed ever upwards without public influence or input, people pay more and more without knowing why (which is why statists love the VAT), the accounting is more intensive, and the lobbying by players looking for VAT rebates for this, that, or the other specific economic activity is obscene. It is extremely corrupting.
My question is: What is a reasonable sales tax rate for a State that has no income tax?
consumption tax is preferred from the stand point that it tends to tax everyone, not just the rich in comparison to income tax.
States with no or little sales tax: Delaware, Montana, New Hampshire and Oregon. Alaska (~1%), and (@4.35%-5.22%)Hawaii, Maine, Virginia, Wyoming, South Dakota
States with no income tax now: Alaska, Florida, Nevada, South Dakota, Texas, Washington, Wyoming
So it looks like best bang for the buck to live in South Dakota, Wyoming, and Alaska
Note that Louisiana is one of the TOP 5 states with highest sales tax at 8.69% already.
The other four Tennessee (9.44%), CA (9.08),AZ (9.01), WA (8.61%)
I lived in Louisiana and then moved to Texas for a while. My property taxes in Texas increased every year that I resided in TX and I never got to vote on any property tax proposal. I then moved back to Louisiana and my combined property taxes and income tax in LA has been less than my property taxes alone in TX. This has been the case for the past thirteen years. My property values were about equal in both states.
So Jindal’s efforts to eliminate the income tax will merely mean that local property taxes will have to increase because after the state adds a sales tax increase, then no one will vote to increase local sales taxes. So the only thing left will be an increase in property taxes to fund local services.
I am opposed to the elimination of the income tax. Also, Jindal has been a big disappointment as a governor. He has failed to communicate with the people. He is not ready for prime time on the national stage.
I remember when the you only had to pay 4.5% tax on your groceries
Right, I believe it would be better to have all the taxes where we can easily see and compare, rather than having it shuffle and hidden away with people having little control over it.
I’d like to a list of places to live with the lowest across the board taxes.
The taxes that most need to be abolished are the “taxes in perpetuity”, such as individual property taxes and death taxes. That is, taxes just for being alive and owning something. Once you have paid for it, and its sales tax, it should be yours, and your childrens, and tax free.
Of course, the state may establish restrictions on such property, as to acreage, number of rooms, and that it must be your permanent residence and home of record.
These taxes are, in principal, even more onerous than income taxes, because if you lose your job, you don’t need to pay income taxes, but if you fail to pay property taxes, you will lose your home.
Not all VAT regimes operate that way. The GST here in Canada is a VAT but the consumer still sees how much of a transaction is tax (vendors are required to itemize it). As a business operator I find it a lot simpler than other taxes- it’s a flat rate, I collect it from my customers, deduct the tax I paid on my purchases and remit the difference. Also, our current government reduced the rate a few years ago from 7% to 5% as part of the platform that got them elected.
We don’t pay sales tax on our groceries in Texas. Can’t afford to buy many groceries any more so it doesn’t save a lot but every little bit helps.
I am curious - does Canada give VAT rebates for exports? Also, I understand they don't collect VAT on food products? Is that true?
Exports are tax-exempt. Groceries and a few other basic items are also exempt.
We do here in TN, but in KY, they don’t and the sales tax in stores is only 6%
“These taxes are, in principal, even more onerous than income taxes, because if you lose your job, you dont need to pay income taxes, but if you fail to pay property taxes, you will lose your home.”
Absolutely, people who think they “own real estate” simply are not thinking clearly. As long as the county can levy taxes on ownership and take the property if you fail to pay the tax you don’t actually own it you have merely bought the right to lease it from the county. Most people just never come to grips with how corrupt the whole system is.
In Texas, they are still formulating plans to get rid of the property tax as well. I support that notion, as well as the notion of the abolition of the income tax.
What I don’t support or recognize is the need for government to grow in % of our money.
If you don’t abolish the income tax you will never get to the point where you can even talk about the property tax.
IMHO, we the slaves of the government allow it to invest in many different scientific and developmental schemes WITHOUT A RETURN for our investments.
Many companies in this country started by concepts used by military research paid for BY US. All kinds of research has been developed.
WHAT IS OUR RETURN? I many cases, we are REQUIRED to buy these new products by government statutes. Many excellent products we used in the past have been barred from sale.
We should be paid back for our investment, just as Alaskans are paid for the oil that is produced there.
Sorry, for that rant. flame on/