Income Taxes Are About Controlling Behavior

Here is an excellent article from the Heritage Foundation’s Daily Signal: “Yes, Low-Tax States Are Out-Competing High Tax States.”

Arthur Laffer and I have examined the data back to 1970 in our book, “An Inquiry into the Nature and Causes of the Wealth of States.” No matter what 10 year period we reviewed from 1970 to 2012, we found that collectively the states with no income tax outperformed the highest income-tax states in terms of population growth rates and real personal income growth.

Yes, there are always outliers. There are always a few states with high income taxes that perform well. California’s Silicon Valley is surging now, while some low-tax states (Alaska of late) are doing poorly. There are clearly many other factors at play.

But taxes are indisputably a major factor in determining where businesses and capital and families locate. Consider the evidence from states that have adopted an income tax in the last 50 years. As we detail in the book, since 1960, there have been 11 such states, including Illinois, New Jersey and Connecticut. Every one of them has experienced slower growth than the rest of the country after adopting the income tax. Each one experienced diminished economic output and population relative to the national average. Does anyone really believe that happened by chance?

So why are income taxes so harmful? Because they are direct taxes on work, saving, investing and business creation. They are taxes on virtue, rather than vice. We tax cigarettes because we want people to stop smoking. So why do we tax work?

Because we want people to stop working, and go on the government dole, so they’ll vote Democrat to keep the gravy train going (until the riots in the streets from the indolent get completely out-of-hand, then we call in the Police State to crush them, which lowers the population, and leaves even more power in the hands of the elite few–see how easy this philosophy is?).

By the way, the whole concept of controlling behavior by taxation is foolish and should be scrapped. You tax to pay for necessary, Constitutionally-mandated, and agreed-upon tasks. And that’s it. Period. End of taxes.