While liberals on both sides of the aisle think that we can tax and spend ourselves out of this economic mess, analyses published by the Tax Foundation and the American Legislative Exchange Council show that states that tax less also spend less and have better economies than those states that tax more. The Wall Street Journal reported:
“States that allow taxpayers and employers to keep more of their earnings are reaping the benefits. States without an income tax have significantly better growth in private sector GDP (59% versus 42%) over the last 10 years. They increased the number of jobs by 4.9% while jobs in the rest of the states declined by 2.6%. States without an income tax gained population (+5.5%) from domestic migration (U.S. residents moving in and out of states) while all other states as a whole lost 1.3% of population between 2000 and 2009.”
The converse was also true that states that taxed more also spent more and had worse economies than the rest.
To conservatives, these analyses merely state the obvious. It really doesn’t take a genius to realize that as taxes increase, consumers will consume less and therefore contribute to a downsizing economy. They will consume less because they will have less money to spend. Of course, even in those circumstances, government officials and economists will try to encourage people to spend their money or go into debt in order to “save the economy.” But fiscal conservatives don’t live that way. If the money’s tight, and the economy is down, then it’s time to save as much as possible, not spend. Our personal and familial economy is far more important than the national economy.
And as government seizes more of people’s incomes through taxes, it spends more on things it doesn’t need. It overpays government employees; it creates needless departments; it wastes money and contributes to corruption.
However, if the government can’t depend on taxes as a major source of revenue, then it will be more careful with what it is able to take in. It won’t be able to spend as much. It will have a tighter budget.
This isn’t to say that those states with fewer taxes have no corruption or waste at all. All state governments these days are too big, even the more conservative ones. But the numbers show that the trend is simply that having fewer taxes leads to smaller government, more freedom and a better economy.
If the government really wants to help us out of this economic mess, they would eliminate the income tax, and the federal government would have to reign in spending. Such a drastic reduction in revenue would force Congress to start cutting whole departments. People would be freer, and the economy would be better.