Hey Democrats, Why Is It That States With The Highest Tax Rates Have The Highest Debt???

I wrote an article entitled, “Tax Cuts Increase Revenues; They Have ALWAYS Increased Revenues” that documents the fact that, on every single occasion in which it has ever been tried, cutting income tax rates has increased federal tax revenues and resulted in a healthier economy.

Democrats stupidly won’t believe that.  Mostly because they are stupid people who are committed to stupid and depraved world views (such as Marxism).

A Newsmax article documents that what is true of the federal government and tax cutting also happens to be true of the states and tax cutting:

Abolish State Income Taxes
Tuesday, 20 Jul 2010 11:15 AM
By Richard Rahn

Did you know there are nine states that have no state income tax?

The non-income-tax states (see accompanying chart) are geographically and economically diverse, ranging from the state of Washington in the Pacific Northwest, to Texas and Florida in the South, and up to New Hampshire in the Northeast.

Why is it that some of the states with the biggest fiscal problems have the highest individual state income tax rates, such as New York and California, while some of the states with the least fiscal problems have no state income tax at all?

High-tax advocates will argue that the high-tax states provide much more and better state services, but the empirical evidence does not support the assertion.

On average, schools, health and safety, roads, etc. are no better in states with income taxes than those without income taxes. More importantly, the evidence is very strong that people are moving from high-tax states to lower-tax-rate states — the migration from California to Texas and from New York to Florida being prime examples. (Next year, the combined federal, state, and local income tax rate for a citizen of New York City will be well over 50 percent, as contrasted with approximately 38 percent for citizens of Texas and Florida.)

If the citizens of California and New York really thought they were getting their money’s worth for all of the extra state taxation, they would not be moving to low-tax states.

The obvious question then is, Where is all the extra money from these state income taxes going?

It is going primarily to service debt, and to pay for inflated salaries and employee benefits. It is interesting that the high-tax-rate states also, on average, have much higher per capita debt levels than states without income taxes. (Alaska is an outlier because it has its oil reserve to borrow against and actually gives its citizens a “dividend” each year.)

The biggest additional burden the high-tax states have is unionized government worker contracts. My Cato colleague Chris Edwards notes: “Half of all state and local spending — $1.1 trillion out of $2.2 trillion in 2008 — goes toward employee wages and benefits.”

His study showed that, on average, total hourly compensation for state and local government workers was 45 percent higher than for equivalent private-sector workers.

In addition, the government workers are rarely fired even those with poor job performance. Importantly, the differential was much greater in states where more than half of the state employees were unionized, and these were all in states with state income taxes, with the exception of Washington.

High rates of unionization of public employees and high rates of debt go hand in hand. Those states whose government workers are less than 40 percent unionized have median per capita state debt of $2,238, while those states where unionization rates are over 60 percent have a median per capita state debt of $6,380.

High rates of unionization tend to lead to excess staffing, unaffordable benefits, and pensions.

There have been a number of both empirical and theoretical studies showing the negative impacts of state income taxes and particularly those with high marginal rates on economic growth within the state.

A recent study published in the Cato Journal by professors Barry W. Poulson and Jules Gordon Kaplan, which was carefully controlled for the effects of regressivity, convergence, and regional influences in isolating the effect of taxes on economic growth in the states concluded: “Jurisdictions that imposed an income tax to generate a given level of revenue experienced lower rates of economic growth relative to jurisdictions that relied on alternative taxes to generate the same revenue.”

State Income Tax Rates and Debt (All Figures Percent)
States Income Tax State Debt as % of Income
Without Individual Income Tax
Tennessee 0 2.02
Texas 0 2.70
Nevada 0 4.07
Wyoming 0 4.90
Florida 0 5.20
Washington 0 7.93
South Dakota 0 10.95
New Hampshire 0 14.10
Alaska 0 24.01
Highest Individual Income Tax rates
Iowa 9.28 6.47
Maryland 9.23 7.26
California 10.55 7.55
Oregon 11.36 8.61
Hawaii 11.00 11.89
New Jersey 9.06 12.01
New York 10.67 12.22
Vermont 8.95 13.12
Rhode Island 9.9 20.04

The state of New York is a poster child for what not to do. At one time, it was the richest and most populous state. But at least going back to the Harriman and Rockefeller administrations decades ago, it decided it could tax and spend its way to prosperity. (Note: New York City residents face a maximum combined state and city income tax of over 12 percent, while those in many New York counties pay a little less than 9 percent, giving the state an average maximum tax rate of almost 11 percent.)

The results have been the opposite of what was promised.

New York’s relative population, economic growth, and per capita income have all declined, particularly in relation to those states without a state income tax.

In the past year, per-person taxes have increased by $419 in New York, far higher than any other state. (Note: They went up only $1 in Texas. Is New York or Texas now better off?)

Income taxes, as contrasted with consumption (i.e., sales) taxes and modest property tax rates, are far more costly to administer and do far more economic damage (by discouraging work, saving and investment) and are far more intrusive on individual liberty.

The states without state income taxes overall have had far better economic performance for most of the past several decades than have the income tax states — particularly those with high marginal taxes.

The Tea Party movement indicates that it might be the right time politically for politicians in the income tax states to call for those taxes to be phased out.

Good economics might actually be good politics this year.

Richard W. Rahn is a senior fellow at the Cato Institute and chairman of the Institute for Global Economic Growth.

That table alone is worth a million bucks.  Notice how it documents the fact that liberal/Democrat economic policy is about as abject a failure as you can get.

What is also interesting is that the United States did not have a permanent federal income tax until 1913.  That, coincidentally, was the same year that Democrats also gave us the Federal Reserve with the promise that they would now be able to fix everything.  Like all of their promises, it was a giant lie.

Many founding fathers warned against a federal reserve system that Woodrow Wilson ultimately rammed down our national throats.  Here are the words of Thomas Jefferson in particular:

“If the American people ever allow private banks to control the issue of their currency, first by inflation then by deflation, the banks and the corporations will grow up around them, will deprive the people of all property until their children wake up homeless on the continent their fathers conquered. The issuing power should be taken from the banks and restored to the people, to whom it properly belongs.” -Thomas Jefferson, The Debate Over The Recharter Of The Bank Bill, (1809).

For the factual record, the Federal Reserve, perversely named as it is, is in fact the very kind of “private bank” that Jefferson warned us about.  It’s fascism, but Democrats love fascism.  Fannie Mae and Freddie Mac are examples of other “government sponsored enterprises” devised by Democrats that give us the very, very worst of both government and private enterprise.

And this article directly relates that tax and the out of control Federal Reserve system with our present out of control debt.

Democrats have led the way in screwing up America for the last hundred years.  They were screwing it up in 1913 under Woodrow Wilson.  They were screwing it up again in the 1930s under FDR.  And now we are royally screwing it up under Obama.

And now we have no chance of lasting another hundred years because Democrats have loaded us up with debt that we can never hope to ever repay even as our debt continues to spiral even more out of control.

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4 Responses to “Hey Democrats, Why Is It That States With The Highest Tax Rates Have The Highest Debt???”

  1. Mark Anderson Says:

    Look at this Wikipedia site for states by income. Democratic states are higher in income. The top ten are 9 Democratic, 1 Republican. The bottom 10 all Republican. Keep right thinking your way to the bottom smart boy. http://en.wikipedia.org/wiki/List_of_U.S._states_by_income

  2. Michael Eden Says:


    Actually you are wrong. You claim that the top ten states are Democratic except one; actually three of the states have Republican governors – #2 New Jersey, #4 Alaska and #8 Virginia. So on that, two of the top five are Republican, making it kind of a wash.

    As someone who mocks me by calling me “smart boy,” I would expect you to at least have enough intellect to get your basic facts straight there, Mr. Smarty Pants.

    But you are quite stupid in another way; you are stupid in assuming that “more income” makes you “richer.” Not so much, it turns out.

    Do you know what the median price of a home is in these states relative to the other states? Do you know what the cost of living is in these states relative to the other states? Apparently that isn’t relative to a person of your “intelligence.” It’s important to note that the cost of living in Bethesda, Maryland is 52 percent higher than in Tupelo, Mississippi; the average apartment monthly rent in Bethesda is $1,464 and median home price is $529,707, versus $512 monthly rent in Tupelo and a median home price of $220,000. So your “rich” states aren’t quite so strong if you were to talk about something practical, like actual purchasing power.

    You’re really “rich” in Maryland; until you consider that the majority of your income goes for housing and you’ve got nothing left. Oh, and the high taxes. But you “smart” people don’t worry about such inane details, do you?

    Kind of a shame that – after mocking me – it turns out that your argument rests on “I have two monies and you only have one money.” Ignoring the fact that my one money actually buys more than your two monies.

    Or how about this little factoid from your Wikipedia article? Take a look at #1 Maryland: Income was going up every single year between 2004 to 2008 during the Bush presidency (from $62k, to $68k, to $70k). But, oh oh, Obama came into office, and incomes dropped for the first time. Looks like Democrat rule doesn’t work so good even in blue states. Maryland did a lot better under Bush.

    I notice the District of Colombia is also in that top ten. Apparently you think that a city that has extreme wealth created by politics and political favoritism combined with extreme poverty in everyone else being incredibly poor counts as a success for Democrat values. Because no area more resembles the book “1984” with the wealthy “Inner Party” versus the poor “Outer Party” than the District of Columbia. But I know how much you libs yearn to create “1984” in America just like you did with all your other communist countries.

    Another thing that I would point out is by your mantra, just taking it at face value, it is in fact the Republican Party which most clearly represents the poor, whereas the Democrat Party is the party of elitist wealth; which makes you people even BIGGER liars.

    Why is the cost of living so much higher in your blue states? Because Democrats regulate the crap out of everything making everything far more expensive.

    Too expensive for ordinary people to afford. This is why there is a rather large population shift away from blue states to red states. MILLIONS of people are escaping your “smart” Democrat states to flow into Republican states. I’ve pointed out that the cost of a moving truck OUT OF California TO Texas is like three times going the other way due to all the Californians escaping to Texas. Why do you think that is, Mr. Smarty Pants? Because it kind of craps all over your genius theory.

    One last thing is that a lot of the states that tend to vote Democrat – such as California – have enormous structural advantages. California not only has the weather; it has the PORTS through which commerce has to flow whether Democrats are stupid or not. It’s kind of like being a rich person who inherited all your money; when you have that kind of advantage, you can afford to be stuck on stupid. At least for a while…

    At least until your blue states like California come crashing down due to your Democrat stupidity:

    California’s $500-billion pension time bomb
    April 06, 2010|By David Crane

    The staggering amount of unfunded debt stands to crowd out funding for many popular programs. Reform will take something sadly lacking in the Legislature: political courage.

    The state of California’s real unfunded pension debt clocks in at more than $500 billion, nearly eight times greater than officially reported.

    That’s the finding from a study released Monday by Stanford University’s public policy program, confirming a recent report with similar, stunning findings from Northwestern University and the University of Chicago.

    See if your “income” (excluding the actual cost of living) pays for that soon coming day of reckoning, genius.

  3. Benjamin David Steele Says:

    Democratic voting states pay most of the federal taxes and Republican voting states receive most of the funding from federal taxes.




  4. Michael Eden Says:

    A few things to say about that:

    1) When I clicked on the chart it showed Florida as a “blue” state. Really? The last two governors have been Republican. It voted for Bush in both 2000 and 2004. It is clearly a red state now, having just elected another Republican governor last year. And it also voted for one of the most conservative Senators in the country (Marco Rubio) in 2010.

    Voting for Obama in 2008 doesn’t make a state “blue” for life. Florida is very much a red state now.

    So let’s just say that somebody was out to prove what they wanted to prove in your first link.

    2) There’s an interesting thing about federal income taxes and states: some end up paying a much higher amount than others because of where they live.

    I live in California – a blue state that has sky-high housing and cost-of-living costs relative to most red states. If you live in Massachusetts, your income is significantly higher than most red states, but it is purely artificial in the sense that you’ve got to pay 40% more for your housing and other costs of living.

    But the federal government doesn’t look at income adjusted by cost of living; they only look at the number on your paycheck.

    So the fact that liberals have screwed up their states and burdened them with higher costs doesn’t matter.

    Too damn bad for liberals and their blue states, isn’t it?

    3) Still another simple fact of the matter is that red states tend to be the states with the smallest populations (with a few notable exceptions such as Texas and FLORIDA). You look at a map and “flyover country” is ALL Republican. And another simple fact is that states with smaller populations get more representation due to our system; the smallest state gets the same number of senators as the biggest one. That means as long as we’re “redistributing wealth,” states with small but over-represented populations (i.e., Republican states) are going to keep getting more of the federal welfare.

    As long as we have federal welfare, the smallest states are going to keep getting more of that welfare on a per capita basis. If you don’t like it, vote for the party that is trying to reduce the federal welfare state. Vote Republican. Because that’s the only way what you’re pointing out will ever change.

    4) It is not hypocritical for Republican states to play the game as the libturds have created that game.

    For example, last year veterans got something like a $250 check from Uncle Sam. Personally, I was opposed to that stupid credit – just as I am opposed to most federal tax credits. But what would have happened if I and all other conservatives hadn’t taken the money? It all would have gone to liberals. And THAT would have taught those damn liberals a lesson?

    So, yeah, I took the money. I can give it to Republicans (and Republican states) if I want to. But as long as you’ve got that stupid system, you either take the money or you let the other side have it all. And that isn’t fair.

    5) So to the extent that red states get more money, I hope they suck idiotic Democrat states DRY.


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