True Believers in the Church of No Income Tax

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By Francis Wilkinson

Arthur Laffer and Stephen Moore published an op-ed article in the Wall Street Journal last week touting their latest edition of "Rich States, Poor States," the report they produce annually for the American Legislative Exchange Council.

The whole endeavor is a pretty good example of what happens when you regard fiscal policy not as a utilitarian pursuit but as a religion.

Laffer and Moore compare the economic well-being of states without an income tax with states with high rates and reach a conclusion no less remarkable for being pre-ordained. It's not just that low-tax states are superior to their high-tax peers in myriad ways. According to the authors, the low-tax states belong to a different genus entirely. "It's like comparing Hong Kong with Greece or King Kong with fleas," they write.

Who are these Kongs, commandeering skyscrapers, swatting petty tax collectors like so many fleas?

There is Texas, of course. Texas has been gaining population and jobs (there might be a link there) for years -- though not, as yet, the kinds of jobs that would enable median household income in the state to rise to the level of the U.S. average.

There is Nevada. (You're right, too easy --let's move on.)

Florida? (Keep moving.)

How about Alaska? Like Texas and Wyoming, it's a no-income-tax state with abundant natural resources to help boost the economy and fill state coffers. Despite its tiny population and vast oil reserves, however, Alaska still relies on a steady infusion of cash transfers routed through Washington from taxpayers in other states. (If I may speak for the class, we're all thrilled that Alaskans continue to pay no state income tax.)

New Hampshire famously lacks an income tax but it stands out on the list for a completely different reason: It's markedly more prosperous than almost all of its no-tax peers. Of course, it's also possible that New Hampshire's relative wealth has something to do with its relative proximity to Boston, Massachusetts.

Or Taxachusetts. That's what some called Massachusetts in 1988, when its governor was running for president. And it's still a high-tax state today. It's got higher income, corporate and even sales taxes than, for example, Alabama. Can you guess which state has better schools? Superior infrastructure? A higher standard of living?

In the last paragraph of their op-ed, Laffer and Moore add the caveat that even they recognize as necessary: "Taxes aren't all that matters, to be sure," they write, "and low-tax states don't always outperform high-tax ones."

So their revealed truth is divine in all respects. Yet not every pilgrim is destined to see the face of God in revenue statistics. (King Kong perhaps, but not God.) Heaven on earth will have to wait.

(Francis Wilkinson is a member of the Bloomberg View editorial board. Follow him on Twitter.)


-0- Apr/25/2012 18:02 GMT