Governors Push Bigger Reliance on Sales Taxes
WASHINGTON — Republican governors are moving aggressively to cut personal and corporate income taxes, including proposals that would increase reliance on state sales taxes, setting up ambitious experiments in tax reform that could shape what is possible on a national level.
Even as Washington continues to discuss, if not act, on ideas for making the federal tax system simpler and more efficient, governors, some with an eye on the next presidential race, are taking advantage of the improving economy and a gradual rebound in revenues to act.
In Louisiana, Gov. Bobby Jindal is pushing to repeal the state’s personal and corporate income taxes and make up the lost revenue through higher sales taxes. Gov. Dave Heineman of Nebraska is calling for much the same thing in his state. Gov. Sam Brownback of Kansas wants to keep in place what was supposed to be a temporary increase in the state sales tax to help pay for his plan to lower and eventually end his state’s income tax.
Along the way these governors are taking small first steps into a debate over what kind of tax system most encourages growth in a 21st-century economy. In particular they are focusing attention on the idea, long championed by conservatives but accepted up to a point by economists of all stripes, that the economy would be better served by focusing taxation on consumption rather than on income.
Taxing consumption has the potential to lift economic growth by encouraging more savings and investment. But the shift could also increase inequality by reducing taxes predominantly for the wealthy, who spend a smaller share of their income than middle- and lower-income people.
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If these governors feel their states don't need to tax their citizens at current rates, I would suggest they don't need to tax other Americans either. Most of these states take more federal money than they contribute. It would follow that any state that doesn't need to tax its corporations doesn't need federal money either. We should allocate these funds back to the states that contribute more than they have taken back from the federal government, the ones form which these "lower state income tax" states are expecting to take jobs.
