States With No Income Taxes Are Not Economically Better Than Those With High Income Taxes

Last updated on February 8th, 2013 at 02:29 am

BOOM! There goes one of the BIGGEST economic talking points the Radical Right has. Bloomberg is reporting that states with no income taxes had less economic output than states with “high” income taxes.

The report stated that Alaska, Florida, Nevada, New Hampshire, South Dakota, Tennessee, Texas, Washington and Wyoming all do not have state income taxes and their economic output increased 8.7% from 2001-2010.

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The states considered to have high incomes taxes were California, Hawaii, Maine, Maryland, New Jersey, New York, Ohio, Oregon and Vermont. The economic output in these states increased 10.1%.

On average, both no tax and high taxes outpaced the rest of the country, which overall was 8.1%.

The study also found “median household income declined an average 0.7 percent among the nine ‘high-rate’ states, compared with a 3.5 percent drop in the nine states without such a levy. The also found no difference in the average unemployment rate between the two groups of states. The time period of the report includes the 18- month recession that ended in June 2009.”

I did an analysis of progressive taxed states vs. flat tax states and what I found was similar to that of this report. I compared various states, one with a flat tax and the other with a progressive tax. For example, I looked at two rust belt states, Pennsylvania and Ohio.

The state of Pennsylvania has a flat corporate tax of 9.99% and a flat income tax rate of 3.07%. The growth in GDP in Pennsylvania was 21% from 1997 -2010.

In Ohio, they don’t have have a corporate tax at all and the progressive income tax rates are 0.5%- 5.9%. The GPD growth in Ohio between 1997 and 2010 was a dismal 7%.

Even going back to 2001, Ohio’s corporate tax was 5.1% to 8.5% while Pennsylvania was still at 9.99%.

So now that the conservatives’ main talking point that lowering taxes cured an economy, what is the next fallacy they will come up with?