VOTE YES! (Story come from MSM whom are in the bag for the FED / IRS)
Is State Income Tax Unconstitutional?
Washington Examiner
Tennessee is one of nine states that does not have an income tax.
Anti-tax advocates want to make sure it stays that way. Next week, Tennessee voters will be asked whether the state constitution should be amended to forever prohibit income and payroll taxes.
“Not having an income tax has already brought jobs to Tennessee, and voting ‘yes’ on [question] 3 will bring even more jobs,” said state Sen. Brian Kelsey, a Republican who sponsored the legislation leading to the amendment.
That’s the common argument made by income tax foes — economic growth more than makes up for the money a state loses in revenue from not having an income tax.
But is that true?
The picture is mixed when comparing states with no income taxes to those with the highest marginal rates.
Some statistics, particularly on job growth, back up tax opponents. And people in those states pay fewer taxes in general. But by other measures, such as household income, states with the highest taxes do better (CRAP).
Eight states in addition to Tennessee do not have an income tax: Alaska, Florida, Nevada, New Hampshire, South Dakota, Texas, Washington and Wyoming.
Since 2000, those nine states posted stronger median employment growth than the nine states with the highest top marginal income tax rates (California, Hawaii, Iowa, Maine, New Jersey, New York, Oregon, Vermont and Wisconsin), averaging 11.5 percent job growth compared to the latter group’s rate of 2.9 percent, according to the Census Bureau.
A low income tax encourages people and businesses to move to a state, said Jonathan Williams, director of the conservative American Legislative Exchange Council’s Center for State Fiscal Reform.
“The way to increase tax revenue is not to increase the taxes but to increase the number of taxpayers,” Williams said.
States with no income tax have a lower overall tax burden. Residents of high-rate states fork out $4,773 in taxes, over $1,300 more than residents in states without an income tax.
And states with no income tax also tend to be more business-friendly, as five of them have no corporate tax rate. Only Alaska and New Hampshire have corporate tax rates that are comparable to the ones in the high-rate states, running between 7 and 12 percent.
The no-tax states have higher rates of economic growth, too. Their economies grew by 3.3 percent on average since 2005, compared with 2 percent for the high-tax states, according to an August report by the U.S. Bureau of Economic Analysis. The averages are thrown off somewhat by sparsely populated Wyoming growing at 8.4 percent, but some high-population, no-tax states also enjoyed strong growth, such as Texas at 4.3 percent and Florida at 3.7 percent.
States with no income tax must get their revenue from somewhere, though. Sales taxes are one way: They average 4.5 percent, but residents of Tennessee and Nevada pay as much as 7 percent.
“It was 5 percent just a few years ago,” said Dick Williams, chairman of Tennesseans for Fair Taxation. That’s a bad deal for state residents, he argues, since sales taxes fall disproportionately on low-income consumers. “An income tax would grow more in line with people’s needs.”
But sales taxes in no-income-tax states are actually lower than in high-tax states, which charge an average 6 percent — 1.5 points higher.
And living in a state with a high income tax doesn’t mean that other taxes will be lower. In most cases, other tax rates are comparable to or even higher than the ones in states that lack an income tax:
• Gas taxes: People in no-income-tax states pay an average 43.4 cents for every gallon of gas they buy, while high-rate states charge 48.6 cents. The national average is 49 cents.
• Tobacco taxes: No-income-tax states charge $1.46 in taxes for every pack of cigarettes, while smokers pay an extra $2 in high-rate states. The national average is $1.54.
• Property taxes: Counties in no-tax states charge an average 1.1 percent of assessed value, while in high-rate states they charge 1 percent. Most counties nationwide charge between 0.5 percent and 1 percent.
“High income taxes do not necessarily translate into low sales taxes or even property taxes,” said Pete Sepp, president of the National Taxpayers Union, a conservative nonprofit group. “There is a strong correlation in the opposite way, in fact.”
Elizabeth McNichol, senior fellow at the liberal Center for Budget and Policy Priorities, notes that many of the no-income-tax states have special advantages that allow them to get by without one. Nearly a quarter of Nevada’s revenue comes from taxes on gambling, while Alaska earned a staggering 92 percent of its general fund revenue last year solely from taxes and royalties on oil drilling. The coffers overflow so much that the state sends annual royalty checks to residents. The latest checks, mailed earlier this month, were for $1,882.
“Other states [such as Wyoming] have mineral wealth. Texas has a lot of land and room for development,” McNichol said.
Tennessee and New Hampshire may not tax regular income, but they do tax dividend and interest income at 6 percent and 5 percent. The Granite State also has a 7 percent telecommunications tax.
Income taxes don’t seem to matter much in terms of the states’ budget health. “We really didn’t see a difference between the high and low income tax states” during the recession, McNichol said.
Part of the problem is that revenue from income taxes can be volatile, Sepp said, resulting in unexpected shortfalls.
Residents of states with high rates are generally doing better, though. They have an average annual income per capita of $45,480, almost $1,000 higher than residents of the no-income-tax states. Median household income is higher too, at $56,583, about $1,500 more.
“A lot of the high-tax states do have higher incomes but that is partly due to the fact that they have higher costs of living,” said ALEC’s Williams. “We think the gap is shrinking, though.”