NCPA - National Center for Policy Analysis


January 25, 2007

States are now in a ferocious competition to attract jobs and businesses, says economist Arthur Laffer, who is advising several Governors and legislators on the issue, and one of the best ways to win this race is to abolish the state income tax.


  • In Georgia, Missouri and South Carolina, Governors and state legislatures are drafting serious proposals to repeal their income taxes to promote economic development.
  • St. Louis, one of America's most distressed cities, may overturn its wage/income tax as a way to spur urban revival.
  • And in Michigan, the legislature is in the last stages of phasing out its hated business income tax -- the most onerous in the land.

The timing for fixing state tax codes could hardly be more ideal because states are swimming in budget surpluses thanks to the booming national economy.  This should be a big year for state tax cuts, says the Wall Street Journal:

  • Governors in Arkansas, Florida and West Virginia have already announced major tax relief plans for 2007.
  • Even New York City has a $1 billion surplus and Mayor Michael Bloomberg is promising a property tax cut.

The idea of financing state services without an income tax is hardly radical, says the Journal:

  • Nine states today -- Alaska, Florida, Nevada, New Hampshire, South Dakota, Tennessee, Texas, Washington, and Wyoming -- manage well without one.
  • With a few exceptions, the non-income tax states are America's most prosperous.
  • Meanwhile, the high income tax states, which tend to be congregated in the Northeast, keep surrendering jobs, people, and voters to the South and West.

Source: Editorial, "Rich States, Poor States," Wall Street Journal, January 25, 2007.

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