Fact & Comment
States’ income tax reductions give citizens more prosperity and spur the higher revenue that comes with better times.
While the White House and congressional Democrats are feverishly trying to enact massive, economy-killing tax increases, numerous states are going in the opposite direction by cutting them. These local officials recognize that reducing the tax burden on their citizens will give them more prosperity
and the higher revenues that come with better times. Arizona, Ohio, Wisconsin, Oklahoma, Nebraska, Iowa, Montana, Louisiana, Idaho and New Hampshire have all passed reductions in state income taxes.
Ohio has engineered the biggest tax reduction in the Buckeye State’s history, eliminating its two tax brackets over 4%. The first $25,000 of an individual’s income is now tax-exempt. Compare that with California, where one hits the 4% bracket at that income level. Ohio’s law also ensures that people who work from home don’t have to pay taxes to cities where they no longer work.
Particularly impressive is what Arizona’s governor, Doug Ducey, managed against fierce Democratic opposition and some Republican reluctance. After much wrangling with the state legislature, the governor achieved a flat tax rate of 2.5% on incomes up to $250,000 and a rate of 4.5% on those above.
New Hampshire has always been known for having no state income tax (and no sales tax), but it did have a 5% levy on dividends and interest income. That tax will now be eliminated.
It’s not just Republican governors who have been signing reductions. Such was the popularity of giving taxpayers real relief that Wisconsin enacted the largest tax cut in its history even though its governor, a Democrat, wanted to boost levies. Louisiana’s governor, a Democrat, also signed on to tax cuts.
But not all states are helping their taxpayers. It’s no surprise, for example, that chronically misgoverned New York raised taxes, even though it fared better than expected in revenue and has billions more in aid coming from Washington. California, flush with $100 billion in extra cash, refuses to reduce its sky-high tax rates.
Low-tax states—and countries—routinely do better than high-tax ones.
Why Washington Detests This Cryptocurrency
The U.S. government is about to wage war against a new, booming class of cryptocurrency called stablecoins.
While bitcoin and similar cryptos get the headlines, it’s stablecoins that governments and central banks really fear—and will fiercely fight.
Unlike bitcoin and its cronies, which fluctuate like roller coasters, stable-coins are tethered to real assets, such as the dollar or gold. This means they can be easily used for everyday commercial transactions as well as long-term contracts. Nobody in his right mind would take out a mortgage denominated in bitcoin, where you could end up owing ten times the nominal price of your house. This new class of crypto has exploded from a total value of $28 billion at the beginning of the year to $110 billion by July. Their use in commercial dealings is mushrooming as well. It’s no wonder: Done right, they’re the equivalent of cash.
One can see how stablecoins will pose a mortal threat to current payment processing systems, which are complex, cumbersome and costly. Thanks to blockchains, stablecoins cut out the middlemen. For instance, credit card transactions typically cost merchants 2% to 3% in fees. With stablecoins, those fees will go out the window.
Stablecoins will also vastly ease cross-border trade and remittances, while eliminating the customary fees.
The ultimate savings for consumers and businesses could amount to literally hundreds of billions—if not trillions—of dollars a year.
That would free up enormous sums of capital for financing new businesses as well as substantially increase productivity-producing investments in existing businesses. As a result, the standard of living will increase meaningfully.
The ostensible purpose of Treasury Secretary Janet Yellen’s July meeting with the President’s Working Group on Financial Markets sounded benign and proper. To quote Yellen, “Bringing together regulators will enable us to assess the potential benefits of stablecoins while mitigating risks they could pose to users, markets or the financial system.”
Some common-sense regulations are in order, particularly to ensure that a stablecoin issuer actually has the assets to back up its coins, just as investors are assured that a money market fund really has the assets it says it has.
But don’t be fooled about the real agenda here. Regulators are waking up to the fact that stablecoins threaten not only existing payment systems but also, and more fundamentally, the very monopoly that governments have on issuing currency. Governments want no challenges to that monopoly.
The fireworks here are just starting.