The tax-cut ref­er­en­dum

Vot­ers across the coun­try en­dorsed spend­ing re­straint

The Washington Times Weekly - - Commentary - By Stephen Moore

For months on end, Democrats crowed that vot­ers were go­ing to toss Kansas Gov. Sam Brown­back and his tax-cut­ting agenda out of of­fice on Tues­day. He was pounded in the me­dia for the ev­i­dent sin of fol­low­ing the Laffer-Moore model of in­come-tax rate re­duc­tions to stim­u­late growth and pros­per­ity. This re­form was de­nounced as a fail­ure and “trickle-down eco­nomics.” Vot­ers don’t want tax cuts, The Kansas City Star, The New York Times and oth­ers hollered hope­fully.

Ex­cept it didn’t turn out that way. Not at all.

Mr. Brown­back and his tax cuts sur­vived (al­beit nar­rowly). The real mes­sage sent on Tues­day was pre­cisely the op­po­site of what the crit­ics hoped. Mr. Brown­back won while his tax-hik­ing neigh­bor, Demo­cratic Gov. Pat Quinn in Illi­nois, was thrown over­board by vot­ers.

Tax-cut­ting gover­nors such as Scott Walker in Wis­con­sin, Rick Scott of Florida, Mary Fallin of Ok­la­homa, John Ka­sich of Ohio and Rick Sny­der of Michi­gan, to name a few, joined Mr. Brown­back and all won — mostly by big mar­gins. The gover­nors who got tossed out of of­fice this week or where party con­trol changed were in the tax-hik­ing states. Democrats lost not just in Illi­nois, but in Mas­sachusetts and Maryland, too — all deep-blue states where in­come taxes went way up. The only Repub­li­can across the coun­try who lost this week was Tom Cor­bett of Penn­syl­va­nia. He in­fu­ri­ated con­ser­va­tives by rais­ing gas taxes.

The Brown­back win is spe­cial salt in the wounds to the left, the me­dia and the teach­ers unions. Lib­er­als had at­tracted mil­lions of out­side dol­lars into Kansas to deny the gov­er­nor and for­mer se­na­tor a sec­ond term. The Kansas City Star ranted day after day that Mr. Brown­back (and I) were “ly­ing” for trumpeting the suc­cess of the tax-cut agenda. He won by promis­ing to move for­ward with his goal to elim­i­nate the state in­come tax en­tirely.

The real tax re­volt was in Illi­nois. The Land of Lin­coln was sup­posed to be a showcase for how load­ing up taxes on the rich could re­build a state econ­omy. As the union bosses cheered, Mr. Quinn pushed through the big­gest in­come tax in Illi­nois his­tory, rais­ing the per­sonal in­come tax to 5 per­cent from 3 per­cent and the cor­po­rate tax to nearly the high­est in the na­tion.

It didn’t work. The state is still in lousy fi­nan­cial shape with mas­sive un­funded pen­sion li­a­bil­i­ties. The bond rat­ing has been down­graded mul­ti­ple times. The rate of job growth in the Land of Lin­coln is the slow­est in the Mid­west and be­hind much-ma­ligned Kansas. Mr. Quinn is gone.

The tax-hik­ing agenda fared poorly on the bal­lot all over the coun­try. In Ne­vada, vot­ers re­jected a new 2 per­cent business mar­gins tax to fund schools. In Ten­nessee, vot­ers ap­proved a con­sti­tu­tional amend­ment ban­ning the leg­is­la­ture from im­ple­ment­ing an in­come tax and Ge­or­gia vot­ers capped the in­come tax. Mas­sachusetts vot­ers banned au­to­matic gas-tax hikes.

The move to cut and cap in­come taxes is rooted in solid sci­ence. As Mr. Laffer, Travis Brown, Rex Sin­que­field and I show in our book, “The Wealth of States,” low and no in­come-tax states sub­stan­tially out­per­form high in­cometax states. Just look at the job-cre­ation rate, which has been two to three times higher in Texas and Florida, where there is no in­come tax, ver­sus New York and Cal­i­for­nia, where the in­come tax can reach 13 per­cent. (See chart).

Alas, in th­ese states, vot­ers coun­tered the na­tional trend. Gov. Jerry Brown won big in Cal­i­for­nia after rais­ing taxes, as did An­drew Cuomo in New York.

But they are danc­ing on a thin sheet of ice. I sus­pect vot­ers don’t want more taxes, be­cause they don’t think the money will be spent wisely by politi­cians. Vot­ers seem to un­der­stand that try­ing to tax a state to pros­per­ity is a fool’s er­rand. The me­dia and po­lit­i­cal pun­dits who said that Mr. Brown­back was a dead man walk­ing still don’t get it. They were big losers on Tues­day, too. Stephen Moore is chief economist at the Her­itage Foun­da­tion.

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