A tale of two tax policies

Marketplace Staff Jul 19, 2006

KAI RYSSDAL: Commentator Steve Moore says Democrats have their own disagreements to deal with.On another contentious topic.

STEPHEN MOORE: Don’t look now, but the Democratic Party is finally starting to embrace pro-growth, tax-cutting policies. It’s just that none of these Democrats are in Washington, D.C.

This year, Democratic governors including Janet Napolitano of Arizona, Brad Henry of Oklahoma, and Bill Richardson signed legislation to cut income tax rates, even for the rich.

The most amazing man-bites-dog story comes from Rhode Island, the bluest of blue states. Voters there went 2-to-1 for John Kerry over George Bush in 2004. But Rhode Island just passed a flat tax, which will lower the top tax rate in this New England state from 9.9 percent to 5.5 percent — the biggest income-tax cut in any state in years.

Why? Because Rhode Island has been bleeding jobs, businesses and people. It’s one of only three states losing population. Rhode Island politicians were mugged by the reality of economic competitiveness: states with low or no income tax, like Florida and Texas and Tennessee, are growing much faster than the high-tax-and-spend states of the Northeast.

Every day 1,000 Americans vote with their feet and move from the highest-tax to the lowest-tax states.

Only one state raised its taxes sharply: hapless New Jersey. The Garden State was already rated one of the five most anti-business states in the country because of high property and income taxes. And now the new governor, Jon Corzine, has raised taxes again. If New Jersey was a stock, you would want to sell all the shares you own.

There’s an old saying that high taxes don’t redistribute income, they redistribute people. That’s a lesson that Mr. Corzine and most Democrats in Washington, D.C., can’t seem to grasp. But it’s good to see that other Democrat leaders across the country are casting aside the politics of class warfare for the politics of growth.

RYSSDAL: Economist Stephen Moore is a member of the Wall Street Journal editorial board.

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