News Column

GOP Lawmakers Look to Abolish Income Taxes

Jan. 17, 2013

Jim Malewitz, Stateline.org

tax cuts

Republican lawmakers in several states are aiming to do what no state has done in more than three decades: eliminate income taxes.

Efforts are under way in at least three states to do away with personal and corporate income taxes, while Republicans in control elsewhere are considering rate cuts.

"At this point I don't know if I could give you what that possible outcome is," Phil Berger, North Carolina's senate leader said Wednesday (January 16), according to the Associated Press, "but I can tell you that we're going to shoot for the lowest possible (rate), and zero is the absolute lowest."

With Republicans now controlling both legislative chambers and the executive branch for the first time since 1870, such a proposal has perhaps never had a better chance in North Carolina.

Nebraska Governor Dave Heineman used his state of the state address to push his plan. "Our current tax system needs to be modernized and reformed," he said Tuesday "It's been nearly five decades since Nebraska had a serious debate about our overall tax system. Life has changed drastically since the 1960s, when we were operating in a completely different economic environment."

In Louisiana, Governor Bobby Jindal says his goal is to "eliminate all personal income tax and all corporate income tax in a revenue neutral manner."

Proponents say such efforts help draw business to their states.

Seven states -- Alaska, Florida, Washington, Nevada, South Dakota, Texas and Wyoming -- do not tax individual income, according to the Tax Foundation. Three states -- Nevada, South Dakota and Wyoming -- have no corporate income taxes.

But doing away with income taxes is easier said than done, even in GOP-controlled states.

Alaska was the last to do so, when it abolished personal income taxes in 1980. Last year, efforts failed in Kansas and Oklahoma, though Kansas Governor Sam Brownback did manage to push through major cuts.

As Stateline has noted, eliminating a central source of revenue is filled with political and practical concerns. Critics warn it forces either drastic spending cuts, which can jeopardize the delivery of services, or it means lawmakers must look elsewhere for new tax revenue elsewhere, often from the less well-off.

Plans in Louisiana and North Carolina, for instance, would offset lost revenue by increasing the states' flat sales taxes, shifting the burden to the poor. Heineman says he would find revenue by eliminating some deductions for businesses.

Meanwhile, in Kansas, Brownback has faced some backlash after major spending cuts. Last week, a district court ruled the state has shortchanged its schools by $400 million, depriving students a "suitable" education, which is mandated by the constitution.

Nevertheless, Brownback has pledged to further lower the rates.

"When I started as governor, we had the highest state income tax in the region, now we have the second lowest, and I want us to take it to zero," he said in his state of the state address. "Look out Texas, here comes Kansas."


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Source: (c)2013 Stateline.org Distributed by MCT Information Services


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