November 10, 2014 | Commentary on Economy, Economic Growth, Taxes, Tax Reform

The Tax-Cut Referendums

For months on end, Democrats crowed that voters were going to toss Kansas Gov. Sam Brownback and his tax-cutting agenda out of office. 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, 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). But the real message sent Tuesday was precisely the opposite of what the critics hoped for. Brownback won, while tax-hiking Gov. Pat Quinn in Illinois was thrown overboard.

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

Brownback’s victory 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, also a 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 entirely eliminate the state income tax.

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. Illinois’ 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. And Mr. Quinn is gone.

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

The move to cut and cap income taxes is rooted in solid science. As my fellow Register columnist Art Laffer, Travis Brown, Rex Sinquefield and I show in our book, “The Wealth of States,” low-tax and no-income-tax states substantially outperform states with a high income tax. 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 state income tax can reach 13 percent.

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

But they are dancing on thin 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 Sam 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.

About the Author

Stephen Moore Distinguished Visiting Fellow
Project for Economic Growth

Originally appeared in The Washington Times