Midterm Message: Voters Want Tax Reform


Midterm Message: Voters Want Tax Reform

Nov 18th, 2014 2 min read
Stephen Moore

Distinguished Visiting Fellow

Stephen Moore is the Distinguished Visiting Fellow for Project for Economic Growth at The Heritage Foundation.

The midterm elections were a resounding mandate for tax reform. Across the country, in state races for governor and in federal races for Congress, voters sent a message they want lower taxes and a simplified tax code.

Consider what happened in Kansas. Democrats had vowed that voters would hang tax-cutting Kansas Gov. Sam Brownback in effigy. He chopped tax rates and reduced tax burdens on small businesses in Kansas.

The national media led by the New York Times pilloried the Brownback tax plan as a failure. Voters didn't see it that way, and he won a second term despite millions spent against him.

Ditto for tax-cutting governors like Scott Walker in Wisconsin, Rick Scott of Florida, Mary Fallin of Oklahoma, John Kasich of Ohio, Susanna Martinez of New Mexico and Rick Snyder of Michigan, to name a few. They all won — and mostly by big margins.

Meanwhile in Illinois, Maryland and Massachusetts, where Democrats raised taxes on "the rich," Republicans won control of the governor's office. The big loser was Pat Quinn of Illinois. At the behest of the teachers unions, Quinn passed the biggest tax hike in Illinois history, and last week voters demoted the Democrat to former governor.

In Arkansas and Arizona, newly elected Govs. Asa Hutchinson and Doug Ducey are pledging to phase out their states' income taxes. The only two big exceptions were New York and California — about the only two solidly blue states left.

What seems to be driving this quest for lower income taxes is the positive example of the nine states that have no income tax.

As Arthur Laffer, Travis Brown, Rex Sinquefield and I show in our book, "The Wealth of States," these no-income-tax states substantially outperform high-income-tax states.

Job creation has been consistently twice as high in states like Florida, Tennessee and Texas as high-income-tax states like New York, California and New Jersey.

On the national level, Americans also want a fair, simple and pro-jobs tax code. Most Republicans who won office pledged to fix our federal income-tax system that handicaps American job-creating businesses with the highest rates in the world.

Barack Obama abstained from doing anything about this tax albatross for six years, and his party paid dearly for it.

A new Public Opinion Strategies Poll of voters found 86% favor "simplifying the tax code." More than 9-of-10 want "the parties to work together" to get this done. Is there any other issue that 90% of Americans agree on today?

This call for a ripping out of the tax code by its roots and starting over may seem as hopeless as the Chicago Cubs winning the World Series. Lobbyists fight tax reform as a job killer — their own, that is.

But sometimes the stars really do align, as happened under President Reagan in 1986, when 97 senators and a majority of House members cleaned out the tax stables and chopped the top tax rate to 28%.

The Washington Post, of all places, editorialized recently: "There is broad agreement that the Internal Revenue Code is an unfair, inefficient mess and that the solution is to lower marginal rates and apply them to a broader base of income. A simpler code, purged of its market-distorting loopholes, would foster economic equality and economic growth, both of which the United States desperately needs."

Even President Obama has endorsed a lower corporate tax rate in his budgets.

Whether it's a flat tax, a fair tax that eliminates the income tax or some new configuration like the 9-9-9 type plan that captured so much public attention and support when Republican presidential candidate Herman Cain proposed it three years ago, this is beginning to feel like the moment for a historic reset on our tax system.

 - Stephen Moore is chief economist at The Heritage Foundation.

Originally appeared in Investor's Business Daily