Democrats are attempting — but will fail — to scare states out of making any adjustments to their tax code that would result in a tax cut.
In the $1.9 trillion spending package, Democrats are attempting to unconstitutionally coerce states against providing tax relief.
As noted in today’s Wall Street Journal:
“Democrats in Congress aren’t satisfied with spending $1.09 trillion to help blue states and union friends. They’ve also launched a sneak attack against conservative states. Read their legislation’s lips: No new state tax cuts.”
The bill includes the following language:
“A State or territory shall not use the funds provided under this section or transferred pursuant to section 603(c)(4) to either directly or indirectly offset a reduction in the net tax revenue of such State or territory resulting from a change in law, regulation, or administrative interpretation during the covered period that reduces any tax (by providing for a reduction in a rate, a rebate, a deduction, a credit, or otherwise) or delays the imposition of any tax or tax increase.”
This is an attempt to prevent state tax competition as Democrat-run states do not compete well with low-tax states.
“Failed governors and mayors hate that their citizens and job-creating businesses are moving to lower-tax, better-governed states. They evidently convinced Democrat congressmen and Senators to try and use federal muscle to prevent a reduction in pro-growth states’ taxes. Tax-hiking Democrats have trouble getting elected in pro-taxpayer states. So now they are trying to kneecap the growing and competitive states from Washington,” said Grover Norquist, president of Americans of Tax Reform.
States such as New York, California and Illinois —which have been spending recklessly for decades —will still be allowed to use the bill’s funds to directly grow the size of government or bail out government union pension funds.
There are currently eight states —Alaska, Florida, Nevada, South Dakota, Tennessee, Texas, Washington and Wyoming —that do not impose income taxes of any kind, and this number is expected to increase in the coming years. New Hampshire, which does not tax wage income, is looking to join this list of true no income tax states by phasing out its 5% tax on interest and dividends income. Several more states — including Arizona and Mississippi— are currently exploring ways to put their income taxes on the path to zero.
Republicans have full control of 23 state governments and 30 state legislatures.
Democrats have full control of just 15 state governments and 18 state legislatures.
Competition between low-tax states and high-tax states allows voters to see a clear contrast between success and failure. Democrats know that taxpayers have already been voting with their feet. Over the last decade, millions of people and jobs have moved from high-tax states into states with low or no income taxes, and the ability to work remotely will only amplify this trend.
Democrats will fail in their attempt to bully the tax-cutting states. Onward.