Last night, a number of governors delivered their "State of the State" addresses, detailing their accomplishments while in office and laying out their plans to move their states forward. Often these speeches, given annually, are a boring rehash of old talking points and vague plans for a lukewarm future agenda. But last night, governors in three states laid out plans to eliminate or signicantly reduce state income taxes. Kansas's Sam Brownback, Nebraska's Dave Heineman, and Wisconsin's Scott Walker all put forth serious tax reform proposals that will boost economic growth and put their states on a more level playing field with the low- and no-income tax states with which they compete for jobs and economic growth.
While any meaningful reforms in Washington, D.C. have stalled, governors and state legislatures are at the forefront of reform, and they are delivering results. The 25 states with complete Republican control of the governship and legislature are fiercely competing with each other to reduce taxes, limit spending and eliminate harmful regulations.
Gov. Brownback detailed his accomplishments in Kansas, and spelled out his desire to scrap the state income tax:
When I started as governor, we began the fiscal year with $876.05 in the bank and a projected deficit of $500 million – even after taxes had been increased.
Working with the legislature, we ended last fiscal year with a $500 million ending balance…a billion dollar swing to the good AND we paid off all of our callable bonds!
The last decade was unfortunately a lost decade where Kansas lost thousands of private sector jobs while the rest of America grew. In December 2010, our unemployment rate was seven percent.
Today our state’s unemployment rate is 5.4 percent – the 10th lowest in America – and Wichita State University projects we will add more than 24,000 private sector jobs in the state this year alone.
When I started as governor, we had the highest state income tax in the region, now we have the 2nd lowest and I want us to take it to zero. Look out Texas, here comes Kansas!
Gov. Heineman made the case for tax reform that does not grow the size of government:
In recent months, I have asked business leaders if they would give up their sales tax exemptions if we could eliminate the individual income tax and the corporate income tax or at least lower the individual and corporate tax rates. You may be surprised, but many are willing to have that discussion. They want simplicity and fairness. They want a modern tax code that rewards productivity, profits and job creation rather than having their lawyers and accountants spending time mining the tax code for exemptions.
Our tax system shouldn’t favor one industry over another. Change is not easy, especially when it involves taxes, but this is the discussion that our state needs to have.
Our tax reform proposal is revenue neutral and budget neutral. I know there are organizations that want to tax more services with the overall goal of growing government. These organizations want to spend more tax dollars on more government programs. That is not what most Nebraskans want and that is not what our plan is about.
Our goal is a better business tax climate that will create more high-paying jobs and more rewarding careers for our sons and daughters. We need a tax climate that rewards middle class families for their hard work. In the next few days, I will have legislation introduced that provides alternative options for eliminating many business sales tax exemptions that could lead to the elimination of the individual income tax and the corporate income tax or at least lowering Nebraska’s individual and corporate tax rates.
And Gov. Walker listed his impressive accomplishments, including turning his inherited $3.6 billion deficit into a surplus, cutting property taxes, reducing unemployment and putting localities on a more sound financial footing. His next act is a significant income tax cut:
Two years ago, when I first stood here as your new governor, Wisconsin was facing a $3.6 billion budget deficit, property taxes had gone up 27 percent over the previous decade, increasing every year, and the unemployment rate was 7.8 percent.
Today, Wisconsin has a $342 million budget surplus, property taxes on a median valued home went down in each of the last two years, and the unemployment rate – well – it's down to 6.7 percent.
And unlike other states, we avoided significant tax increases, massive layoffs and cuts in programs, like Medicaid. Instead, we put in place long-term structural reforms that helped us balance state and local government budgets for years to come. What we did was think more about the next generation than we did about the next election—and it worked.
With the introduction of my proposed budget next month, I will lay out a clear plan for reducing the burden on hard-working families by lowering income taxes on the middle class. We want to continue to put more money in the hands of the hard-working taxpayers and small business owners in our state.
These governors join a number of others – Jindal, Kasich, McCrory, Fallin, and Pence, by my count, in calling for serious income tax cuts. Because GOP governors know that to be successful, you need to be more like Texas and less like Illinois.