Mike Kole had an interesting statement in a recent post:
Any time the Daniels Administration wants to turn Indiana into a jobs, wealth, and population magnet, it can take some very simple steps.
1. Cut or eliminate the state income tax. Seven other states have no income tax. Indiana should become the 8th.
2. Cut or eliminate the corporate taxes. Business go off-shore or to other states to flee the tax burden. Eliminate that burden, and they will flock here instead.
The seven states that have no state income tax are Alaska, Florida, Nevada, South Dakota, Texas, Washington and Wyoming. According to this chart, these states have the following ranks for household median income: Alaska – 6, Washington – 13, Nevada – 18, Wyoming – 33, Texas – 35, Florida – 39, South Dakota – 41.
I don’t think Alaska is representative since its citizens are greatly subsidized by oil checks from the government. The remaining state rankings do not give me great confidence that eliminating state income taxes is very helpful in attracting high paying jobs for working families.
Instead, perhaps we should look at what the top ranked states are doing: Connecticut, New Jersey, Maryland, Massachusetts, and New Hampshire. My guess is that the tax structures there are distasteful to libertarian ideology and yet somehow their citizens, on average, do better than citizens in more ideologically palatable states.