The Wall Street Journal recently reported on the growing divide between blue and red states when it comes to income taxes. What it failed to mention is that this shows the genius of the nation’s founders.
“Republican-led states are racing each other to flatten, cut, and eliminate individual income taxes, with 23 states lowering their top income-tax rates since 2021,” Richard Rubin and Jeanne Whalen write.
And, indeed, this year, nine states – all Republican – either cut their top marginal tax rate or lowered their flat tax rate. Ohio became the 14th state to adopt a flat tax.
“Democratic-controlled states are moving the opposite way,” notes the Journal, “pushing to increase taxes on top earners to combat inequality and plug budget holes expected from Republicans’ cuts to federal health and nutrition assistance programs.”
(We will leave aside the fact that these reporters fail to explain why only Democratic states are expecting “budget holes” caused by supposed federal spending cuts. The truth is that these states have been spending like there’s no tomorrow.)
Washington state is one of those tax-hiking states. Lawmakers approved a bill that will start taxing income for the first time – but only incomes above $1 million (see “The Middle Class Will Pay For Washington’s ‘Millionaire Tax’”). California could very well impose a retroactive 5% wealth tax. New York City’s socialist mayor is trying to force the state to raise its top rate. Virginia, Michigan, and Rhode Island Democrats want to raise their top rates
The Journal notes that the number of states with top rates below 5% and above 10% have both been increasing.
“The middle ground is quickly disappearing.”
So how is this a good thing? After all, we’ve written many times in this space about the folly of playing the “tax the rich” game.