Olympic-Style Race Lights State Tax Reform Torch
The governors of Wisconsin, Kentucky, and Oklahoma are taking the lead in the 400 meter dash toward state tax reform this legislative session. Each of these heartland leaders decided that this is his race to win, and each is determined to bring home the gold in economic expansion.
Leading the pack is Wisconsin Governor Scott Walker. His bold leadership style set the stage for an economic turnaround that is attracting businesses and jobs. Walker’s primary focus is on “organic” job growth, which means helping startups and small businesses grow. Walker catalyzed this growth by reducing overall tax rates, corporate income taxes, and property taxes. Similar measures in the past have pole-vaulted Wisconsin’s ranking up several notches with improvements in key economic indicators, such as access to capital, business friendliness, and workforce. At the same time, the state’s bond rating is positive and pension system is fully funded.
A remarkable turnaround, considering Wisconsin had to rebound from a $3.6 billion deficit.
In his first thousand days in office, Gov. Walker reduced Wisconsin’s tax burden by $1.4 billion, which helped grow the local economy by attracting businesses and jobs. Walker already has surpassed his goal of creating 10,000 new businesses by 2015, with 13,000 new businesses created and the promise of many more to come.
Recently, Gov. Walker added a new tax cut proposal that uses the state’s $912 million budget surplus to cut income and property taxes.
Through his Blueprint for Prosperity proposal, Gov. Walker lays out a plan that allows taxpayers to keep more of their wages and creates incentives and educational opportunities for workforce training.
Walker’s tax cut plan would change withholding schemes and cut property and income taxes, returning $800 million to workers.
Five hundred clicks due south of Wisconsin, Governor Steve Beshear of Kentucky is feeling the pressure of lower tax rates in four neighboring states and is offering a tax plan that, while less aggressive that Walker’s, provides a 22-point plan dubbed “Kentucky Competes.” The proposal reduces the number of tax brackets and lowers top tax rates to 5.9 percent from 6 percent. For low-wage earners who might see a small increase in taxes, Beshears offers a Hold Harmless Tax Credit. The plan also expands the state sales tax to include professional services and taxes admission to campgrounds, golf courses, country clubs, and fitness centers. He also proposes a variety of tax incentives for angel investors, the New Market Tax Credit program, and the state’s Research and Development Tax Credit.
Recognizing the political brouhahas that often accompany tax reform measures of this kind, Beshear called on the state legislature to find common ground when he presented the “Kentucky Competes” plan, leaving the door open for the state’s Senate and House to offer up their own plans for tax reduction.
In Oklahoma, Governor Mary Fallin is keeping a watchful eye on the neighboring state of Kansas, which already is seeing the magic that is made possible through broad-based tax reductions. Governor Fallin is taking a second run at cutting the top income tax rate, proposing a gradual reduction, over the next four years, to 4 percent from its current rate of 5.25 percent.
Currently, the nine states that do not impose income tax on work have shown remarkable growth. For years, they managed a formidable lead in this winner-take-all competition for businesses and workers. In the years to come, with leaders such as Walker, Beshears, and Fallin closing fast, those same nine states may find new competitors on their playing field.