Budget & Tax
Trent England | June 6, 2017
Blue state blues
Oklahoma liberals want higher taxes. House Minority Leader Scott Inman says his caucus hasn’t just been asking for tax increases, “We’ve been screaming it.”
The liberal argument is simple: More revenue should make it easier to craft a state budget, right?
Connecticut offers a cautionary tale. According to The Connecticut Mirror, the state now has a “$5.5 billion budget crisis, looming over every government agency and legislative decision like a tidal wave.” When the state’s legislative session ends Friday, lawmakers expect to have no budget agreement. A special session is imminent, just weeks before the end of the fiscal year.
Connecticut is the most heavily taxed state in the country. Besides all the ordinary taxes, it has a death tax and the nation’s second-highest cigarette tax.
How can a high-tax state be in such a fix? The answer is found in two simple truths: politicians always spend all the money, and there is always an appetite for more.
High taxes lead to high spending. Politicians who favor big government encourage an ever-bigger appetite for even bigger government. The Wall Street Journal describes how this is working out in Connecticut:
Last month the state Office of Fiscal Analysis reduced its two-year revenue forecast by $1.46 billion. Since January the agency has downgraded income-tax revenue for 2017 and 2018 by $1.1 billion (6%). Sales- and corporate-tax revenue are projected to fall by $385 million (9%) and $67 million (7%), respectively, this year. Pension contributions, which have doubled since 2010, will increase by a third over the next two years. The result: a $5.1 billion deficit and three recent credit downgrades.
According to the fiscal analyst, income-tax collections declined this year for the first time since the recession due to lower earnings at the top. Many wealthy residents decamped for lower-tax states after Mr. Malloy and his Republican predecessor Jodi Rell raised the top individual rate on more than $500,000 of income to 6.99% from 5%. In the past five years 27,400 Connecticut residents, including Ms. Rell, have moved to no-income-tax Florida, and seven of the state’s eight counties have lost population since 2010. Population flight has depressed economic growth—Connecticut’s real GDP has shrunk by 0.1% since 2010—as well as home values and sales-tax revenues.
The truth is that higher taxes can mean deeper budget holes, especially when those taxes target volatile sources of revenue. And beyond a certain point, people and businesses will simply vote with their feet for lower tax states. Thankfully, the majority of Oklahomans maintain a healthy skepticism of politicians who claim they just need a little bit more.
David and Ann Brown Distinguished Fellow
Trent England is the David and Ann Brown Distinguished Fellow at the Oklahoma Council of Public Affairs, where he previously served as executive vice president. He is also the founder and executive director of Save Our States, which educates Americans about the importance of the Electoral College. England is a producer of the feature-length documentary “Safeguard: An Electoral College Story.” He has appeared three times on Fox & Friends and is a frequent guest on media programs from coast to coast. He is the author of Why We Must Defend the Electoral College and a contributor to The Heritage Guide to the Constitution and One Nation Under Arrest: How Crazy Laws, Rogue Prosecutors, and Activist Judges Threaten Your Liberty. His writing has also appeared in the Wall Street Journal, USA Today, Washington Times, Hillsdale College's Imprimis speech digest, and other publications. Trent formerly hosted morning drive-time radio in Oklahoma City and has filled for various radio hosts including Ben Shapiro. A former legal policy analyst at The Heritage Foundation, he holds a law degree from The George Mason University School of Law and a bachelor of arts in government from Claremont McKenna College.