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ALEC: Here’s How Georgia Could Improve Competitiveness

Mike Klein

Mike Klein

Georgia’s track record as a low-tax, pro-business, pro-growth state is absolute.  However, the state has been unable to enact an important threshold – elimination or at least a sizable reduction in the 6 percent maximum personal income tax rate – and that prevents Georgia from being considered at the top of states that have low-tax, pro-growth fiscal policies.

Today the American Legislative Council released its sixth annual “Rich States, Poor States”  economic competitiveness index report that evaluates states on 15 fiscal policy sectors that include tax rates, state regulations, right-to-work laws and size of the public workforce as a percentage of statewide population.  The ALEC formula rewards low-taxing, low-spending states, of which Georgia is one.

Georgia does well … ranked as the eighth best state nationally and up two spots from one year ago.  But therein is part of the challenge.  Georgia ranked eighth in the first ALEC report five years ago, then slipped several spots and only now has it reclaimed the eighth spot ranking.

To see that idea from another angle, ALEC does not consider Georgia has done enough with tax and regulation policies in five years to greatly improve its ranked position vs. other states.

Rich States, Poor States“Georgia has become one of the most Republican states in the country and it’s also become a very fiscally conservative state over the last 10 and 20 years,” said co-author Stephen Moore, during an ALEC conference call this week.  “If there’s a state that could eliminate its income tax it would be Georgia.  The table is set for that.  We’ve been pushing it for a long time.”

The 2010 Georgia Special Council on Tax Reform recommended elimination of most personal income tax deductions and adoption of the lowest possible revenue neutral income tax rate with 4 percent as the original target.  The Legislature has never come closer than almost voting on a bill that would have reduced the maximum personal income tax rate to 4.5 percent.  There was no personal income tax reform legislation during this year’s General Assembly.

Nine states do not collect personal income tax.  “I’ve always thought Georgia should be the next domino to fall especially because, who are your neighbors?” said Moore, who is a member of the Wall Street Journal editorial board.  “You’ve got Florida and Tennessee, both which have no income tax.  You’re what we call an income tax sandwich.  You’re sandwiched between two states that don’t have (state personal income tax) so that puts you at a competitive disadvantage.”

Moore, ALEC’s Jonathan Williams and economist Arthur Laffer are the co-authors.  “Georgia can do some other things that would not necessarily cost from a revenue perspective,” said Williams, who is director of ALEC’s Center for State Fiscal Reform.  He cited additional pension plan reform, requiring a super majority legislative vote for tax increases, and mandatory government spending limits, along with reduced state liability and workmen’s compensation costs.

The 2013 edition of ”Rich States, Poor States” also highlights funding and obligation problems posed by public sector pension plans, which the non-partisan State Budget Solutions says are underfunded by some $4.6 trillion.  Williams said the federal government recently filed suit against Illinois “for basically fraudulent pension accounting.  We find that issue in a lot of states.”

(Mike Klein is Editor at the Georgia Public Policy Foundation.    Click here to read “Rich States, Poor States.”  Click here to watch Stephen Moore speak to the Policy Foundation 2013 annual dinner on the Foundation YouTube channel.)

May 23, 2013 Posted by | Uncategorized | , , , , , , , , | Leave a comment

WSJ Economics Writer: U.S. Cannot Borrow Its Way to Prosperity

Stephen Moore remembers asking his son, who’s the best basketball player in the world?  They agreed, it’s LeBron James, who earns about $40 million per year in salaries and endorsements.  Moore posed a question to his son: how long would it take LeBron James to earn $1 trillion?  The answer is a staggering 25,000 seasons.  Not even Michael Jordan played that long!

Moore delivered the economic keynote address at this past weekend’s conference hosted by the Georgia Public Policy Foundation and the Conservative Leadership Policy Institute.  Moore is the Wall Street Journal’s senior economics writer, a member of its editorial board, the author of six books and a former senior economist on the Congressional Joint Economic Committee.

Here’s the point Moore made with his LeBron James example:  We hardly know what $1 trillion means even as we watch the federal government routinely run debt into the several trillions.

“We have spent too much money, we have borrowed too much money, we have printed too much money and we have taken too much power from the states,” Moore said.  “Milton Friedman taught us this 30 or 40 years ago.  There’s no free lunch.  If Washington or the state of Georgia spends a dollar, that dollar has to come from somewhere.”

Last week the National Commission on Fiscal Responsibility and Reform floated a draft report with ideas to reduce the national debt by $4 trillion over 10 years.  Dozens of proposals would significantly change Social Security, other federal entitlements and discretionary spending.

Moore’s remarks in Atlanta on Saturday are timely because of that report, and also because Congress went back to work Monday, ready to argue about what to do with your money.

Tuesday’s agenda will include the Senate debate on funding earmarks.  Thursday’s action will move to the White House where President Barack Obama, Democratic and Republican leaders seem ready to dig in their heels about extension of Bush-era federal income tax cuts.  Congress also needs to fix the alternative minimum tax for 2010 taxpayers before the holiday break.

Stephen Moore

“We had better make sure we extend all the Bush tax rates come next January,” Moore told 250 conference attendees.  “If you want to balance the budget in Washington, if you want to balance the budget here in Atlanta, you want more rich people.”

Here’s why:  Rich people invest; investment triggers growth; growth triggers more employment; employed people purchases products and services and employed people pay taxes, exactly the opposite of unemployed people who require government services paid for by employed people.

Moore believes the nation has arrived at a critical historical point:   “The number one issue is this, what country is going to be the global number one super power?  For our lives, the United States has been a force for good.  We’ve led the world.

“But now for the first time in our lives we have an honest to god rival.  And who is that; China, now becoming one of the most prosperous countries in the world.  China predicts in 18-to-20 years that it will catch the United States,” Moore said.

“China is focused right now like a laser beam on competitors.  They have their eye on the ball.  That’s what we need to do as a nation and that’s what we need to do in Georgia.  Everything you do, make sure you keep in mind, is this going to make Georgia more competitive?

“Step one and I’m deadly serious about this: Abolish the state income tax.  This is not a radical idea. There are nine states in this country that have no state income tax,” Moore said.  “Texas, Florida, Tennessee; these states are able to pay their bills without having an income tax.  It’s so obvious; the states without an income tax are the ones that have driven growth.”

Georgia’s Special Council on Tax Reform is expected to propose some revisions to the state’s 6% individual income tax when it reports to the General Assembly in January.  Sources say it might propose reduced individual income tax rates in a new model that would move taxation away from earned income and toward taxation of services and products purchased.

Moore predicted the Republican majority U.S. House will pass a bill to repeal Obamacare, the Senate will not and health care will become “death by a thousand cuts.”  He predicted the individual mandate will be eliminated.  “What we need to do with health care is, we need to allow states to begin to experiment.  Let people buy insurance from anywhere they want to.”

Moore started his address with this idea: “The election we just saw was not a victory for the Republican Party.  It was a victory for the conservative movement and free market principles.”  He finished with this idea:  “Both parties are still fighting with each other.  It’s like none of them learned the lesson.”

Mike Klein is Editor at the Georgia Public Policy Foundation.

November 15, 2010 Posted by | Uncategorized | , , , , , , , | Leave a comment