Red State Governors Compete to Cut Taxes, Blue States Fall Further Behind

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AP Photo/Charlie Neibergall

When President Biden tries to brag about the economy, he’s attempting to steal credit for the economic success of red states.  

Republican-controlled states are continuing to achieve exciting policy wins, including more than two-dozen state income tax cuts since 2020.

Bloomberg reported the Southeast now accounts for over two-thirds of U.S. job growth since 2020. Wages grew at a higher rate in red states than blue states from 2022-23. Companies earned more in these states.    

“For the first time in our nation’s history, just six states in the Southeast, including Tennessee, are contributing more to America’s GDP than the entire Northeast – that includes New York, New Jersey, Massachusetts and Pennsylvania,” Tennessee Gov. Bill Lee said during his State of the State Address.

Texas, Florida, Tennessee, Georgia, South Carolina, and North Carolina have led the way. Three of those states have no income tax, Georgia and South Carolina recently cut their income taxes, and North Carolina has led the long-term move to flatten and reduce income taxes, now ratcheting down to a 2.49% rate. 

This is part of the larger success of low tax states: No-income-tax states grew at double the rate of the national average and their state GDP grew by 56% more (Tax Foundation). Eight of the top 10 in-migration states have no income tax, a flat tax, or are moving toward a flat tax.

Americans are moving, growing families, and working in states that are cutting taxes or already have no income tax. Meanwhile blue states, controlled by Democrats, are hemorrhaging people and businesses. California, New York, and Illinois led the way in population loss since 2020. 

Red states are continuing to get leaner and meaner on taxes. 

In Tennessee, Gov. Lee stated that this year he and legislators in Nashville “will also propose tax cuts again by simplifying our franchise tax and making Tennessee an even stronger choice for companies that choose to do business in our great state.”

Arkansas Governor Sarah Huckabee Sanders stated her intent to eliminate the income tax during her campaign, saying, “When I take office, we will work on responsibly phasing out the state income tax to reward work – NOT government dependency – and let you keep more of your hard-earned money in the failing Biden economy.”

Arkansas legislators followed through on that promise in a special session in late 2023, enacting an income tax cut. 

Oklahoma Governor Kevin Stitt led his 2024 State of the State Address with another call to cut income taxes and keep the state moving toward zero income tax: “When I stop to think about Oklahoma in 20 years, here’s what I see: I see people from all over the country moving here so they can keep more of their hard-earned money thanks to our 0% income tax. I see entrepreneurs flocking here. We’re the business headquarters capital of the world.”

With new pressure from neighboring Arkansas, and a budget surplus, Oklahoma legislators should finally get landmark tax reform done. Despite a GOP supermajority, the Oklahoma Senate has held up tax cuts during regular session and multiple special sessions in the past couple of years. 

While some may fall into the trap of worrying about “paying for” tax cuts, red state tax-cut champions have proven the best way to keep cutting taxes long-term is to use excess revenue – well above the amount needed to run government – to permanently reduce rates gradually. 

Also called “revenue triggers,” this policy means taxpayers come first. When government takes in more tax dollars than it should, taxpayers get a rate reduction before special interests descend on the state capitol to ask for new spending.

Oklahoma has a bill to use this method to eliminate its income tax. North Carolina has cut its rate for over a decade this way. 

Kansas legislative leaders have advanced a tax cut bill to implement a flat tax. Democrat Governor Laura Kelly remains in the way of Kansas joining the tax cut revolution. 

Red states have developed a new playbook to cut taxes and Americans are voting for it with their feet. Expect more of the same in 2024, and 2025 when even more state legislatures return. 

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