Right Hooks

High Tax Rates and Debt Go Hand in Hand

The message here for blue states is that higher taxes aren't the solution.

Business Review Board · Apr. 5, 2017

With Income Redistribution Day right around the corner, many Americans are wondering just where their hard-earned money is going. It’s easy to think about this only in terms of federal allotments. But, sadly, many states are also awash in debt, and a good portion of what taxpayers are doling out locally is merely feeding the debt swamp closer to home.

In terms of the overall tax burden, the Tax Foundation, based on 2012 Census data, puts New York, Massachusetts, Alaska, Connecticut and New Jersey in the top five, with overall debt ranging anywhere from $11,623 per person in New Jersey to $17,405 in New York.

Meanwhile, the Mercatus Center, in a study published last June, ranked states according to their fiscal conditions. That study, using “short- and long-term debt and other key fiscal obligations, such as unfunded pen­sions and healthcare benefits,” placed Kentucky, Illinois, New Jersey, Massachusetts and Connecticut dead last.

Which brings us full circle to Income Redistribution Day. A new USA Today article reveals the states with the highest tax rates. In order of highest to lowest, here are the “top” 10: New York (12.94%), Hawaii (11.27%), Vermont (10.75%), Maine (10.73%), Minnesota (10.24%), Connecticut (10.23%), New Jersey (10.14%), Rhode Island (10.09%), Illinois (10.00%) and California (9.52%).

You’ll notice some parallels between tax burden and tax rates. New York, Connecticut, New Jersey and Illinois — states that make one or both the Tax Foundation’s and Mercatus Center’s fiscally bleak lists — also happen to have some of the nation’s highest tax rates. But of the states with the lowest tax burden, three of them — Alaska (6.27%), Wyoming (7.29%) and South Dakota (7.12%) — make the list of the Mercatus Center’s five most monetarily healthy states. That’s not to say that red states don’t contain prodigious debt too. But the message here for blue states is that higher taxes aren’t the solution. Unless the objective is to continue the great blue state exodus.

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