The reduction in income based taxes would need to be offset by increased economic activity. A $1 reduction would need $5 of activity (assuming 20% at Federal level, individual States obviously differ.) Corporations are sensitive to rate changes given the longer planning cycle (but that becomes an off-shoring debate?)
Laffer needs marginal rates between 55-75% to maximize revenue, good luck to any politician trying to push that through.
*The move to Florida currently is Service-based companies who are immune from manufacturing concerns, as an exmaple of portable money. But Florida is also an outlier given the size of the tax-income derived from tourism ($33B in 2024 with a $117B state budget, roughly the same as NYC.)
I'm not in a border city, but I've heard these debates about tax differences at the municipal level when trying to find a home in two neighboring cities. Homes sell like hotcakes in the high-tax city because of how great the school is, while homes in the low-tax city sell for much less and sit on the market for much longer.
I wonder how much these sorts of state-level decisions influenced Moretti's Great Divergence narrative a 10+ years ago?
100% agree. Excellent piece. Businesses and workers should be thinking about the basket of taxes and public investment that they get in return, not just the sticker tax rate.
With all the questions around government transparency, a look into how beneficial current government programs are seems worthwhile. I'm curious as to how the continued reductions in income tax will fare state by state.
How do the actions of neighboring states impact these decisions? In our case, we often hear that families choose Tennessee over KY because of the income tax differences.
Good question. First, we know people are moving less than they used to. Second, when people move they consider total economic package not just the tax rate. States can compete by cutting costs of living (taxes) or by improving the benefits of living there.
Our discussion about taxes has solely focused on cutting taxes. That is not a complete analysis.
How have Kentucky’s income tax revenues changed year over year since tax rate reductions began in 2023, and do the initial two years of data show a sustained decline in the state's revenue?
"The Office of State Budget Director reported today that General Fund receipts for fiscal year 2023 (FY23) totaled $15.1 billion, exceeding budgeted estimates by $1.4 billion, the largest revenue surplus in history." This is from the Office of the State Budget Director at the close of the fiscal year in 2023 in Kentucky. You can read more https://osbd.ky.gov/Publications/Tax%20Receipt%20Reports%20%20Fiscal%20Year%202023/2306TaxReceipt.pdf
Very interesting the arguments for cuts are good in intentions but i think people forget the work that taxes do on a daily basis. The benefits of the cuts are not equal either. It is like you said a balance. One that needs to be struk well.
The reduction in income based taxes would need to be offset by increased economic activity. A $1 reduction would need $5 of activity (assuming 20% at Federal level, individual States obviously differ.) Corporations are sensitive to rate changes given the longer planning cycle (but that becomes an off-shoring debate?)
Laffer needs marginal rates between 55-75% to maximize revenue, good luck to any politician trying to push that through.
*The move to Florida currently is Service-based companies who are immune from manufacturing concerns, as an exmaple of portable money. But Florida is also an outlier given the size of the tax-income derived from tourism ($33B in 2024 with a $117B state budget, roughly the same as NYC.)
I'm not in a border city, but I've heard these debates about tax differences at the municipal level when trying to find a home in two neighboring cities. Homes sell like hotcakes in the high-tax city because of how great the school is, while homes in the low-tax city sell for much less and sit on the market for much longer.
I wonder how much these sorts of state-level decisions influenced Moretti's Great Divergence narrative a 10+ years ago?
100% agree. Excellent piece. Businesses and workers should be thinking about the basket of taxes and public investment that they get in return, not just the sticker tax rate.
With all the questions around government transparency, a look into how beneficial current government programs are seems worthwhile. I'm curious as to how the continued reductions in income tax will fare state by state.
How do the actions of neighboring states impact these decisions? In our case, we often hear that families choose Tennessee over KY because of the income tax differences.
Good question. First, we know people are moving less than they used to. Second, when people move they consider total economic package not just the tax rate. States can compete by cutting costs of living (taxes) or by improving the benefits of living there.
Our discussion about taxes has solely focused on cutting taxes. That is not a complete analysis.
How have Kentucky’s income tax revenues changed year over year since tax rate reductions began in 2023, and do the initial two years of data show a sustained decline in the state's revenue?
"The Office of State Budget Director reported today that General Fund receipts for fiscal year 2023 (FY23) totaled $15.1 billion, exceeding budgeted estimates by $1.4 billion, the largest revenue surplus in history." This is from the Office of the State Budget Director at the close of the fiscal year in 2023 in Kentucky. You can read more https://osbd.ky.gov/Publications/Tax%20Receipt%20Reports%20%20Fiscal%20Year%202023/2306TaxReceipt.pdf
Very interesting the arguments for cuts are good in intentions but i think people forget the work that taxes do on a daily basis. The benefits of the cuts are not equal either. It is like you said a balance. One that needs to be struk well.