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By Nancy Thorner –
The Heartland Institute attracted an overflow crowd at its headquarters’s library at 1 S. Wacker Drive, #2740, Chicago, IL, for an event on Thursday, July 17th at 5:30 p.m. The event was billed by The Heartland Institute as “An Evening with Stephen Moore and Travis H. Brown,” co-authors with Dr. Arthur B. Laffer and Rex A. Sinquefield, to discuss their new book An Inquiry into the Nature and Causes of the Wealth of States. Steve Forbes, Chairman and Editor-in-Chief of “Forbes Media,” referred to the book as “a bible for state and local leaders who truly want rapid economic growth. It will profoundly, positively change politics and economics in America.”
The book makes a positive argument for tax reform through an analysis of the economic growth or malaise resulting from the tax policies employed by states over a fifty year period. These four policy variables are analyzed that can have enormous effects on the financial well-being of states and individual residents:
- Personal and corporate income tax rates
- Total tax burden as a percentage of personal income
- Estate and inheritance taxes
- Right-to-work laws
The book’s final chapter of “An Inquiry into the Nature and Causes of the Wealth of States” deserves special attention, as it rebuts the criticism directed against the book and its authors for the ideas and analyses presented therein. The first of fourteen rebuttal arguments refutes those who believe that “Taxes and Other Supply-Side Policy-Variables Don’t Affect Population and Gross State Product Growth.”
About co-authors Moore and Brown
Co-author Stephen Moore founded and served as president of the Club for Growth from 1999 to 2004. He was a member of the Wall Street Journal editorial board and frequently opines on the pages of their op-ed section. In 2014 the Heritage Foundation announced that Moore would become its chief economist. Moore is known for advocating free-market policies and supply-side economics. Having grown up in New Trier Township, Illinois , Moore graduated from New Trier High School in 1978.
This is the second visit by co-author Travis H. Brown to The Heartland Institute. On Oct. 30, 2013, he gave a presentation at a Heartland Authors Series luncheon about his solo best-selling book How Money Walks, that explores how wealth and people move between the states. Mr. Brown is the CEO and co-founder of Pelopidas, LLC, a St. Louis-based public affairs and advocacy firm, a frequent contributor to Forbes.com, and a nationally sought-after speaker who regularly appears on national media outlets, including CNBC and Fox New Business.
Steven Moore’s thoughts
Just what was the impetus that inspired Stephen Moore to be on board as one of four co-authors of “An Inquiry into the nature and Causes of the Wealth of States? When traveling around the country, Mr. Moore noticed that red states were getting redder and the blue states bluer. Further observed was how different the blue states were from red states in their cultural views and economic policies. It was like being in two different countries. Furthermore, Democrats were becoming an endangered species in red states, while Republicans were becoming the same in blue states.
When considering the four largest states population-wise, Texas, California, Florida, and New York, there are two red (Texas and Florida) and two blue (California and New York). The four states combined are of great importance to this nation, as one in every three Americans live in one of the four most populated states. But why are Texas and Florida outpacing CA and New York in both population and economic growth? Might it be because red states have adopted Reganomics while blue states are bogged down in Obamanomics? Factors such as taxes, drilling for resources, Right to Work status, and how the economy is regulated in each state do matter. Consider the job growth in all four of the most populated states over the last twenty years: Texas (58%); Florida (44%); New York (zero net growth); and California (12%).
Moore spoke about debating New York Times Paul Krugman over why people move from Point 1 to Point 2. To Paul Krugman there is a simple explanation. It’s all about sunshine and weather. But this doesn’t explain the surge of individuals from CA to Houston, Texas. Three moving vans move to Houston from places in CA for every one van that travels from Houston to CA. This didn’t happen by chance. Accordingly, Texas has added one million jobs or 40% of the total job gains in the U.S., while CA has lost one-half million jobs.
Moore believes that if Illinois lowered its income tax rate and became a Right to Work state it would see tremendous economic growth. As Moore reflected, “Liberal states and cities must either change or die like Detroit.” According to Moore, the governor’s race in IL is the most important race in the nation come November. If Quinn is re-elected, Illinois will keep on its downward trajectory toward certain death.
Travis Brown’s thoughts
In evaluating research compiled over the last fifty years, Illinois has experienced a bleeding of state income with most of it occurring in Cook County. It is easy to be fooled about Chicago. How we love the amenities and the reasons for being here in Chicago, but facts convey another story.
Without the tremendous job growth in Texas, as already noted, things would likely be much worse now with possibly a flat rate of growth nationally, rather than the dismal 2.9% U.S. GDP realized in the first quarter of 2014. Temporary, urgent tax hikes are often used by many states — described by Brown as a “tax on work” — as a way to cure problems. How then can it be explained that the nine states having a zero price on work (no state income tax) perform better than those having a state income tax? Often forgotten is that throughout one-half of this nation’s history, there were no taxes. The state of New Jersey once had no income tax. Now New Jersey levies state taxes at rates ranging from 1.4 percent to 8.97 percent, assessed over progressive income brackets.
New Jersey’s current economic situation, as the one here in Illinois, gives validity to this statement that no state has ever taxed its way into prosperity. Instead, high state tax rates have resulted in mass migration from states having an income tax to those states without income taxes. California’s income tax rates are the highest in America, reaching an astronomical 13.3 rate, which explains why people are moving out of California. According to Brown, one out of every five individual employed in this nation resides in states with a zero income tax. They include: Alaska, Florida, Nevada, South Dakota, Texas, Washington and Wyoming. States with nearly no income tax are Tennessee and New Hampshire New Hampshire. A dichotomy: Liberals love jobs but they dislike business!
As to what happens when taxes increase on work, Brown used the analogy of the cigarette tax, questioning what happens when cigarette taxes increase? The outcome is that less cigarettes are sold, which results in less tax revenue. But because of the competitive market people can buy cigarettes somewhere else like out of state. The same happens when the price on work is raised. There is less work due to the loss of jobs, which results in decreased tax revenue.
Regarding the presidential election of 2016, Travis Brown related how the most important thing is to beat HER in 2016. The use of HER produced some perplexed looks until Brown explained that Hillary may not be the choice of all Democrats. Elizabeth Warren is becoming the darling of many on the party’s far left wing. Speaking on Friday, July 18, at Netroots Nation, a convention for liberal bloggers and activists, Warren got the crowd more fired up than Vice President Joe Biden was able to do the day before when she outlined the 11 tenets of progressive policies which should define the Democratic agenda. Those who doubt Elizabeth Warren can overtake Hillary Clinton in popularity must only look back to the big upset in 2008 when Obama, virtually an unknown, beat Hillary.
Question and Answer Period
A lively discussion followed the remarks by Stephen Moore and Travis H. Brown. Of merit were the following responses given by Moore and Brown to questions entertained from those in attendance.
- The mobility of tax payers is part of the American dream. Individuals move up and down tax brackets as incomes change. It is important to keep the price on work as low as possible to stem job losses. In states where income tax rates are high, people are leaving for other states. Unfortunately Colorado is becoming a blue state as CA residents migrate to Colorado and continue to vote Democratic. The same is happening to New Hampshire, which used to be a red state, as residents from Massachusetts flee to N.H. taking their Democratic allegiance with them.
- With the highest corporate tax in the world at 35%, the U.S. is essentially putting a tariff on everything it produces. This is resulting in companies moving abroad where tax rates are lower. In essence, we are exporting American jobs abroad, an unpatriotic thing to do!
- Walgreen is being pressured to ditch its US headquarters in Deerfield, IL, for Europe. The Drugstore chain Walgreen Co. (WAG +2.55%) has come under intensifying shareholder pressure to use its large ownership stake in the Swiss-based Alliance Boots as a justification to re-domicile in Europe and reduce its U.S. tax bill, according to a Financial Times report. The company’s tax rate of 37.5% could drop to 20% overseas.
- Chicago is even worse than Detroit in its overall debt level when it should be a world class city. A major drawback is that the Democratic Party is owned by the Chicago Teachers Union. Even some Republicans are guilty of the same. It is thought that Mayor Rahm Emanuel should have stood up to CTU president, Karen Lewis, who might be a formidable candidate for mayor to unseat Mayor Emanual now that Toni Perwinkle has indicated her disinterest in running for the mayoral office.
- Rick Snyder was cited as a governor who has turned around Michigan in his first term in office. Even though Michigan has lost the car industry, cars are still produced in the U.S. but in other states, mostly southern “Right to Work” states.
- On the whole Northeast states are being bleed to death as its residents migrate to other states because of the heavy tax burdens placed on citizens and businesses. This has resulted in Northeast states losing political power (seats) in the U.S. House. It was noted, however, that despite losing House seats, each state still has two senators.
- Without hesitation, both Moore and Brown predicted that if Republicans take over the governorship here in Illinois, things will change for the better. Moore and Brown met with Republican candidate Bruce Rauner before their Heartland appearance and liked what Rauner had to say for turning the state around. If Pat Quinn wins in November, Illinois will completely fail as a state and will bleed to death.
- Not to be forgotten: Government spending is taxation and consists of the spending of something that is yours!
It was nice to see Illinois Republican legislators Jeanne Ives (42nd Representative District) and Tom Morrison (54th Representative District) in attendance.
St. Rep. Tom Morrison (R-Palatine), author Travis Brown (c) and Nancy Thorner (r)
Check out these coming events sponsored by The Heartland Institute: