Tax Reform

Key Points
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Key Points
  • A vibrant, growing economy allows businesses and households to flourish.
  • A state’s economic vitality starts with a principled tax code that is fair, transparent and competitive relative to other states.
  • Over the past decade, the nine states without a personal income tax have consistently outperformed the nine states with the highest taxes on personal income – in job creation, population growth and even tax revenues.
  • With the right set of policies in place, lower-tax states can attract much-needed human and financial capital from higher-tax states that penalize wealth creation. 

Mainstream economists, small business owners and taxpayers across the country understand that growth-oriented reforms mean increased opportunity for all. As demonstrated by the annual Rich States, Poor States: ALEC-Laffer State Economic Competitiveness Index, sound tax and fiscal policies are critical to economic health, allowing businesses and households to flourish.

A dynamic state economy starts with a principled tax code. As noted in the ALEC Principles of Taxation, state tax codes should be fair, transparent and economically neutral. Low, competitive tax rates on a broad tax base offer a level playing field to all. In this environment, more residents will benefit from greater economic growth.

The advantages of a low-tax environment are clear. Over the past decade, the nine states without a personal income tax have consistently outperformed the nine states with the highest taxes on personal income. Similarly, those states with no income tax saw their population rise 109 percent faster than their high-tax counterparts. In those same ten years, job growth in states with no income tax increased 130 percent faster versus the states with the highest income taxes. Even state and local tax revenues in the nine states without income taxes grew 51 percent faster. While other factors have surely played a role, these general trends held true decade after decade for the past half-century.

As the research overwhelmingly shows, competitive tax and fiscal policies are vital to a state’s future. With the right set of policies in place, lower-tax states can attract much-needed human and financial capital from higher-tax states that penalize wealth creation.

Articles

Tax Reform

What’s Driving This Year’s Ambitious Tax Cuts: Jonathan Williams in Governing Magazine

Jonathan Williams/May 30, 2023
Video

ALEC’s Flagship Guide to Economic Growth: Rich States, Poor States

Tax Reform

Idaho Joins Historic 2022 Flat Tax Revolution

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Publications

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Model Policies

  • A Next-Generation Tax and Expenditure Limitation Act Final

    A Next-Generation Tax and Expenditure Limitation Act Short Title: Responsible Budgeting Act. Section 1. Structural Balance (a) Sense of the Legislature: Stewarding taxpayers’ funds requires a close connection between spending and revenue. Structural balance provides this link over the medium term instead of each year to provide policy…

  • Protecting Religious Homeschooling Act Final

    Section 1. Religious Property Tax Exemption A property tax exemption based on religious purposes includes real property owned by a church which allows its premises to be used by an entity if such entity is not required to make rental payments to the church, is not required to execute a…

  • Statement of Principles on State Taxation of Digital Advertising and Data Usage Final

    Statement of Principles Opposition to Discriminatory Tax Treatment Well-crafted tax policy should not favor one form of commerce over another. Policies that target digital goods and services for taxation that their traditional counterparts do not face arbitrarily favor the latter, creating a competitive imbalance. Tax policy should be carefully structured…

  • Statement of Principles on Balancing Budgets Over the Business Cycle Final

    Statement of Principles Annual Balance is Disruptive and Creates Uncertainty Households and businesses benefit from stable and predictable state government services. Yet state spending tends to boom along with the economy, and recessions bring sudden and often substantial spending cuts and revenue increases. Budget adjustments that can be made quickly…

  • Resolution Urging Congress to Protect Consumer Privacy in Banking and Financial Transactions Final

    Resolution Urging Congress to Protect Consumer Privacy in Banking and Financial Transactions WHEREAS, the Biden Administration and some in Congress have proposed changes to tax information reporting which would require financial institutions to provide the Internal Revenue Service reports of incoming and outgoing transactions from every customer financial…

  • Statement of Principles on ARPA Aid to State Governments Final

    Statement of Principles Temporary Funds Require Temporary Spending History reveals that federal spending and bailouts are not a “free lunch” for states. Academic research shows that federal aid to the states increases both state spending and overall tax burdens. If state leaders spend temporary federal funds, the increased spending should…

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Task Forces

Tax and Fiscal Policy

The ALEC Tax and Fiscal Policy Task Force is dedicated to researching and promoting sound policy aimed at creating a…

Press Releases

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