Progressives in Washington are intent on pushing through a $1.4 trillion covid relief bill, the so-called American Rescue Plan Act. Full of special interest spending, the bill will have little, if any, effect on the trajectory of the Covid virus. It will, however, have a dramatic impact on the level of government debt, making future federal tax hikes inevitable.
What can conservatives do about it? Unless Americans are prepared to sit back and watch their country morph into a European-style social democratic state, they need an alternative. The good news is that individual states can show us how different things could be.
For example, here in Mississippi, plans are advancing to eliminate personal income tax entirely. A bill prepared by House Speaker, Philip Gunn, seeks to phase out income tax within the state over the next decade, starting this summer.
At present, anyone earning over $10,000 in Mississippi pays 5 percent to the state government. Under the Gunn plan, no one would pay any income tax on their first $47,400 a year and married couples would not pay any state income tax on their first $95,400. If this proposal passes, the majority of households will be exempt from paying state income tax in just a few weeks.
The Mississippi model for eliminating income tax is an illustration for conservatives across the country of how it can be done.
Some conservatives in Mississippi are understandably wary about the plan because they see it as a tax swap.What Mississippians are given in terms of an income tax reduction, they fear, could be taken away with an increase in taxes elsewhere.
Some of these concerns are not unfounded, with a concurrent proposal to raise the sales tax from 7 to 9.5 percent. But it is not a straight swap. The change is not tax neutral and the overall tax burden for Mississipians will still fall by about $2 billion.
Normally, the more you tax something, the less of it you get. State governments understand this when they increase taxes on tobacco to discourage us from smoking.
So why tax incomes when doing so means you end up with fewer incomes? Moving the tax burden away from income towards consumption means more jobs and greater personal freedom for individuals who now get to decide how they spend their own money.
Conservatives looking to set out an alternative to Washington’s high tax agenda should seek to switch the burden of taxation away from taxes on income towards taxes on consumption.
Of course, whenever anyone tries to shift the tax burden, those that benefit from the change generally keep silent, while those who might lose out from the change make their voices heard. That is why when making structural changes to the tax system, it is often wise to ensure targeted tax breaks to ensure no one is worse off. This is precisely what Mississippi is proposing to do, with a gradual cut in taxes on groceries, until their eventual elimination.
America, it is often noted, is divided between blue states and red states. As a recent arrival to the United States, I have been struck by the extent to which people, businesses, and innovation, seem to be flowing out of the blue states and into the red ones.
Americans seem to be leaving high tax states like California and New York, and moving to low tax states like Texas, Florida, Tennessee, New Hampshire and even South Dakota.
Instead of drawing the obvious lesson from that mass migration, those that run the federal government seem determined to make the rest of America like California and New York. Our mission as conservatives is to show, state by state, that another America – one that remains true to the Founding ideal of limited government – is not only possible but works better.
Douglas Carswell is the President & CEO of the Mississippi Centre for Public Policy. He was a British Member of Parliament for twelve years.
The views expressed in this piece are the author’s own and do not necessarily represent those of The Daily Wire.