About 45 years have passed since a U.S. state last eliminated its income tax on wages and salaries. But with recent actions in Mississippi and Kentucky, two states now are on a path to do so, if their economies keep growing.
The push to zero out the income tax is perhaps the most aggressive example of a tax-cutting trend that swept across states as they rebounded from the COVID-19 pandemic with surging revenues and historic surpluses.
But it comes during a time of greater uncertainty for states, as they wait to see whether President Donald Trump’s cost cutting and tariffs lead to a reduction in federal funding for states and a downturn in the overall economy.
Some fiscal analysts also warn the repeal of income taxes could leave states reliant on other levies, such as sales taxes, that disproportionately affect the poor.
Kentucky’s bourbon industry is now utterly fucked from inevitable or already declared retaliatory tariffs…
Time to lower the state’s tax revenue even more!
Half of Kentucky’s bourbon is exported, and Kentucky makes 95% of the bourbon in the world.
It is a major segment of their economy, and now half of it is in extreme danger.
So of course, with that ongoing disaster… it is now time to eliminate income taxes… and presumably make up the difference with sales and/or property taxes?
… Roughly 35% of Kentucky State Government inflows come from its income tax, about 5% comes from property taxes, most of the rest is sales tax.
If they just removed the income tax, they’d blow through their entire state savings/trust fund thing in 2 or 3 quarters, if they didn’t pull in additional revenue from elsewhere or just lop off about a third of their spending… which mostly goes to funding schools, paying teachers, and funding medicaid.
Just a bunch of geniuses over there.
‘Man of Constant Sorrow’ indeed, fuck.
Or maybe it’s a 5D play. If the economy collapses in that time, their state will be in a better position
Sorry, I only inhabit 3 dimensions and change through time, can you explain this 5D logic to me?
What good is a rainy day fund if the dollar becomes worthless?
If you’re sure it’s about to crash, the smart thing to do is spend it all beforehand
I mean… I may be wrong about this, but I think its just a gigantic pile of cash.
Its a revenue budget surplus, not like a … state version of a soverign wealth fund.
Can’t be legally ‘invested’ in anything. It’s just locked in as giant pile of cash, with no interest rate, no ability to invest it in one thing or another. Only either do nothing, or spend it on government costs.
You are basically saying ‘spend all the money now, because prices will be much higher later’.
But uh… if they just… you know…didn’t wipe out a progressive income tax source of funds… that is you know, ongoing, a flow, not a static total…
The state would yes, still have to cope with rising general costs… but this would be augmented by that flow of rising amounts of tax revenue.
If your scenario is agnostic massive inflation, that the dollar goes down in value generally, then it would be much better to keep the flow going, as that will be balanced on both the spending and revenue side by whatever the inflation is.
The inflation would increase both state budget costs and state budget revenues from taxes, as both incomes and sales prices would rise, thus so would income and sales tax revenue.
And then in that scenario, yes, still use the static pool of reserve cash to shore up irregularities in that flow, maybe to help subsizide at a state level some of the rising consumer price burden, or maybe sure, spend it all at once to try to build some kind of massive infrastructure project that generally supports economic activity, or start giving it out as small business grants, or start a state backed entity to provide some kind of locally sourceable vital staple consumer good.
But you can do all that without massively destabilzing your state budget flows by cutting out the income tax revenues.
It is not a 5D move to stop inhaling a third of the oxygen you normally breathe before you use your reserve of calories from eating breakfast to fuel you to go run a mile.
You could… just use those deposited breakfast calories to run a mile… and keep breathing normally the whole time. That’ll probably result in a better mile time.
Saying someone is doing a 5d chess move is an over-exaggeration of saying they did a 3d chess move, which means to do something that seems incomprehensible at a glance but makes total sense to someone who understands the rules.
The joke is to insist that if you understood the reasoning, it’s actually a brilliant move. But it’s 5d chess, a game that doesn’t exist (and 5d chess with multiversal time travel isn’t really 5d chess, despite the name)