Monday, October 5, 2015

Using graphics to see an argument more clearly

Sometimes the only way to check on an argument is by looking at a map or other graphic. On September 25th at the blog for the Idaho Freedom Foundation Wayne Hoffman posted about how the Tax Law Rewrite Should Be Open To The Public. That blog post also appeared as a guest opinion article in the Idaho Press Tribune. He said that:

“....The rewriting of the income tax code is also a topic that deserves absolute transparency and openness. Lewiston Tribune editorial writer Marty Trillhaase noted Friday that’s not what Idahoans are getting from this state Legislature. A group of Idaho lawmakers has been meeting in secret to work through the logistics of what it would take to fix Idaho’s broken tax code. The group includes the chairmen of the House and Senate tax committees as well lawmakers from throughout Idaho, both Republican and Democrat. The non-partisan Legislative Services Office staff is facilitating the meetings, which have also been attended by officials from the governor’s office and the state Department of Commerce. “

I agree the tax code is a topic that deserves transparency, but was confused by why it took Wayne until his third paragraph to get to that main point. He instead began by warning:

“Idaho has a serious problem with its tax system. The state’s income taxes are the highest in the Intermountain Region, with a top marginal income tax rate of 7.4 percent. It’s a deterrent to people wanting to move here and to people wanting to stay. State officials have worked for the last 15 years to bring the rate down from the nosebleed top rate of 8.2 percent to where it is today. At the start of the 2015 legislative session, Gov. Butch Otter unambitiously suggested clipping the current top rate by a tenth of a percent every year for four years, but he never introduced legislation to do it. A proposal to eliminate the sales tax on groceries and get the top rate to 6.5 percent right away passed the House but was denied a vote in the Senate.”

I went to Wikipedia to check on the definition for the Intermountain states, which (as shown above) are the six with land west of the Rockies and east of the Cascades and the Sierra Nevada. Note that only Idaho’s two southern neighbors, Nevada and Utah are included.

Then I went to the Tax Foundation’s web site and downloaded their Facts and Figures publication to check the state income tax rates in Table 12. They are shown in the following bar chart. (Click on it to see a larger, clearer version).

Mr. Hoffman is correct about Idaho being highest, but he didn’t bother to mention that Nevada has no income tax (which I’ve shown last as a rate of zero) and also has no sales tax. So, how could we ever hope to compete with them?

We can get a somewhat broader comparison by instead looking at the eight Mountain States (as shown above) that also include Idaho’s two eastern neighbors, Montana and Wyoming. State income tax rates in those eight states are shown in the following bar chart. Wyoming also has no income tax (which I’ve again shown as a rate of zero).

We really also should include Idaho’s two western neighbors, Washington and Oregon in a comparison of tax rates.

As shown above, we can compare with our six neighbors. The following bar chart shows Washington also has no income tax (shown as a rate of zero). Now Idaho  doesn’t have the highest rate. Instead Oregon, which has no sales tax, does.

Mr. Hoffman began his second paragraph by claiming:

“Getting the top income tax rate dramatically lower is an important step in securing the state’s economic vitality. The high tax rate impacts everyone, rich and poor.”

He ended with:

“Unwinding all the special interest breaks to get an income tax rate that is super low and fair to everyone is important work.”

Three of our six neighbors have no income tax. (Four other states without one are Alaska, Florida, South Dakota, and Texas). I can’t see how lowering Idaho’s income rates (to perhaps 4.5% or less) would help us. Becoming fourth out of seven won’t make us win a battle that is already lost. To me it seems transparently silly. 

For another viewpoint, see the Better Idaho blog post on Idaho's Race to the Bottom.

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