SE Texas Record

Sunday, December 15, 2019

Job growth boosted by federal state and local tax provisions: think tank claim

By John Breslin | Aug 13, 2018


States with low, or no, income tax rates are reporting higher job growth following the enactment of new legislation late last year, according to a Texas free market think tank.

Texas, which has no income tax, is third in the nation for jobs growth, 2.9 percent, figures from the Bureau of Labor Statistics (BLS) reveal.

The top two states for jobs growth, at three percent, are Utah and Idaho, both of which have an income tax, the former at five percent, the latter 7.4 percent, according to the BLS and the non-profit Tax Foundation.

Texas and Washington, both of which have no income tax, are third and fifth on the jobs growth list. The former has the 12th largest sales tax rate - an average of 8.1 percent on transactions at the till - while Washington has the highest in the country, 9.1 percent.

Both Utah and Idaho also charge sales tax ranging from 5.95 percent to  8.6 percent in the former and six percent in the latter.

One of the provisions of the Tax Cuts and Jobs Act passed late last year capped the amount, at $10,000, that can be deducted by individuals from their state and local taxes (SALT).

According to the Tax Foundation, 30 percent of tax filers took a SALT deduction in 2014. Of that number, nearly 90 percent of households had incomes above $100,000, the foundation's study found.

New York Gov. Andrew Cuomo, representing one of three states suing the federal government over the caps, said in a statement: "The federal government is hell-bent on using New York as a piggy bank to pay for corporate tax cuts and I will not stand for it."

In his statement, Cuomo said that getting rid of the SALT deduction will cost New Yorkers $14.3 billion in 2018 and another $121 billion between 2019 and 2025.

The Texas Public Policy Foundation believes the provision in the tax act is boosting job growth in states with low tax rates.

Chuck DeVore, vice president of national initiatives with the foundation, said, "Since the inception of the federal income tax, state and local taxes (SALT) have been deductible by taxpayers who itemize their tax returns. " He described this as "a federal subsidy for high state taxes.

"2017’s tax cut and reform limited SALT deductions to $10,000 per filer, and, while most taxpayers will see lower overall taxes, some high-end taxpayers in high-tax states such as New York or California may see a net increase in their tax liability," DeVore told the South East Texas Record.

"Here’s where things get interesting: since tax reform passed, low-tax states such as Texas as seeing 80% higher job growth than that in the (higher) tax states in the first six months of the year.

"This may signal a shift of job-creating capital from high-tax states to low-tax states. If California wants to keep up with Texas, it may have to cut taxes to attract jobs or risk being left behind."

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Texas Public Policy Foundation