A growing number of Democrats are finally realizing that high taxes mean competitive disadvantage. But you won't find these Democrats in Washington. According to a column in the Wall Street Journal (subscription required) Democratic majorities are cutting taxes at the state level, and even (gasp!) cutting marginal tax rates.
Only last week, the very blue state of Rhode Island adopted one of the most sweeping pro-growth tax reforms in any state in recent years. Democrats, who control 70% of the state legislature, teamed up with Republican Governor Donald L. Carcieri to enact a plan that allows residents the choice of a flat tax that cuts the top tax rate on high income earners to 5.5% from 9.9% if they voluntarily give up deductions. In an instant, Rhode Island has gone from the state with the third highest income tax rate in the nation to the 27th, according to the Tax Foundation.
And what drives Rhode Island's reform?
"Our high tax rates make us uncompetitive," says Democratic House Speaker William Murphy. "Business leaders with incomes of more than $250,000 look at Massachusetts and see a 5.3% income tax, Connecticut with a 5% tax, and Rhode Island with a 9.9% tax. They make a choice on where to move and create jobs, and that difference in tax rates is a big factor in where they go."
Meanwhile in Washington, the lesson hasn't sunk in.
Senator Norm Coleman , Republican of Minnesota, said it was difficult to explain to voters that tax cuts can bring in more revenue by creating jobs and encouraging investment. ``We have to do a better selling job" for the Senate to succeed at enacting more tax cuts, he said.
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