Laffer and Moore: The Red-State Path to Prosperity (WSJ)
You can tell a lot about prosperity in America by observing the places people are moving to and where they are packing up and moving from. New Census Bureau data on metropolitan areas indicate that the South and the Sunbelt regions continue to grow, while the Northeast and Midwest continue to shrink.
Among the 10 fastest-growing metro areas last year were Raleigh, Austin, Las Vegas, Orlando, Charlotte, Phoenix, Houston, San Antonio and Dallas. All of these are in low-tax, business-friendly red states. Blue-state areas such as Cleveland, Detroit, Buffalo, Providence and Rochester were among the biggest population losers.
This migration isn’t accidental. Workers and business owners are responding to clear economic incentives. Red states in the Southeast and Sunbelt are following the Reagan model by reducing tax rates and easing regulations. They also offer right-to-work laws as an enticement for businesses to come and set up shop. Meanwhile, the blue states of the Northeast, joined by California, Minnesota and Illinois, are implementing the Obama model of raising taxes on businesses and the wealthy to fund government “investments” and union power.
The contrast sets up a wonderful natural laboratory to test rival economic ideas.
Consider the South. We predict that within a decade five or six states in Dixie could entirely eliminate their income taxes. This would mean that the region stretching from Florida through Texas and Louisiana could become a vast state income-tax free zone.
Three of these states—Florida, Texas and Tennessee—already impose no income tax. Louisiana and North Carolina, both with bold Republican governors and legislatures, are moving quickly ahead with plans to eliminate theirs. Just to the west, Kansas and Oklahoma are also devising plans to replace their income taxes with more growth-friendly expanded sales taxes and energy extraction taxes. Utah, while not a Southern state, leads the tax-cutting pack under Republican Gov. Gary Herbert.
Mr. Laffer is chairman of Laffer Associates. Mr. Moore is a member of the Journal’s editorial board