The Wall Street Journal has repeatedly supported the conservative call for states to cut income taxes in order to foster economic growth, ignoring a large body of evidence that shows cutting or eliminating income taxes is economically damaging.
In recent months, The Wall Street Journal has published opinion pieces in support of Republican governors' push to reduce or eliminate state income taxes.
A January 30 editorial claimed that eliminating state incomes taxes “makes sense,” arguing that it would spur economic growth and bolster state revenues. Economist Art Laffer and Wall Street Journal editorial board member Stephen Moore reiterated that thinking in a March 28 opinion piece titled “The Red-State Path to Prosperity,” which argues for - among other measures - “pro-growth tax reform” that hinges upon a reduced reliance on income taxes.
Both pieces ostensibly rely on research conducted by the corporate-funded, right-wing American Legislative Exchange Council (ALEC). Both Laffer and Moore have published research jointly with ALEC, and the January 30 editorial directly references Laffer's ALEC research. According to the Center on Budget and Policy Priorities (CBPP), ALEC's studies on state-based tax reform are heavily biased toward states with low taxes and often do not comport with broader research findings:
ALEC's studies and reports claim that its agenda would boost economic growth and create jobs, but they are disconnected from a wide body of peer-reviewed academic research on public finance.
In addition, the preponderance of mainstream research refutes core elements of ALEC's argument, showing that state tax cuts or lower state taxes generally do not boost the economy, state tax cuts do not pay for themselves in the form of higher economic growth that generates more revenues, progressive taxes and corporate taxes do not inherently damage the economy, and taxes generally do not cause people to flee a state. (emphasis added)
Indeed, a recent review conducted by CBPP reinforces the lack of validity in ALEC and WSJ's claims -- of the eight peer-reviewed studies on the effect of state-level personal income taxes on the economy since 2000, six have found insignificant effects, and one had internally inconsistent results. CBPP also found that in states that cut taxes the most in the 1990s, average annual job growth fell far below the national average in the following economic cycle.
Neither piece mentioned the overwhelming evidence that, contrary to the findings of studies conducted by ALEC, lowering or eliminating state income taxes generally has neutral or negative effects.
While both WSJ pieces mention that eliminating income taxes could increase inequality by having to rely on other, more regressive forms of taxation that disproportionately affect low-income households, they quickly brush it aside, claiming that the economic benefits from reduced reliance on income taxes outweigh negative distributional impacts. However, given the fact that peer-reviewed research and empirical evidence show no economic benefits from reduced state-level income taxation, The Wall Street Journal's “red-state” tax prescriptions only promise reduced income equality.