A new report from the Institute for Reforming Government (IRG) on economic reforms already tried by several states could provide a path to economic growth and prosperity.

“We believe by working toward implementing these types of pro-growth policies state governments will see higher economic growth and job creation that benefits working families,” said a report summary.

The report “Growing Economic Prosperity – Lessons from Tax Reforms in the States,” says there are four reforms that states should adopt:

  1. Enact taxpayer controls that put more decision making directly into the hands of taxpayers to approve spending or other policy changes, before lawmakers are able to increase taxes.
  2. Ease the taxpayer’s burden of compliance by making tax laws simpler through fewer tax brackets and reduced steps in calculating the total tax bill.
  3. Reduce tax rates on personal income and business income.
  4. Broaden the tax base.

The IRG, led by former Governor Scott Walker, relies upon the experiences of Wisconsin, North Carolina, Kansas, Colorado and Utah to make the case for the reforms.

Not surprisingly, Wisconsin is given prominence in the report:

Wisconsin’s steady commitment to real reform built upon the previous successes year after year, and, after eight years, yielded results dramatically different than those in 2010. Heavy tax burdens and lost job opportunities were replaced with economic prosperity and a better quality of life. Over the eight years of the Walker administration, tax cuts accumulated to $8 billion, giving the average Wisconsin household a savings of $3,478. Property taxes on a typical home were slashed by $3.6 billion to a rate lower than they were in 2010, while home values rose. The unemployment rate in June 2019 was at a historic low of 2.9 percent, one of the lowest in the nation. Real GDP grew at twice the rate from 2010 to 2017 (10.3 percent) compared to 2001 to 2010 (4.9 percent), catapulting Wisconsin from 35th in the nation to 11th for the fastest growth.

On the other hand, Kansas provides a cautionary tale:

Kansas’ tax reform efforts ultimately failed because the plan lacked revenue offsets and did nothing to broaden the tax base. These problems with the original reforms led to a significant budget crunch and financial distress. The state since has passed several tax increases to reverse the results of the original, legislative action in 2012.

The report concludes:

The correct approach to reform is dependent upon the unique tax bases, budget priorities, and fiscal structure in each state. Successful tax reform is not simply about reducing tax rates. It must consider how lower tax rates will broaden the tax base by attracting more families, jobs, and new businesses that, in turn, will provide revenues to pay for necessary government services.

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