Is 2013 the year for getting rid of income taxes?

What happens when you search for income tax on google this week? One might guess that there is discussion about how taxes are due next month. Maybe there would be information on assistance with preparing or filing taxes by April 15th? What actually shows up on google, and on any major news site if you were to look, is that nationally there are many states having conversations about getting rid of the state income tax.

The conversation

Many changes have been proposed this year at state legislatures regarding income taxes. As we have seen in D.C. and throughout the country there has been strong resistance to raising taxes the past couple years. Some states are attempting to take tax reform into their own hands and one step attempted has been to work toward eliminating state income taxes. According to this article in Huffington Post, 37 states have one party in control and 22 of those states are led by Republicans. That allows many anti-tax Republicans the opportunity to introduce this legislation with less push back from Democrats. The goal in many of these states is to cut the income tax and using sales tax to make up for the lost revenue.

Which states?

Last year Oklahoma and Kansas both attempted to eliminate the state income tax. Oklahoma was successful in reducing the income tax significantly while Kansas was not. The following states are currently trying to follow Oklahoma’s footsteps:

· Louisiana

· Nebraska

· Kansas

· North Carolina- "The money accounts for more than half the state’s $20 billion annual budget”

· Georgia

Why not?

A recent article in Forbes argued all states should repeal the state income tax to improve the economy and create jobs.

This is not a new idea and Alaska, who successfully abolished their income tax in 1980, has been used as a positive example as they were able to support themselves with energy production levies. Oklahoma supporters who fought and won last year are labeling it a “pro-growth” system and have been championing the low tax, economic development movement for a couple years. Not to mention all the states mentioned in the post below who currently have no state income taxes.

Despite the supporters, there are still several serious concerns that these states should not ignore. America’s poor and middle-class taxpayers don’t really need the extra burden of high sales taxes. If this does not create major growth and economic opportunity in Oklahoma, then how will they make up for the lost revenue? Who knows what challenges might arise from tax reform in these states? Will there be enough money for public services, schools, and the rising costs of an aging population?

Needless to say, 2013 will be an interesting year for the state income tax.


Sources:

http://www.huffingtonpost.com/2013/01/13/income-tax-eliminated_n_2466612.html

http://online.wsj.com/article/SB10001424052970203889904577200872159113492.html

http://www.forbes.com/sites/realspin/2013/01/22/why-all-u-s-states-should-eliminate-the-income-tax/