Removing income tax entirely, can it be done?

English: Governor Bobby Jindal at the Republic...

Governor Bobby Jindal at the Republican Leadership Conference in New Orleans, Louisiana. (Photo credit: Wikipedia)

Could it be possible…no income taxes at all? Bobby Jindal thinks so:

Governor Jindal has unveiled a?specific proposal.

The plan will eliminate two major tax types: personal income tax and corporate income and franchise tax. Eliminating income taxes in a revenue-neutral manner and improving sales tax administration will dramatically simplify Louisiana?s tax system and reduce administrative problems for families and small businesses. The effective start date of the program is January 1, 2014. ?The plan will ensure revenue neutrality by?[b]roadening the state sales tax base and raising the state rate to 5.88%.

This is a superb plan.

Of all the possible ways for a state to generate revenue, the income tax is the most destructive.

That?s why researchers consistently have?found?that states without this punitive levy grow faster and create more jobs.

It?s also worth noting that jurisdictions such as?Monaco,?Bermuda, and the?Cayman Islands?manage to be very prosperous in the absence of an income tax, though the incredible wealth of these places is partly a function of bad policy elsewhere, so the comparison isn?t perfect.

Anyhow, Gov. Jindal expands on this research with some very powerful data.?

Over the last ten years, more than 60 percent of the three million new jobs in American were created by the nine states without an income tax. Every year for the past 40 years, states without an income tax had faster growth than states with the highest income taxes. Economic growth in the nine states without income taxes was 50 percent faster than in the nine states with the highest top income tax rates. Over the past decade, states without income taxes have seen nearly 60 percent higher population growth than the national average. ?While we have reversed the more than two-decade problem of out-migration, we can do more to keep people here. Here are a couple of staggering statistics. Between 1995 and 2010, according to IRS data, Louisiana lost $3 billion in adjusted gross income to Texas.


Would John Key have the stones to do something similar? Or is his government as addicted to tax and spend policies as Labour would be?

I particularly like that he recognizes the power of?tax competition?as an argument for better tax policy. Taxpayers win when Texas and Louisiana compete to have less oppressive tax systems.

Indeed, this should help explain why I am so fixated on the importance of making governments compete with each other. Simply stated, governments are very?prone?to over-tax and over-spend if they think taxpayers have no escape options.

Might the taxpayer win in New Zealand if we competed with Australia and other Pacific rim nations for the least?oppressive?tax regimes?