A Taxing Time for States - How Tax Reform Can Make or Break a State's Economy

New Orleans native, Michael Lewis authored the 2003 best-selling book, Moneyball. This book told the story of Billy Beane and his successful turnaround of the Oakland Athletics baseball team using something called sabermetrics. This is a way of observing and analyzing the statistics of baseball players to such an extent that someone can accurately predict how successful a baseball player will be in their position based on the number of times a baseball player gets on base and the number of times they get a hit at the plate.

As Lewis learned about the way Billy Beane used statistics to turnaround his baseball team, he also applied the discipline of statistical analysis to predict certain patterns in states across the nation. He tracked the states that were growing and those that were losing population each year. What he noticed about states that were growing was a statistical prediction that tracked the way taxes were collected and administered.

Before Billy Beane’s statistical predictions no one expected to build a championship baseball team by calculating statistics on each player. Yet, after it was done, it transformed baseball to such a degree that sabermetrics now rules the draft in Major League Baseball. In like manner, tax policy was often thought to be irrelevant by economists as a driving force for growth. A quick look at the numbers, however, reveals otherwise.

Take for example Lewis’ home state and my home state as well – Louisiana.

Begin to talk about taxes and you are sure to either clear a room or incite a riot. The typical thinking about taxes goes something like this: I don’t want to pay more taxes…but I want everyone to pay their fair share…

But what is fair? Who gets to decide what “fair” means? Whose standard are we going to use? Mine? Yours? And who gets to decide what is taxed? How did taxing income become an acceptable source of revenue to the government? Was it always this way? Of course not! Taxes on incomes began during the Civil War in 1862 and we’ve never looked back.

A good tax system must be designed so that it puts more money back into the pockets of people and setting a pro-growth agenda that will help create jobs and establish states like Louisiana as a place where business and industry can thrive.

Looking at Louisiana’s current system as an example, the complexity of its tax code with its multiple brackets across many taxing streams – from income tax to corporate tax to corporate franchise tax to severance tax to inventory tax to sales tax to the state’s 468 tax exemptions – is a recipe for disaster.

Good tax policy is achieved through a broad tax base with low tax rates.