Vice President Joe Biden reminded us again over the weekend that he’s no Frank Underwood when it comes to understanding political control. At a retreat in Maryland last Friday for Democratic members of Congress, Biden, in the process of lamenting Republican rejection of the Obama administration’s tax-and-spend policies, proclaimed that “There isn’t a Republican Party. I wish there were. I wish there was a Republican Party.” Biden’s sound bite is red meat for a Democratic conference and provides good fodder on the Morning Joe set, but it’s completely detached from facts and reality.
In fact, most Americans live in a state that is completely governed by Republicans. In 2014, Republicans have the governorship and entire control of the state legislature in 24 states, whereas Democrats have total control of only 13 states. Over 157 million Americans, more than half of the U.S. population, live in places where Republicans run all of state government, whereas just under 82 million people live in Democrat-controlled blue states.
Not only are there more states under unified partisan control than at any time in more than a half century, the two parties are taking states in diametrically opposite directions from a policy standpoint, and it’s leading to quite the contrast in economic outcomes. John Hood, President of the North Carolina-based John Locke Foundation, describes the current dynamic in the March issue of Reason Magazine:
“Think of it as a vast natural experiment in economic policy. Because states have a lot otherwise in common-cultural values, economic integration, the institutions and actions of the federal government-testing the effects of different economic policies within America can be easier than testing them across countries. Governors, state legislators, and other policy makers have dutifully supplied the experimental data. And scholars have been studying the results.”
Democrat-run states have higher taxes than those run by the GOP. The average top marginal income tax rate in Republican-run states is 4.04 percent, while taxpayers in states where Democrats control all the levers of state government face a top average rate nearly double that at 7.65 percent.
Every year, the non-partisan Tax Foundation puts out the State Business Tax Climate Index, which looks at every state’s tax structure and ranks them on their conduciveness to economic growth and job creation. Of the ten states with the best business tax climates in the country, six of them are completely run by Republicans, whereas none of the top ranked states are under unified Democrat control. Meanwhile, six of the ten states with the worst business tax climates in the nation are under total Democrat control.
That’s just income taxes. When looking at the overall picture, Democrat-controlled states have state and local tax burdens that are more than fifteen percent greater, on average, than unified GOP control states.
As was noted in this space last month, while Republican-run states like North Carolina, Indiana, Kansas, Texas, Wisconsin, and Ohio have been busy cutting and flattening income taxes in recent years, deep blue states like California, Illinois, New York, and Connecticut have been passing tax increases and then exempting the politically-connected and well-lobbied, leaving ordinary taxpayers to pick up the full tab. By raising tax rates and shrinking the base, Democrat-run states are demonstrating what the opposite of sound tax reform looks like.
These policies are not without consequences. Though there is little prospect for a GOP takeover of most deep blue states in the near future, taxpayers have taken it upon themselves and are voting with their feet. From 2005 to 2010 – blue state standard bearers NY, IL,
Given that the majority of academic research finds a negative association between marginal income tax rates and economic growth, it’s not surprising that the high-tax and low-tax approach taken by Democratic and Republican-run states, respectively, has produced contrasting economic outcomes. The average unemployment rate for Democrat-controlled states is more than eight percent higher than GOP-run states, according to Bureau of Labor Statistics data.
Folks living in the DC bubble have a hard time grasping the fact that there is a big and interesting world outside the Beltway where important things actually happen. Unlike in Washington, the two parties have the ability to implement and carry out their preferred policies in the states. The good news is that they have been doing just that, and the economic disparity it is producing will be, to the chagrin Vice President Biden and other Democratic politicians, a major factor in 2014, 2016, and beyond.
