You know, they say that you should never look a gift horse in the mouth. Generally speaking, I have the same attitude towards proposed tax cuts; you shouldn't look them in the mouth. When one is offered up, especially in high-tax Iowa, you take it. However, the proposal to
remove income tax liability on those under 30 is just moronic.
This idea is bad. Very bad. There are probably dozens of reasons why (
State 29 and
Joe@Roth CPA point out many), but I'll limit myself to just a couple of big ones.
It's bad politics. So, let's say that we eliminate taxes on Iowans under the age of 30. Great. Now what. Everyone else in the state, from little old ladies to the corner grocery store to fathers of three, is still paying taxes that are on the high end of the national spectrum. Those folks might want to see a little tax relief as well.
Problem. Younger people tend to be on the lower end of the income spectrum. By removing them, now only the higher earners are left. So, next year, when you come back with a proposal to lower taxes on those folks, our friends on the other side of the aisle will pan-fry you in the "tax cuts for the wealthy" skillet.
Moreover, the other side of the equation works as well. If you ever try to reinstate taxes on the under 30's, the other side will bludgeon you with the "putting the burden on the poorest and most unfortunate amongst us" hammer. And the corollary to this fact is that you've created an entire new group of people who are now government service users but who aren't government service payors. That is, you've created a new group of people sucking on the government teat who don't realize that somebody has to foot the bill.
As a general rule, when elections roll around we have a name for people who are government consumers but not government payors. They're called "Democrats."
That's why flatter tax rates and across the board tax cuts are better policy for Republicans. It keeps more people involved in sharing the burden of government. It doesn't pit different groups of the population against each other through class envy or age group interest groups.
This proposal does nothing except make our steep progressive rates a sheer cliff.
It treats the symptom rather than the disease. Young people don't leave Iowa because of high tax rates, at least not directly. No. They leave because of a couple of key factors.
First off is wanderlust. Who doesn't dream of going out into the world and conquering it--small town kid makes good and returns triumphantly. There is never going to be a better time to make your attempt than when you finish up school (either high school or college). So, kids bolt to Chicago, L.A., New York, Minneapolis, Denver, Dallas, or Atlanta to give life a whirl. Short of developing some big cities or making our existing cities more like big cities, we aren't going to avoid losing young ones to those temptations.
Second, and more importantly, there is the issue of jobs. Young people leave because places like Chicago and Minneapolis have lots of jobs. If you graduate from Iowa State with a degree in aerospace engineering, you'll notice a real dearth of jobs in that field in Iowa. If you graduate with a degree from the prestigious creative writing program at Iowa, you'll probably move to New York or L.A. to be near the industries most likely to utilize create writing. Those same pressures apply to just about every degree offered by our state's colleges and universities.
The proposal to nix taxes for under 30's does nothing to deal with either of the reasons kids leave Iowa. And those reasons are the real disease. The kids leaving is just a symptom of that disease.
So, if a proposal to nix taxes for everyone under 30 doesn't actually treat the disease, what would?
Answer: an environment friendlier to business and, especially, entrepreneurs. Eliminate red tape that hinders and unnecessarily complicates the running of a business. Drop the corporate tax rate so that we don't have to pay Maytag every few years to hang around, and so that the next time we have a Gateway Computers, we don't run it off to South Dakota. Just those two things would go a long way to curing our aging blues.
And, here's a bonus. When there are jobs, there are people. When there are people, you start to develop that high-energy vibe that the kids are looking for when they get out of school.