City Journal: The Real Problem with the Blue-State Model

Last April, shortly after New Jersey governor Phil Murphy proposed a budget with hundreds of millions of dollars in new taxes, his Texas counterpart, Greg Abbott, published an op-ed in the Garden State’s largest newspaper, inviting businesses and residents to consider moving south. “I’d like to throw a lifeline to businesses and families throughout New Jersey who are looking for greater economic opportunity and relief from high taxes. Come to Texas and be a part of our economic success story,” wrote Abbott. “Combine our low taxes and reasonable regulatory environment with our access to global markets and our robust infrastructure, and it’s easy to see why the Texas economy continues to flourish.”

Shortly afterward, Murphy responded in the Dallas Morning News, explaining that his budget sought to move Jersey in a “stronger and fairer” direction, after years of putting “the wealthy and big corporations ahead of ordinary people.” He didn’t explain how his state—with the nation’s third-highest corporate income tax and its worst business climate—had put “corporations ahead” of ordinary people. Nor did Murphy clarify how Jersey, where the top 1 percent of households pays 38 percent of the income taxes, favored “the wealthy.” Instead, the governor touted what he considered Jersey’s strengths—among them, lots of “investment” in things like education—as a reason for firms and residents to stay put.

Murphy’s stance was typical of officials in high-tax states, who’ve long argued that businesses and families care about more than just taxes. They also want quality government service, on this view—and are willing to pay extra for it. In late 2017, when the Trump administration proposed nixing the federal exemption for state and local taxes, defenders of the policy, mostly from high-tax Democratic states, said that ending it would hurt them by making local taxes more expensive to residents.

Read the full piece here.