Hype surrounding no-income tax states like Texas is based upon misleading population data, opponents say.

Spencer Platt / Getty Images

In the Income Tax Debate, ‘Growth’ Depends on How and What You Count

  • Joe Wertz

Spencer Platt / Getty Images

Hype surrounding no-income tax states like Texas is based upon misleading population data, opponents say.

The Great State Income Tax Debate is all about economic growth, and one way to measure a state’s losses and gains is to count jobs, output and people.

Many such measurements are tied to population.

And some opponents say Gov. Mary Fallin’s income tax phase-out plan is based on a “highly misleading analysis” of population data.

Gov. Mary Fallin unveiled her income tax phase-out plan during last week’s State of the State address. Her plan is based on one proposed by the Oklahoma Council of Public Affairs and Arthur Laffer, famed economic adviser to President Ronald Reagan.

In a blog post, Oklahoma Policy Institute director David Blatt criticizes Laffer’s methodology and cites a report by the Institute for Taxation and Economic Policy, a left-leaning nonprofit think tank based in Washington, D.C.:

Laffer cherry-picked metrics that are all tied to population growth; 2) population is growing in the South and West, where most of the no-income tax states happen to be, for reasons of climate, demographics, and the housing market, not state tax rates

Right-click here to download a copy of the Institute on Taxation and Economic Policy's Feb. 2012 report.

Demand rises with population, and larger populations bring “natural” increases in economic output and total number of jobs, ITEP argues in its report, “Don’t Be Fooled By Junk Economics.”

The Oklahoma Policy Institute leads a coalition that’s fighting to keep the state income tax.

There are other reasons for population growth says Dick Lavine, a senior fiscal analyst for the Center for Public Policy Priorities, an Austin-based nonpartisan, nonprofit think tanks that focuses on improving the economic and social conditions of low– and moderate-income Texans..

Half of Texas’s recent population growth is “natural growth,” he told us. Basically: a bigger ratio of deaths minus births.

There are more accurate ways to measure economic growth, ITEP says: per-capita gross state product, median household income and average unemployment.

Blatt blogs:

On all three measures, most non-income tax states are faring worse than the average state. And on all three measures, Oklahoma is doing better than six of the nine non-income tax states.