Episode 215: “To Shrink Government, Cut Taxes: How the States are Doing It” with Grover Norquist

For an excellent primer about how the politics of our over-complicated state and local tax systems operate, this conversation with Grover Norquist is absolutely the place to start. 

It's comprehensive, easy to understand and often humorous, as only Grover knows how to make it.

(When Grover is not doing taxes, he’s doing stand-up comedy. For real, and he’s good at it.) 

As founder of Americans for Tax Reform, which opposes all tax increases as a matter of principle, no one in modern times has fought harder than Grover Norquist to shrink the state by keeping the issue of high taxes and IRS abuses in the public eye. 

To my delight, I learn that there are some good things taking place at the state level, where many states are either getting rid of their income tax altogether or moving to a flat tax. Grover explains where and how this is happening, with ATR playing a leading role. 

“Americans for Tax Reform,” explains Grover, “hosts frequent conference calls among the various governors and legislative leaders. We’re creating a community where each of the governors understands fully well that most other Republican governors are phasing down to zero or significantly cutting tax."

But how can states afford to have no income tax? Grover tells us how. 

“How does Florida pay for it? Florida 22 million people. New York, 20 million. Florida spends a $100 billion on state government. It's a lot, a $100 billion. New York, twice as much, 200 billion.”

“But the roads aren't any better up in New York. Public safety and cops aren't any better. Schools aren't any better. They hire more government employees, pay them more and have ridiculous pensions. That's what you get for twice the cost of state government. New York wouldn't need an income tax if they spend half as much. So the key is spending restraint.”

Of course politicians have figured out a lot of other ways to tax us besides the income tax. Sales taxes. Property taxes. Excise taxes. Capital gains taxes. Cigarette taxes. Estate taxes. Alcohol taxes. Disguised taxes (aka licensing fees). And on and on. 

We get into these and learn how for example “red states have gotten suckered into subsidizing their blue cities.”

One big takeaway: A simple tax system is the friend of the taxpayer. Complicated tax systems? The more confusing and opaque, the more governments love them. Grover explains why having a single tax rate makes it tougher for them to raise taxes. 

“All taxes are raised to the breaking point, to the point where politicians careers are broken.”

Also discussed in this episode: the FAIR tax which aims to eliminate the IRS, school vouchers, Janet Yellin’s quest for an international minimum corporate tax, what to negotiate for in the debt ceiling fight and the significance of ATR’s no tax increase pledge.

Listen in. There’s much to learn here.