The Red State Model for a Post-Pandemic Economy – WSJ

The 2008 recession hit state treasuries hard. Most states experienced steep declines in revenue. They responded by raising taxes collectively by $29 billion in fiscal 2009 at the time, the largest annual hike in history. The taxing frenzy, however, quickly dissipated after the 2010 elections, when Republicans won a net seven governorships, upping their count to 29. That set off an intense, often acerbic state competition to attract residents and employers, as Republican states cut taxes and reduced regulation.

Now, with a pro-tax Democrat in the White House and a lockdown-induced recession in the rearview mirror, a new clash among the states is breaking out. While several Democratic strongholds have imposed big tax increases, claiming fiscal stress and the need for equity in taxation, a group of Republican-led states has cut levies. The contrasts are likely to intensify as November s elections get nearer, with 36 governorships and more than 6,000 state legislative seats in play.

It s hard to overestimate the influence the 2010 state elections had on America s political and economic landscape. Republicans that year began a march in the states that would eventually see them occupy 33 governor s mansions and take more than 900 legislative seats away from Democrats.

After enacting pro-business agendas, Republican governors then began openly wooing firms and residents from Democratic strongholds. Texas, for instance, ran provocative radio ads in places like California and Illinois, inviting businesses to move south.

via www.wsj.com