The plan would eliminate all personal and corporate income taxes, plus the corporate franchise tax (in essence a licensing fee based upon corporate capital that is perhaps the most unfavorable of all the states that have one), in exchange for raising the state tax rate 1.88 percent and coverage of that to a host of previously-exempt services. However, several large exemptions will continue to exist against the entire state sales tax portion, principally concerning the acquisition of unprepared food, medicines, and utilities. Plus, any person whose income falls below $20,000 annually will be able to apply for a rebate of up to $300, and anyone drawing retirement payments such as Social Security can get a rebate tied to the first $60,000 of income (currently, recipients and state and local government retirees do not pay income taxes). Finally, it raises the tax on tobacco products, by $1.05 per pack of cigarettes.
Evaluated on economic terms, the plan has much going for it. Over the decades, research results continue to demonstrate that the most reliable path to increased societal wealth comes through systems relatively light on income taxes compared to sales taxes (nine states currently have no income taxes). Empirically, states with the lowest income taxes for decades have seen the most economic growth, while those with the lowest sales taxes have seen the least growth.