Phasing Out State Income Tax Key to Success in Dying Blue States

Betsy McCaughey
Tue, 20 Jan 2026 19:55:12 -0800
Opinion

Across the nation, states are fiercely competing for companies and population by slashing taxes.

New York Gov. Kathy Hochul is dooming her state to be the loser.

In 2026, eight states are cutting their income taxes, and four others are reducing corporate tax rates.
Updated: Wed Jan 21, 2026

Across the nation, states are fiercely competing for companies and population by slashing taxes.

New York Gov. Kathy Hochul is dooming her state to be the loser.

In 2026, eight states are cutting their income taxes, and four others are reducing corporate tax rates.

South Carolina is pushing ahead on legislation to phase out its income tax entirely over the next few years, joining nine other income-tax-free states.

That's bad news for New York.

Saddled with a spendaholic governor and state legislature, New York is becoming increasingly unattractive to newcomers and businesses alike.

On Tuesday, Hochul unveiled a record-breaking $260 billion state budget — two and a half times the size of Florida's, despite Florida's larger population.

She may not want you to notice, but her budget has a gaping hole: Spending exceeds predicted revenues by a staggering $18 billion.

What will plug that hole?

Slap your face for saying the unmentionable: tax hikes.

Hochul's position on raising taxes is a red flag that New York state's worst is yet to come.

She's previously hinted at raising the corporate tax rate this year — the most damaging thing you can do to a state's economy, according to tax policy analyst Preston Brashers.

Her budget announcement didn't go that far, but it did extend an existing corporate tax surcharge for three more years, rather than letting it sunset as the law currently requires.

That means the Empire State still has the highest marginal corporate tax rate in the U.S., a mind-blowing 18.28%.

Hochul says she won't seek to raise personal income taxes just yet — but she doesn't rule it out for next year. Yikes.

By some measures, New Yorkers already carry the nation's heaviest tax burden.

Go ahead, Governor. Drive in the knife and kill the state's meager remaining prospects.

Hochul claimed last week that she's laser-focused on "affordability" — which she defines as a buffet of government handouts, paid for with tax dollars.

She believes the state's tax structure is "working right now."

She's got her head in the sand.

Over the last decade, New York has suffered more population loss than any other state, and more job loss than any other besides California.

Why? High taxes.

Millions of Americans fled the 10 states with the highest tax burdens in that time, while millions relocated to the 10 states with the lowest taxes.

This is not an act of nature but rather the result of decisions by Hochul and other tax-addicted politicians.

New York doesn't have to continue its decline. There's a path out of this mess.

Since 2021, 27 states have adopted major tax cuts to increase their competitiveness and business appeal.

Hochul should look around and see how other states are outcompeting what was once the Empire State.

When people flee high-tax states, they take their money — and the state's tax base — with them.

But cutting tax rates often yields a gradual increase in revenue, as taxpaying companies and workers move in.

Mississippi's ongoing income tax phaseout is designed to take advantage of this well-documented economic phenomenon: It schedules an additional rate cut to kick in each time revenue increases by 5%.

South Carolina will soon vote on an income tax elimination bill that does the same.

That's the path forward for New York and other tax-hell states.

Iowa Gov. Kim Reynolds has shown how it can be done. When she took office in 2018, Iowa had one of the highest corporate tax rates in the nation at 12%; Reynolds reduced it in stages to 5.5%.

She's also brought personal income tax rates down gradually, from nearly 9% to a flat 3.8% this year.

Reynolds has also made Iowa the poster state for deregulation, with a rule that any regulation has to be justified to the governor's satisfaction — or it automatically sunsets after five years.

All of it has helped Iowa soar from No. 21 to No. 14 in Chief Executive magazine's ranking of the best states for business.

No state is doomed to economic failure. A staggering 54% of corporate CEOs say they are "open to examining new locations" based on taxes, energy costs, regulation and workforce availability.

"The competition to win over these CEOs has reached unprecedented levels," reports Chief Executive.

But New York is all but out of the running. Chief Executive ranked the state 49th in business friendliness — keeping company with deep-blue states like Illinois, New Jersey and California.

In her State of the State address last week, Hochul boasted about "building an economy that works for all."

Untrue.

The figures don't lie: New York is lagging way behind the rest of the nation.

"If you're betting on the future, you need to bet on New York," she said.

Cut taxes, Governor, and we'll take that bet.