Originally posted to The Daily Economy.

​In game theory, a “first-mover advantage” gives the opening player the power to set the rules of engagement. President Donald Trump built much of his political brand — and his Art of the Deal persona — on this idea: act big, set the tone, make others play defense. The strategy is simple: push hard up front, frame the deal, and only backtrack if necessary. It’s a tactic that can yield results in business, where individual stakes are limited and profit-and-loss signals keep players accountable.

But politics and governance aren’t business transactions. They’re repeated, dynamic games with millions of stakeholders, unclear incentives, and no bottom-line feedback. In this setting, the first-mover tactic, combined with erratic unpredictability, doesn’t create leverage — it creates dysfunction.

As Trump himself recently said on the White House lawn:

“I may do it… I may not do it. I mean, nobody knows what I’m going to do.”

That kind of uncertainty may work in a poker game — but it’s catastrophic for the economy. It undermines trust, destabilizes markets, and delays investment. And we’ve seen the consequences of this “nobody knows” governing style play out across nearly every major policy initiative — from trade and taxes to tariffs and pandemics.

Strategic Blunders in Economic Policy

Take trade policy. The United States–Mexico–Canada Agreement (USMCA) didn’t improve on NAFTA — it layered on more restrictions, mandates, and regulatory hurdles, making trade less free. It imposed stricter rules of origin, weakened investor protections, and made regional auto manufacturing more expensive. Rather than liberalizing trade, it entrenched protectionism under a new name.

Meanwhile, Trump’s tariffs are one of the largest tax increases on Americans. The Tax Foundation estimated that US tariffs imposed from 2018–2020 raised tax revenues by over $80 billion annually and increased consumer costs by an average of $1,277 per household. Retaliatory tariffs from China, the EU, and others directly harmed US exporters, especially in agriculture and manufacturing.

Even the widely publicized “Phase One” trade deal with China fell short. China failed to meet its purchase commitments, and the structural reforms promised — on intellectual property theft and forced technology transfers — never materialized. Strategic ambiguity resulted in economic underperformance.

Uncertainty Is a Tax on Growth

In economics, uncertainty acts like a tax on business decisions. Research shows that policy uncertainty reduces private investment, hiring, and innovation. The Hoover Institution noted that by 2019, Trump’s trade war and erratic regulatory threats were already slowing business investment before COVID hit.

Tax reform followed the same chaotic path. The 2017 Tax Cuts and Jobs Act (TCJA) made some positive moves — cutting the corporate tax rate from 35 percent to 21 percent, doubling the standard deduction, and improving full expensing. But it was undermined by temporary provisions and a lack of spending restraint. The Manhattan Institute found that despite strong pre-COVID growth, the Trump administration added $4.7 trillion to the national debt, including $3.9 trillion in new borrowing from legislation signed into law. 

Why? As I found while working at the White House then, sending fiscal progressives like Steven Mnuchin to negotiate massive spending bills was a mistake. At the White House Office of Management and Budget, we saw how Mnuchin consistently prioritized deal-making over fiscal discipline — resulting in bloated omnibus bills and exploding deficits.

Pandemic Panic and Government Overreach

COVID-19 response amplified these failures. What began as “15 days to slow the spread” became 15 months of federal overreach, lockdowns, and more than $5 trillion in COVID-related spending. Much of it — like enhanced unemployment benefits and state bailouts — was extended long after the emergency faded.

This was not a market correction. It was a government overreaction to previous government failures. The Congressional Budget Office reported that federal spending reached 31 percent of GDP in 2020 — exceeding even World War II levels as a share of the economy. That’s not “stimulus” — it’s control.

The Wrong Game, the Wrong Incentives

In business, unpredictability might create bargaining power. In government, it creates instability. That’s because public policy affects long-term decisions across millions of households and firms. Public choice theory explains how politicians often respond to the wrong incentives — seeking short-term wins instead of long-term outcomes.

We saw it with proposals to block Nippon Steel’s acquisition of U.S. Steel. It’s a private deal, but political posturing — under both Trump and Biden — has turned it into a nationalist spectacle. It’s great that Trump recently approved it, but not after making it politically charged, more restrictive, and an agreement that presidents shouldn’t get involved in. Likewise, new tariffs on $18 billion in Chinese imports will raise prices, reduce output, not solve perceived trade problems, and be a drag on other pro-growth efforts by Trump.

The outcome? Higher costs. More uncertainty. Less investment. Slower growth.

The Way Forward: Economic Freedom Over Erratic Power

There’s still time to get it right. The presidency is a powerful platform — but it should be used to unleash markets, not micromanage them. That starts with credible first moves that restore fiscal sanity, reduce tax burdens, lift regulatory burdens, and build trust through policy stability.

We should learn from bold reformers like Argentina’s Javier Milei, who are shrinking government and restoring trust in free markets. In the US, we have the tools — we just lack the direction and leadership to a brighter future.

What America needs isn’t another flawed deal. It needs a direction rooted in liberty, stability, and prosperity. As I often say, let people prosper. That’s the real art of leadership.

​What’s driving state-level prosperity—or stagnation?

While Washington obsesses over headlines and dysfunction, the real policy battles shaping Americans’ lives are happening in state capitals. From tax cuts and spending reforms to school choice and regulatory rollbacks, we’re seeing a tale of two paths: one that embraces economic freedom and another that doubles down on top-down control.

In this episode of This Week’s Economy, I talk with Patrick Gleason, Vice President of State Affairs at Americans for Tax Reform and regular contributor to Forbes, about the most important trends in state policy. We get into who’s doing it right, who’s doing it wrong, and how to push back against the growing threats of government overreach.

You can catch the full episode on YouTube, Apple Podcast, or Spotify.
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Originally published at Kansas Policy Institute.

From Topeka to Washington, too many politicians are combining tax relief with bloated budgets—and it’s putting future prosperity at riskKansas’s recent fiscal trajectory offers a cautionary tale for federal policymakers.

While tax relief is essential for economic growth, pairing it with unchecked spending can lead to fiscal instability. The state’s experience underscores the importance of coupling tax reforms with disciplined budgeting—a lesson Washington should heed as it considers the so-called “One Big, Beautiful Bill” (OBBB).

Kansas: The Perils of Overspending

Over the past decade, Kansas has seen both the promise and the peril of bold tax reform. In the early 2010s, the state attempted a major tax overhaul under then-Governor Sam Brownback, slashing income tax rates in hopes of spurring growth. However, the tax cuts were not paired with corresponding reductions in spending. Instead, state budgets continued to expand, and the resulting deficits sparked political backlash and fiscal instability.

Fast-forward to 2025, and Kansas again finds itself in a precarious fiscal position. The Legislature recently passed another tax relief package aimed at flattening income tax rates and reducing the property tax burden—moves that are pro-growth in theory. However, these reforms come alongside a surge in state spending. Our research at KPI shows that, for 2025 alone, the state budget is $8.7 billion larger than if spending had followed a responsible limit based on population growth plus inflation since 2005.

Spending per resident has soared to unsustainable levels, outpacing economic growth and increasing the burden on Kansas taxpayers. Kansas’s state government spending per resident was $5,428, placing it 23rd highest among the states. State and local tax collections per capita stood at $6,326 in 2022, ranking Kansas 24th nationally, well above no-income-tax states like Florida and Texas. This high tax burden helps explain why Kansas has seen a net outmigration of nearly 198,000 residents since 2000.

Forecasts show Kansas facing a $741 million deficit within four years. Assuming these projections are accurate, it is not because of the tax cuts but because of unsustainable spending growth. A decade after the first tax reform attempt, Kansas still grapples with the consequences of failing to control government expansion. The lesson is clear: even the best tax reforms can falter without fiscal discipline.

The Responsible Kansas Budget: A Blueprint for Reform

To address these challenges, Kansas needs to adopt KPI’s Responsible Kansas Budget (RKB). This simple yet powerful framework starts by demanding real cuts to inflated spending now—not just limiting future growth. Only then can state and local spending growth be effectively capped to population growth plus inflation, a measure of what taxpayers can sustainably afford.

By taking this two-step approach—cutting first, capping second—Kansas can reduce the government’s burden, avoid deficits, and create room for meaningful tax relief. This framework is a prerequisite for long-term stability.

The RKB also demands a shift toward performance-based budgeting. That means funding decisions should be based on outcomes, not historical inertia. Dedicated funds and earmarked programs currently dominate the Kansas budget, limiting lawmakers’ flexibility and reducing transparency. These automatic appropriations are a recipe for bloat and inefficiency.

A responsible budget should reflect real priorities, not legacy carveouts or special interests. And it should reject the fallacy of burden-shifting—replacing one tax with another—without actually reducing the total tax load on Kansans.

With a responsible budget and sound tax policy, Kansas could join the growing number of states advancing toward flatter and simpler tax systems. Over a dozen states have already adopted or are moving toward flat income taxes, and several—including Florida, Tennessee, and Texas—have eliminated income taxes entirely in favor of consumption-based models that encourage savings, investment, and growth.

Washington’s “One Big, Beautiful Bill”: Echoes of Kansas

At the federal level, the “One Big, Beautiful Bill” (OBBB) mirrors Kansas’s approach in its ambition and flaws. The bill includes several encouraging provisions:

• Extending the expiring 2017 Tax Cuts and Jobs Act (TCJA) provisions,
• Eliminating federal taxes on tips and overtime pay,
• Making some Social Security income tax-free,
• Rolling back Biden-era green energy subsidies,
• Adding modest reforms to Medicaid and SNAP.

These are meaningful steps toward a more growth-oriented economy. However, the bill’s excessive spending without immediate cuts, numerous carveouts in the tax code, and a massive $4 trillion increase in the federal debt ceiling undermine the positives. Rather than pursue a broad-based, neutral tax system, OBBB introduces more tax carveouts—targeted benefits for politically favored groups. This kind of special treatment is anti-growth, distorting economic decisions, and reducing fairness. Worse, the bill does little to reform the largest drivers of federal deficits: “entitlements.”

Medicaid Reforms: Necessary but Potentially Disruptive

Among the most important components of OBBB are the long-overdue reforms to Medicaid. These changes aim to rein in ballooning entitlement costs and require work among capable adults. For Kansas, however, this could initially create budgetary pressure if federal matching funds are reduced or enrollment drops more quickly than anticipated. However, short-term stress should not deter long-term reform. Kansas must begin to wean itself off the federal budget, in Medicaid and elsewhere, especially in programs where dependency has grown far beyond the original intent. Taxpayers in Kansas are being overtaxed to support an unsustainable federal system. Rather than fearing change, Kansas should seize the opportunity to modernize its Medicaid program, cut costs, and move toward a more state-driven and fiscally responsible healthcare model.

Tax Carveouts vs. Tax Reform

Whether in Topeka or D.C., the distinction between tax carveouts and true tax reform is critical. Carveouts are a form of cronyism: they reward lobbyists and special interests, not families and small businesses. They complicate the tax code, reduce transparency, and make it harder to achieve long-term economic growth. By contrast, real tax reform broadens the base and lowers the rate for all taxpayers. It removes distortions, encourages work and productivity, and treats taxpayers equitably. The federal government should follow the lead of states like Kansas (when done right), Arizona, and Iowa by simplifying the tax code and moving toward a broad-based consumption model, not patchwork exemptions. Simply shifting the burden from income to consumption taxes isn’t enough—real reform must actually reduce the total burden on taxpayers.

Why Spending Discipline Matters

No tax policy can succeed in the long run without spending control. When spending outpaces economic growth, the gap must be filled with higher taxes, borrowing, or inflation—all of which harm the private economy. We’ve seen this nationally, as federal spending exploded during COVID-19 and remained high even after the emergency passed. And let’s not ignore federal borrowing. With debt levels now nearing $37 trillion, future generations will bear the burden of today’s excesses. Every trillion in new debt erodes trust, crowds out private investment, and raises the specter of inflation.

In Kansas, the failure to reduce spending has led to budget shortfalls even in times of economic growth. That’s because the state government has locked itself into long-term obligations and special funds that leave little room for discretion. Every dollar funneled into a dedicated account is one less that can be used for tax relief or urgent needs. In Washington, the same problem plays out in the form of entitlement autopilot and defense contractor guarantees. Unless both levels of government prioritize spending restraint, tax relief will be short-lived and economic growth will stall.

As states and the federal government consider long-term reform, one of the most promising directions is a shift from taxing income to taxing consumption. Income taxes penalize productivity, savings, and investment—the very engines of economic growth. Consumption taxes, by contrast, are less distortionary and more transparent. A flat consumption tax, such as a final sales tax, aligns incentives and simplifies compliance. Texas and Florida have demonstrated the viability of no-income-tax models, relying instead on consumption-based revenue systems. Kansas should explore similar reforms by reducing reliance on income taxes and eliminating carve-outs that clutter the code. At the federal level, replacing income and payroll taxes with a broad-based consumption tax could boost growth, improve compliance, and reduce the tax gap. But that can only happen if spending is first brought under control to avoid just shifting the burden.

A Time for Courageous Leadership

The opportunity is clear: Kansas and Washington can implement sustainable, pro-growth tax reform. But doing so requires real courage. It means cutting unnecessary programs, resisting special interests, and saying no to budget gimmicks. It means adopting a responsible budget cap—like the RKB—and sticking to it. In Kansas, that starts with ending the use of dedicated funds to circumvent scrutiny. It means evaluating programs on performance and eliminating those that fail to deliver value. It means using surpluses for tax relief or debt reduction, not new spending obligations. It means getting Kelly Era spending surges under control. In Washington, it means pairing tax relief with real entitlement reform. It means capping spending growth and ending the practice of raising the debt ceiling without structural change.

Conclusion: The Path to Prosperity

Tax relief is not enough. Without spending discipline, it leads to deficits, debt, and future tax hikes. Kansas has seen this firsthand and must not repeat the mistakes of a decade ago. Washington is at risk of making the same errors now. The path to prosperity lies in cutting inflated spending now, capping future growth, enacting broad-based tax reform, and shrinking the government’s footprint. Only then can we ensure a truly free and prosperous future. Washington would be wise to follow.

Originally posted at Pelican Institute. 

Congress is moving fast on a sweeping package known as the “One Big Beautiful Bill” (OBBB)—and it could have real implications for Louisiana. While the OBBB includes some beneficial provisions, especially by extending the 2017 Trump tax cuts, the bill overall fails to deliver the kind of fiscal discipline and pro-growth reform America needs. If anything, it reflects a dangerous continuation of Washington’s deficit spending spree. That’s a warning sign for Louisianans who want to see lower taxes, more opportunity, and a more responsible federal government.

The OBBB: What It Gets Right—and What It Doesn’t

The U.S. House recently passed the OBBB, which is now under review in the Senate. The legislation would:

• Extend expiring provisions from the Tax Cuts and Jobs Act (TCJA),
• Eliminate taxes on tips and overtime pay,
• Make Social Security benefits tax-free for many seniors,
• Extend full expensing and other pro-growth business tax cuts,
• Raise the state and local taxes (SALT) deduction cap to $40,000,
• Implement modest work requirements for Medicaid and SNAP,
• Roll back certain Biden-era clean energy subsidies.

Extending the TCJA helps maintain some degree of predictability for taxpayers and businesses. That alone reduces uncertainty and allows for better planning and investment. However, the other so-called “relief” measures are classic tax code distortions. Exempting tips, overtime, or Social Security benefits from taxation may sound good politically, but they complicate the code and narrow the base. Every carveout like this means higher tax rates elsewhere or more debt. Instead, the focus should be on across-the-board rate reductions funded by spending restraint.

Still Too Much Spending, Still Too Many Gimmicks

While the tax reforms in the OBBB are directionally helpful, the bill still suffers from two major flaws:

1. It spends too much. Instead of focusing on deficit reduction, the OBBB layers tax relief over another pile of federal spending even after spending about $1.5 trillion less than otherwise over a decade. But most of the spending reductions are delayed and should be immediate like tax reforms. As Adam Michel at Cato points out, the Senate must fix this by cutting wasteful expenditures, corporate welfare, and unnecessary industrial policy subsidies.
2. It’s riddled with carveouts. Rather than simplifying the tax code and broadening the base, the bill is filled with new preferences and targeted cuts—precisely the kind of special-interest favoritism that distorts economic incentives.

These problems weaken the bill’s long-term pro-growth impact. Without real fiscal restraint, any tax cuts today risk becoming tax hikes tomorrow.

What It Means for Louisiana

Louisiana taxpayers may see a short-term benefit. Workers could take home more pay, and families might enjoy marginally lower tax burdens. But federal fiscal irresponsibility won’t stay in Washington. It ripples through the economy. When Congress runs massive deficits, it puts upward pressure on inflation and interest rates—costs that fall disproportionately on low—and middle-income Americans. If spending continues unchecked, future tax hikes or program cuts are inevitable.

How Will It Affect My Taxes?

• If you’re a tipped or hourly worker: Your paycheck could go up.
• If you’re a retiree: You might stop paying federal taxes on Social Security benefits.
• If you itemize deductions: The higher SALT cap could ease your burden.

These are tangible benefits. But they come with a cost—unless matched with spending reductions, they contribute to an unsustainable fiscal trajectory.

How Will It Affect My Job?

In the short term, businesses may benefit from lower tax compliance costs and marginally stronger hiring incentives. But rising federal debt threatens to crowd out private investment over time. Louisiana’s economy, heavily dependent on energy, trade, and small businesses, needs more than tax tweaks. It needs a leaner federal government.

A Missed Opportunity to Do Better

The U.S. Senate can—and should—fix the worst parts of the OBBB. That means:

• Making the TCJA tax cuts permanent across the board,
• Eliminating new carveouts and corporate subsidies,
• Reducing federal spending,
• Simplifying the tax code to maximize growth.

These changes would help ensure tax relief isn’t just a temporary sugar high. They would also align with Louisiana’s needs: broad, lasting reforms that empower workers and businesses without fueling inflation or debt.

The Louisiana Connection

Back in Baton Rouge, lawmakers are navigating their budget debates. Thanks to economic growth and some early tax reforms, new revenue—roughly $155 million—is on the table. However, too much of the state budget is still soaked in pork projects and misplaced priorities. For example, the Senate Finance Committee just slashed funding for the new LA GATOR program to help families choose a school or educational program that fits their child’s needs, yet increased funding for the public schools families are trying to leave. They also added millions in more pork projects. This is precisely why Louisiana needs a Responsible Louisiana Budget, which would cap spending growth at the rate of population growth plus inflation. It’s a simple rule to ensure the budget doesn’t grow faster than what taxpayers can afford. If federal aid begins to shrink or federal work requirements increase state responsibilities, Louisiana will need even more discipline to weather the storm.

The Bottom Line

The One Big Beautiful Bill is a mixed bag. It offers short-term tax relief, especially by extending the TCJA, but fails to rein in the federal spending binge sufficiently. It’s not the pro-growth reform Americans need. At best, it reduces uncertainty by keeping some of the 2017 tax cuts in place. Louisiana lawmakers and residents should take note. Don’t count on D.C. to get this right. Push the Senate to improve the bill. And demand real spending discipline at the state level to ensure federal relief translates into real prosperity, not more fiscal risk.

Originally published at South Carolina Policy Council. 

South Carolina just took a major step toward meaningful tax reform—and closer to becoming a national leader in economic competitiveness.

Last Tuesday, the South Carolina House of Representatives passed an amended version of H.4216, a landmark income-tax reform bill that incorporates many of the recommendations long advanced by the South Carolina Policy Council and other free-market voices.

With bipartisan recognition that the state’s current progressive income tax structure is outdated and burdensome, this reform is the strongest sign yet that South Carolina is serious about eliminating the income tax. 

What’s in the amended Bill? 

​Originally the bill would consolidate South Carolina’s income tax brackets into a flat rate of 3.99%. Under the amended version the state would move to a two-tiered system with a 1.99% rate on taxable income up to $30,000 and 5.39% on income above that. The amended version of H.4216 also includes two key options for sustainable tax relief.  

The bill requires 5% revenue growth before triggering tax relief, then allocates either $200 million or 25% of the state's recurring general fund surplus (whichever is greater) toward cutting the income tax. This ties tax relief directly to responsible budgeting. 

This combination ensures that future tax cuts are based not on wishful forecasts, but on actual fiscal results. It’s a major win for fiscal conservatives and reform advocates alike. 

In fact, during floor debate, lawmakers publicly credited the South Carolina Policy Council for their leadership and guidance in shaping the surplus buydown portion of the bill—affirming that smart ideas can become law when backed by principled policy and persistent advocacy. 
 
Why this matters 

As it stands, South Carolina levies the highest personal income tax rate in the Southeast at 6.2%. Under H.4216, that top rate would fall to 5.39% immediately on income over $30,000 and 1.99% on income under $30,000. 

Additionally, the bill charts a path to a flat 1.99% and eventually full elimination. That would give South Carolina the lowest flat income tax in the nation – beating Arizona’s current 2.5%—and put it on a clear trajectory to join the ranks of zero-income-tax states like Texas, Florida, and Tennessee. 

As Patrick Gleason with Americans for Tax Reform observed, “H.4216, if enacted, would have South Carolina go from a tax cut laggard to a national leader.” He added, “It would make clear the ultimate goal is to take the income tax rate to zero, giving the Palmetto State a tremendous advantage when competing with all states and other nations for job-creating investment.” 

As currently drafted, the bill would reduce taxes for nearly 40% of South Carolina filers, raise them for close to 25%, and leave the rest unchanged. This imbalance can be addressed if lawmakers aggressively target either the deduction structure or further reducing the rates by focusing on spending restraint. With thoughtful adjustments, the bill can ensure meaningful relief for all taxpayers without unintended hikes along the way. 
 
What now? 

The Senate now has the opportunity to build on this momentum. They should maintain the surplus trigger, improve the structure for fairness and simplicity, and adopt the most sustainable flat rate possible. That means: 

• Using AGI as the income tax base to minimize taxpayer compliance costs. 

• Providing a broad standard deduction and reducing or eliminating special credits. 

• Ensuring the tax code does not unintentionally raise taxes on working families. 
  
  

This moment is a turning point. With the right tweaks, South Carolina can chart a clear, responsible path to zero income taxes – strengthening families, growing small businesses, and attracting investment from across the nation. 
With the income tax bill now a red-hot issue, the Senate has made clear its intent to take up the legislation at the start of 2026, the second year in the two-year legislative cycle.  

But work on this issue should begin well before then, starting in the Governor’s Office. If the governor aims high and exercises fiscal restraint on state spending growth, more recurring revenue will be available to accelerate the buy-down of the top marginal income tax rate. That would help South Carolina responsibly get to zero income tax as quickly as possible, without shifting the burden to tax hikes in other areas. 
​
While the current bill represents a major step forward, there’s still room for polishing to ensure it delivers the greatest benefit for all South Carolinians. The House has done commendable work; now it’s time for the governor and the Senate to finish the job. If both chambers and the governor stay focused on delivering the strongest, most responsible tax relief possible, South Carolinians at every income level will benefit.