General Summary of Plan:
Imagine that some state wants to create some government program at the state level (We call this state the "donor state" for reasons you see later). The federal government itself won't do that program nationwide because it can't afford it in Bush's 2nd term.
This "donor state" that wants to create the program at the state level is unwilling to raise the necessary state taxes needed to to fund it, because people and businesses seeking to avoid extra taxation will move out to neighboring states, thereby partially frustrating the effort to raise revenue.
The solution to this is that the donor state agrees with neighboring states to raise taxes by the same amount (We'll call these neighboring states "recipient states" for reasons we'll see in a moment).
Since these neighboring "recipient states" and the donor state all raise their taxes by the same amount, there are fewer attractive lower-tax places for people and businesses to go, so fewer people and businesses move out of the donor state under this higher taxation.
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