April 15, 2004

Does Personal Income Tax Progressivity Inhibit Economic Growth?


What is the relationship between income tax burdens and state economic growth? A December 2003 study by the Oklahoma Council of Public Affairs (OCPA), titled Income Tax Progressivity in Oklahoma: Hindering Economic Growth, Variating State Revenue, attempts to weigh in on this issue. The authors of the report claim that Oklahoma’s personal income tax is among the most progressive in the nation, and that states with especially progressive income taxes tend to experience slow economic growth. This paper evaluates OCPA’s findings and shows that their study has two important flaws: Oklahoma’s income tax is far less progressive than OCPA claims, and, when properly measured, there is no statistical linkage between income tax progressivity and economic growth.

Read the Full Report (PDF)