October 26, 2017

International Business Times: Do Lower Taxes Spur Economic Growth? What Happened In No-Tax States

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Researchers at the non-partisan and non-profit Institute on Taxation and Economic Policy compared the nine states without personal income taxes, which include Florida, Texas and Washington, to the nine states with the highest top marginal tax rates over the last decade, which include California, New York and Oregon.

They found the states with the highest top tax rates (which had an average top tax rate of 10.01 percent) outperformed the states without income taxes in per capita GDP growth, 25.8 percent to 17.4 percent between 2006 and 2016. The highly taxed states also generated slightly higher levels of per capita personal income growth, disposable personal income growth and personal consumption growth, as well as prime age employment, a measure of the job market that, unlike the traditional unemployment rate, includes people who have stopped looking for work.

“Over the last decade, economic growth in the states without income taxes has lagged behind growth in the states with the highest top personal income taxes,” wrote the study’s authors, Carl Davis and Nick Buffie. “While this finding does not indicate that higher income tax rates necessarily cause economic growth, it does call into question the notion that cutting or abandoning state income taxes leads to a clear improvement in state economies.” Read more

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