Governors of states with higher taxes inevitably deny their effect on their state, or justify them based upon essential services, fairness, or necessity for sustaining revenue.

But what are the actual facts?

The Mercatus Center, a research center at George Mason University, recently completed a comprehensive study on state economic prosperity and taxation. Its key findings:

1. Higher taxes reduce economic growth. A 1% increase in taxes results in a 1.9% decrease in growth.

2. Taxes impact where people live. People move to states with lower rates and leave those with higher ones.

3. Income tax progressivity (higher rates as income increases) affects new firm creation.

Here is a listing of the fifty state tax rates:



The results are in: If a governor wants to increase their state’s economic growth, attract more residents, create new jobs and make life better for everyone living there, they should lower their state taxes.

One crazy idea: How about sending this study to Congress and the White House and see if they’ll apply these principles to the country as a whole?

http://www.ijreview.com/2014/07/157256-c...lts-prove/

*cough* Kansas *cough*

I just don't want to pay them at the rate I do. Especially when I consider how it is all wasted anyways and I actually had to work my ass off for that money.

This is a garbage in garbage out study due to the metrics applied. Many states have one large industrious city that ends up financing the rest services of the rural part of the state (GA, IL, IN, MN) which adversely skews the trend lines.

Texas' lack of state taxes are definitely an incentive for businesses, but the Long Star State has 3.5 major cities, major military investments and spends little to no money on infrastructure in West Texas. Florida can afford not to pay state taxes because its a major vacation destination and also 4 major metros as well.

(07-16-2014 09:22 AM)Redwingtom Wrote:  *cough* Kansas *cough*

Number one, a single year is too short a term to evaluate the true impacts. Tax cuts inherently take longer to have an impact than other measures.

Number two, there's a lot of noise in any economic data, and a reading of the linked article suggests that nothing was done to control for these. Can't tell for sure, but without knowing, it's hard to determine whether the points noted actually mean anything.

Number three, there's really only so much a state can do by lowering taxes. The big factor that makes all states noncompetitive for business is the federal rate, and whether the state tax is zero or 20%, it's just an override on top of the federal rate which has the far bigger impact. If you want to attract a business with taxes, you'd do far better to give them property tax holidays and things like that.

Number four, it's frigging Kansas. Years ago the company I worked for was all ready to move it's major operations to Wichita (picked Wichita over Normandy in France, despite the fact that I recommended the latter because of the tax savings were so much better in France, and this was at the height of Reaganomics and France had a socialist government--that was what really opened my eyes to what is going on in international taxation). Then the president's wife spent a weekend there and told him she would divorce him if he made her move there. And yes, I know France might not look brilliant for taxes today, but that was 30 years ago, and after 30 years we would have been so far ahead that it wouldn't much matter what they did today--besides we could move fairly easy to anywhere else in the EU.