Thursday, February 28, 2013

Contrary To GOP Rhetoric, Low-Tax States Have Worse Economic Growth

Republicans love to claim that low-tax states such as Texas enjoy a disproportionate amount of economic success, while higher-tax states like California are economic basket cases. Republican governors in several states are using that rationale to propose gutting their state income taxes (and, in many instances, replacing them with regressive sales taxes).

But a new report from the Institute on Taxation and Economic Policy shows that so-called “high tax states” are actually experiencing more growth and less decline in income than states that are supposedly super-conducive to economic expansion:

In reality, states that levy personal income taxes, including the states with the highest top rates, have seen more economic growth per capita and less decline in their median income level over the last ten years than the nine states that do not tax income. Unemployment rates have been nearly identical across states with and without income taxes.

Here’s the breakdown:

– Four of the nine states without income taxes are actually doing worse than the average state in regards to economic growth per capita: Texas, Tennessee, Florida, and Nevada.

– Five of the nine states without income taxes are doing worse than average in terms of median income growth: New Hampshire, Florida, Tennessee, Alaska, and Nevada.

– Six of the nine states without income taxes had higher than average annual unemployment rates over the last decade: Texas, Florida, Tennessee, Washington, Alaska, and Nevada.

In fact, it was the “high tax” states that did the best in terms of growth, as this chart shows:


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