Adequate Tax Collections are Vital to Economic Growth

March 8th, 2012

A new report from the Institute on Taxation and Economic Policy refutes the notion that no-income tax states are performing better economically than higher income tax states. The report, called “High Rate Income Tax States Are Outperforming No-Tax States” compares the nine highest income tax rate states with the nine states with no income tax in three key economic measures.

Anti-tax groups often tout the ability of low or no taxes to spur economic growth while proposing tax cuts. However, as the figure shows below, these claims have not been realized.

Key Economic Indicators for Nine “High” Income Tax States and Nine No Income Tax States 2000-2010

The report also provides a critique of research by Arthur Laffer that claims to show that the nine no-income tax states are performing better than other states. According to the report, Laffer’s research fails to account for revenue from natural resources and for population trends that are not attributable to taxes.

Adequate tax collections are vital to, rather than detrimental to, economic growth.
Tax cuts are not the answer for Mississippi’s economic growth. Public investments in education, workforce development, and other quality of life areas are essential for a state’s economic competitiveness and prosperity.
Source: MEPC analysis of data from the Institute on Taxation and Economic Policy