Do states with higher or lower taxes do better economically?
While everyone has their own opinions on the question, a new study on state economic prosperity and taxation will have some saying, “I told you so.”
Governors of states with high taxes will relentlessly deny their effects on the state, or simply justify them with fairness, necessity or needed to sustain the revenue.
Governors of states with low taxes, use that as a means to attract business. For example, Governor Rick Perry (R-Texas) ran advertisements throughout California just last year in an attempt to sway companies to move to Texas because of their lower taxes.
So which of the two is actually true?
The Mercatus Center, a research center at George Mason University conducted a study to find out just that. Its key findings are:
- Higher taxes reduce economic growth. A one percent increase in taxes results in a 1.9 percent decrease in growth.
- Taxes impact where people live. People move to states with lower rates and leave those with higher ones.
- Income tax progressivity (higher rates as income increases) affects new firm creation.
The key findings illustrate that if a governor wants to bring in more residents, create more jobs and make life better for everyone in it, then instead of increasing the taxes, they need to be dropping them.
If only there was a way we could get this into the hands of Congress and see if they could apply these new findings to the whole country…
Photo Credit: ijreview.com
This post originally appeared on Western Journalism – Informing And Equipping Americans Who Love Freedom