Report: State Income Taxes Impact the Economy

(Albuquerque) The Laffer Center for Supply-Side Economics at the Texas Public Policy Foundation has joined Rio Grande Foundation to publish a recent analysis of income taxes at the state level. The study, “Taxes Really Do Matter: Look at the States” authored by Dr. Arthur B. Laffer, a former advisor to President Ronald Reagan, and Stephen Moore, senior economics writer for the Wall Street Journal, debunks recent research by the Institute for Taxation and Economic Policy (ITEP), a group that advocates for state level income taxes.

In the report, Laffer and Moore found that in any ten-year period, the no-income tax states – Alaska, Florida, Nevada, New Hampshire, South Dakota, Tennessee, Texas, Washington and Wyoming – consistently outperform the equivalent number of the highest income tax states – Oregon, Hawaii, New Jersey, California, New York, Vermont, Maryland, Maine and Ohio. No-income-tax states experienced a 14 percent population growth versus only 5.5 percent of the highest income tax states. Similarly, job growth in the no-income tax states was 5.5 percent while -1.6 percent in the highest tax states.

“The California/Texas comparison is especially interesting as California has one of the highest income tax rates at 10.3 percent and Texas has no income tax,” said Laffer. “Over the ten-year period studied, Texas gained nearly 870,000 transplants from other states while California lost over 1.5 million residents.”

“New Mexico provides further evidence for the Laffer/Moore thesis on the reduction or elimination of personal income taxes, said Rio Grande Foundation president Paul Gessing. “The top rate was reduced from 8.2 percent to 4.9 percent during the Richardson Administration which spurred economic growth, at least relative to other states.”

The data clearly shows that Americans are moving out of low tax states and moving away from high tax states and taking their incomes along with them. “You can’t tax an economy into prosperity,” said Laffer.

The Laffer Center for Supply-Side Economics is a partnership with the Texas Public Policy Foundation dedicated to preserving and promoting the core tenets of supply-side economics.

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