New Study Shows Clear Negative Relationship Between Local/State Tax Burden and Econ. Growth
Arlington, Va. – U.S. metropolitan areas with lower taxes exhibit higher employment growth, faster population growth, and greater increases in real personal income than areas with a higher tax burden, concludes a new study released today by the National Foundation for American Policy (NFAP), an Arlington, Va.-based policy research group. The study, “Higher Taxes, Less Growth,” found that areas with higher taxes had lower employment growth, smaller personal income gains and slower growth of population.
“These findings are particularly relevant at a time when many states and cities are proposing to raise taxes to address short and long-term budget problems,” said Stuart Anderson, Executive Director of NFAP.
1. Employment growth between 2000-2006 was 54% higher in the 50 metropolitan areas with the lowest tax burden than in the 50 highest-tax metro areas (measuring the tax burden as state and local taxes as a percent of personal income in 1997 for all 381 metropolitan areas).
2. Real personal income growth was 80% higher between 2000 and 2006 in the 50 areas with the lowest state and local tax burden (as a percent of personal income in 1997) than in the 50 highest-tax metro areas (see chart above).
3. In the 50 lowest-tax areas, population growth at 8.6% (between 2000 and 2007) was more than three times higher than in high-tax metro areas (2.6%).
Conclusion: The results suggest a clear negative relationship between state and local tax burdens and local economic growth.