June 17, 2013
Some policymakers, organizations, and individual economists assert that a consensus exists in the academic literature that state tax cuts boost state economies and that state tax increases harm them, but no such consensus exists.
In a recent review of the economic literature on the impact of taxes on economic growth, the Tax Foundation asserted such a claim. However:
- The Tax Foundation mischaracterized or exaggerated the findings of a three of the seven articles it cited, and the conclusions of a fourth article it cited are contradicted by a much more recent paper by the exact same author (which the Tax Foundation failed to include in its review).
- The Tax Foundation omitted from its review at least 20 relevant articles that have been published in major journals or edited compilations since the beginning of 2000, 18 of which either conclude that state and local tax levels have essentially no effect on various measures of state economic performance or suggest that adverse impacts are minimal or limited to particular taxes or time periods.
FROM: Center on Budget and Policy Priorities