State Tax Rankings: What Do They And Don’T They Tell Us?
AbstractThis study examines some of the prominent state tax rankings that have been developed in recent years, with a focus on the indices that are specifically attempting to measure state and local taxes in some way. Each index is reviewed to determine what aspect of state tax systems are being measured and how. The article begins with a theoretical framework that informs the question of what tax rates should be measured, depending on the purpose of the intended index. It is important to distinguish, for example, whether tax rates are measured as average tax rates, marginal tax rates, statutory tax rates, or effective marginal tax rates. After analysis of the way several prototypical indices are constructed, this study also considers whether the indices actually have economic explanatory power. The Tax Foundation’s State Business Tax Climate Index is used as an explanatory variable in several estimated state GDP growth models. While the index has a statistically significant effect on state GDP growth in simple models, once more state-specific factors are included in the growth models the significance of the index disappears. Research suggestions are made for techniques that can be used to more effectively assess the explanatory power of state tax rankings. The conclusion of the analysis is that caution on the use and interpretation of such indices is warranted.
Download InfoIf you experience problems downloading a file, check if you have the proper application to view it first. In case of further problems read the IDEAS help page. Note that these files are not on the IDEAS site. Please be patient as the files may be large.
Bibliographic InfoArticle provided by National Tax Association in its journal National Tax Journal.
Volume (Year): 65 (2012)
Issue (Month): 4 (December Citation: 65 National Tax Journal 985-1010 (December 2012))
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
- Goolsbee, Austan, 2000. "The Importance of Measurement Error in the Cost of Capital," National Tax Journal, National Tax Association, vol. 53(n. 2), pages 215-28, June Cita.
- Thomas A. Garrett & Russell M. Rhine, 2010.
"Economic freedom and employment growth in U.S. states,"
2010-006, Federal Reserve Bank of St. Louis.
- Thomas A. Garrett & Russell M. Rhine, 2011. "Economic freedom and employment growth in U.S. states," Review, Federal Reserve Bank of St. Louis, issue Jan, pages 1-18.
- John E. Anderson & Robert W. Wassmer, 2000. "Bidding for Business: The Efficacy of Local Economic Development Incentives in a Metropolitan Area," Books from Upjohn Press, W.E. Upjohn Institute for Employment Research, number bb.
- Helms, L Jay, 1985. "The Effect of State and Local Taxes on Economic Growth: A Time Series-Cross Section Approach," The Review of Economics and Statistics, MIT Press, vol. 67(4), pages 574-82, November.
- Austan Goolsbee, 2000. "The Importance of Measurement Error in the Cost of Capital," NBER Working Papers 7558, National Bureau of Economic Research, Inc.
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Charmaine Wright).
If references are entirely missing, you can add them using this form.