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The Effect of State Income Taxation on Per Capita Income Growth

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  • Randall G. Holcombe
  • Donald J. Lacombe

Abstract

This study examines the impact of changes in marginal state income tax rates on per capita income by comparing income growth in counties on state borders with income growth in adjacent counties across the state border. Compared to a standard cross-sectional analysis, this border-matching technique is a better way to hold constant many factors that can vary for geographical reasons, such as climate, culture, and proximity to markets. The results show that over the 30-year period from 1960 to 1990, states that raised their income tax rates more than their neighbors had slower income growth and, on average, a 3.4% reduction in per capita income.

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File URL: http://pfr.sagepub.com/content/32/3/292.abstract
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Bibliographic Info

Article provided by in its journal Public Finance Review.

Volume (Year): 32 (2004)
Issue (Month): 3 (May)
Pages: 292-312

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Handle: RePEc:sae:pubfin:v:32:y:2004:i:3:p:292-312

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Cited by:
  1. Daniel C. Monchuk & John Miranowski & Dermot J. Hayes & Bruce A. Babcock, 2005. "Analysis of Regional Economic Growth in the U.S. Midwest, An," Center for Agricultural and Rural Development (CARD) Publications 05-wp392, Center for Agricultural and Rural Development (CARD) at Iowa State University.
  2. Caporale, Tony & Leirer, Jonathan, 2010. "Take the money and run: Political turnover, rent-seeking and economic growth," Journal of Economic Behavior & Organization, Elsevier, vol. 76(2), pages 406-412, November.
  3. James Alm & Janet Rogers, 2011. "Do State Fiscal Policies Affect State Economic Growth?," Working Papers 1107, Tulane University, Department of Economics.
  4. Neil Bania & Joe A. Stone, 2008. "Ranking state fiscal structures using theory and evidence," Journal of Policy Analysis and Management, John Wiley & Sons, Ltd., vol. 27(4), pages 751-770.
  5. Barry W. Poulson & Jules Gordon Kaplan, 2008. "State Income Taxes and Economic Growth," Cato Journal, Cato Journal, Cato Institute, vol. 28(1), pages 53-71, Winter.
  6. Yaya KEHO, 2011. "Tax Structure and Economic Growth in Cote dIvoire: Are Some Taxes Better Than Others?," Asian Economic and Financial Review, Asian Economic and Social Society, vol. 1(4), pages 226-235, December.
  7. repec:ebl:ecbull:v:5:y:2006:i:1:p:1-12 is not listed on IDEAS
  8. Coomes, Paul A. & Hoyt, William H., 2008. "Income taxes and the destination of movers to multistate MSAs," Journal of Urban Economics, Elsevier, vol. 63(3), pages 920-937, May.

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