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Estimating the Impact of Taxes on the Economic Growth in the United States

Author

Listed:
  • Kalaš Branimir

    (University of Novi Sad, Faculty of Economics Subotica, Republic of Serbia)

  • Mirović Vera

    (University of Novi Sad, Faculty of Economics Subotica, Republic of Serbia)

  • Andrašić Jelena

    (University of Novi Sad, Faculty of Economics Subotica, Republic of Serbia)

Abstract

In a research paper, the authors provide an empirical approach to taxes and economic growth in the United States in the period 1996-2016. The basic goal is to explore how taxes affect economic growth. The subject of the research is measuring the effects of tax revenue growth and tax form as a personal income tax, corporate income tax and social security contributions on gross domestic product as a proxy for economic growth. Methodology framework includes several tests to clear the potential problem of heteroscedasticity, autocorrelation, multicollinearity and specification of the model. Based on diagnostic tests, a regression model is adequately created where fundamental econometric procedures are applied. Correlation matrix reflects a strong and positive relationship between tax revenue growth and corporate income tax on the one side and gross domestic product growth, on the another side. Also, personal income tax and social security contributions are weakly related to gross domestic product growth. The model shows a significant effect of tax revenue growth and social security contributions, while personal income tax and corporate income tax do not have a significant impact on gross domestic product growth. Interestingly, personal income tax as the main tax form in the tax structure of the United States has no significant impact on economic growth compared to social security contributions which percentage share is lesser.

Suggested Citation

  • Kalaš Branimir & Mirović Vera & Andrašić Jelena, 2017. "Estimating the Impact of Taxes on the Economic Growth in the United States," Economic Themes, Sciendo, vol. 55(4), pages 481-499, December.
    • Handle: RePEc:vrs:ecothe:v:55:y:2017:i:4:p:481-499:n:3
    DOI: 10.1515/ethemes-2017-0027
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    References listed on IDEAS

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    Full references (including those not matched with items on IDEAS)

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    More about this item

    Keywords

    tax; growth; income; impact; the United States;
    All these keywords.

    JEL classification:

    • B40 - Schools of Economic Thought and Methodology - - Economic Methodology - - - General
    • H20 - Public Economics - - Taxation, Subsidies, and Revenue - - - General
    • H21 - Public Economics - - Taxation, Subsidies, and Revenue - - - Efficiency; Optimal Taxation

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