Low-Tax US States Economically Out-Perform High-Tax Cousins

by Mike Godfrey, Tax-News.com, Washington

27 September 2006

A comparative study of state tax burdens across the United States has found, perhaps unsurprisingly, that low-tax states outperform their high-tax counterparts in employment growth, personal income growth, and population growth.

The report, entitled 'High Taxes Lower Economic Performance' by J. Scott Moody of the Maine Heritage Policy Center, a conservative think tank, evaluated the 50 states between fiscal years 1994 to 2004. It found that the ten lowest tax states had an average tax burden of 9.5%, while the ten highest tax states averaged 13%. Correspondingly, the low tax states had population growth that was 172.1% higher, personal income growth that was 31.9% higher, and employment growth that was 78.6% higher.

Additionally, the report looked at the 25 lowest tax states and the 25 highest tax states, thus examining all 50 states. The lowest tax states had an average tax burden of 9.9%, while the highest tax states averaged 11.5%.

The lowest tax states level of taxation was 13.7% lower than the highest tax states. Correspondingly, the lowest tax states had population growth that was 74.4% higher, personal income growth that was 15% higher, and employment growth that was 32.6% higher.

Commenting on the findings, Moody observed that: “States with low taxes have greater job creation and wage growth than states, like Maine, with high taxes."

“The data reveals that high tax states are missing out on the level job creation and wage growth that low tax states are experiencing,” he concluded.

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