Lower Taxes Boost Growth? Not Really.
A cherished equation of conservative economic thought — lower taxes equals higher growth — took a beating from a couple of sources this week.
On Monday, Michael Linden, director of tax and budget policy at American Progress, published an analysis of marginal tax rates at the Federal level over the past 60 years, concluding that growth was actually fastest in years when the top rates were highest. Go figure.
Then today comes a report from a team of economists at Penn State that looks at the same issue at the state level. You would expect that, other things being equal, states with lower taxes would achieve better economic performance, right? Nope. Turns out there’s no statistical correlation, according to Penn State prof Stephan Goetz, one of the authors of the study. Goetz speculates that low-tax states may skimp on services that businesses happen to find pretty useful, such as road repairs and education: “It’s essentially a case of you get what you pay for. You can’t attract businesses if you can’t provide needed public services.” more








