Taxes, Incentives, and Economic Growth: Assessing the Impact of Pro-business Taxes on U.S. State Economies

71 Pages Posted: 15 Jul 2012 Last revised: 21 Aug 2012

See all articles by Kenneth J. Meier

Kenneth J. Meier

American University; Cardiff University; Leiden University - Institute of Public Administration

Soledad Artiz

Harvard University

Date Written: 2012

Abstract

State government policy frequently focuses on stimulating a healthy business environment with the assumption that this is linked with long term economic growth. The conventional wisdom is that a state’s tax rates are negatively correlated with economic development, prompting states to decrease business-targeted taxes to encourage economic stimulation. Surprisingly, however, very few studies have documented the long-term effects of these taxes on different facets of the state economy and overall business atmosphere. In short, we do not know how the level of business taxation actually affects the economies of states. Using panel data for all fifty U.S. states from 1977 to 2005, this paper examines the impact of state business taxes on the overall economic status of the state, specifically looking at their effect on economic development and business growth. With an elaborate set of controls, the paper links taxes to gross state product, job creation, personal income, poverty rates, and business establishments.

Suggested Citation

Meier, Kenneth J. and Artiz, Soledad, Taxes, Incentives, and Economic Growth: Assessing the Impact of Pro-business Taxes on U.S. State Economies (2012). APSA 2012 Annual Meeting Paper, Available at SSRN: https://ssrn.com/abstract=2107522

Kenneth J. Meier (Contact Author)

American University ( email )

4400 Massachusetts Ave, NW
Washington, DC 20016
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Cardiff University ( email )

Aberconway Building
Colum Drive
Cardiff, Wales CF10 3EU
United Kingdom

Leiden University - Institute of Public Administration ( email )

P.O. Box 13228
Den Haag, 2501 EE
Netherlands

Soledad Artiz

Harvard University ( email )

1875 Cambridge Street
Cambridge, MA 02138
United States

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