Tax Myths Debunked

E. Fruits & R. Pozdena, Tax Myths Debunked, American Legislative Exchange Council, 2013

48 Pages Posted: 12 Feb 2013

See all articles by Eric Fruits

Eric Fruits

International Center for Law & Economics (ICLE); Portland State University; Economics International Corp.

Randall J. Pozdena

QuantEcon, Inc.

Date Written: February 6, 2013


The U.S. economy has recently suffered its deepest and most prolonged recession since the Great Depression. The fundamental causes of the recession and the slow recovery are the result of two decades of poorly conceived housing credit and other policies and the adoption of long-ago discarded Keynesian policies. The latter policies have failed to rejuvenate the economy and have left behind a massive accumulation of national debt. This accumulation has significantly constrained the policy options of the Federal Reserve, Congress and state and local governments.

State fiscal policy reform therefore needs to include policies that will support economic growth and break with the long tradition of high levels of taxation, government spending and intervention at the state level. The states must do this alone because the federal government will be in no position to provide financial assistance.

In this setting, defenders of the status quo and advocates for the so-called “progressive” reforms of higher taxes and greater government involvement have sought to discredit legitimate and research-based state fiscal policy reforms. The purpose of this paper is to set the record straight regarding recent pro-growth reform proposals, as well as illustrate the theoretical and empirical mythology that is used to discredit reform efforts.

After first providing an introduction and background to the current challenges that states face in reforming tax and spending strategies, the study provides an analysis of reform proposals that will reduce tax system impediments to economic growth.

Numerous scholarly articles and papers are referenced throughout this report, and detailed citations are available in the report’s bibliography.

Suggested Citation

Fruits, Eric and Pozdena, Randall J., Tax Myths Debunked (February 6, 2013). E. Fruits & R. Pozdena, Tax Myths Debunked, American Legislative Exchange Council, 2013, Available at SSRN:

Eric Fruits (Contact Author)

International Center for Law & Economics (ICLE) ( email )

2117 NE Oregon St.
Suite 501
Portland, OR 97232
United States


Portland State University ( email )

United States


Economics International Corp. ( email )

4318 NE Royal Court
Portland, OR 97213
United States
503-928-6635 (Phone)


Randall J. Pozdena

QuantEcon, Inc. ( email )

P.O. Box 280
Manzanita, OR 97130
United States

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