Do States Choose Their Mix of Taxes to Minimize Employment Losses?

Posted: 16 May 2003

See all articles by J. William Harden

J. William Harden

University of North Carolina (UNC) at Greensboro - Bryan School of Business & Economics

William H. Hoyt

University of Kentucky

Abstract

We consider the mix of taxes chosen by a state government to minimize reductions in employment growth. The optimal mix of taxes requires that the decrease in employment growth for an additional dollar of revenue is equal for all taxes. We test this prediction using state-level data from 1980-1994. We find the corporate income tax has a significant negative impact on employment while the sales and individual income taxes do not. Our results also suggest that states are not choosing the mix of taxes to minimize losses in employment growth with corporate income taxes set relatively too high.

Suggested Citation

Harden, J. William and Hoyt, William H., Do States Choose Their Mix of Taxes to Minimize Employment Losses?. Available at SSRN: https://ssrn.com/abstract=396880

J. William Harden (Contact Author)

University of North Carolina (UNC) at Greensboro - Bryan School of Business & Economics ( email )

401 Bryan Building
Greensboro, NC 27402-6179
United States
336-256-0188 (Phone)

William H. Hoyt

University of Kentucky

Lexington, KY 40506
United States

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