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28 Cato J. 53 (2008)
State Income Taxes and Economic Growth

handle is hein.journals/catoj28 and id is 55 raw text is: STATE INCOME TAXES AND ECONoMIC GROWTH Barry W Poulson and Jules Gordon Kaplan This article explores the impact of tax policy on economic growth in the states within the framework of an endogenous growth model. Regression analysis is used to estimate the impact of taxes on eco- nomic growth in the states from 1964 to 2004. The analysis reveals a significant negative impact of higher marginal tax rates on economic growth. The analysis underscores the importance of controlling for regressivity, convergence, and regional influences in isolating the effect of taxes on economic growth in the states. Taxes and State Economic Growth A number of studies have explored the impact of taxes on state economic growth.' Most, but not all, of these studies find evidence of a negative effect of taxes on various measures of state economic per- formance. A few studies have attempted to isolate the effect of state Cato journal, Vol. 28, No. 1 (Winter 2008). Copyright @ Cato Institute. All rights reserved. Barry W Poulson is Professor of Economics at the University of Colorado, Boulder, and a Distinguished Scholar at the Americans for Prosperity Foundation. Jules Gordon Kaplan is Adjunct Professor of Economics at the University of Colorado, Boulder. They wish to thank Byron Schlomach, Mary Katherine Stout, and a referee for helpful comments. Financial support was provided by the Texas Public Policy Foundation. An earlier version of this article was published by the Texas Public Policy Foundation (Poulson and Kaplan 2007). 'See Bartik (1991), Plaut and Pluta (1983), Benson and Johnson (1986), Helms (1985), Canto and Web (1987), Rasmussen and Zuehllke (1990), Vedder (1990,1995), Modifi and Stone (1990), Barry and Kasennman (1993), Bahl and Sjoquist (1990), Hines (1996), Crain and Lee (1999), Crain (2003), Haughwout et al. (2003), Inman (1989, 1995), Goolsbee and Maydew (2000), and Besci (1996). 53

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