Document Type
Article
Publication Date
12-6-2010
Abstract
In an article in the Wall Street Journal, Arthur Laffer argued that, since 1960, the introduction of state income taxes reduced the relative size of a state’s gross state product and its relative per capita personal income. This paper criticizes Laffer’s conclusions on a number of grounds. 1. He uses incorrect figures for per capita income. In fact, relative per capita income rose in a majority of states that introduced an income tax since 1960. 2. The results are not clear when a state’s data is compared to other states in its region, rather than to the United States as a whole. Since many of the states that introduced an income tax were hard-hit by the decline in the economy (such as Illinois, Indiana, Michigan, Ohio, West Virginia), the comparison to the United States as a whole is misleading. 3. Even if the data were accurate, the argument for causation would be quite weak because so many other factors affect a state’s economic health.
Repository Citation
Shakow, David J., "Does It Hurt a State To Introduce an Income Tax?" (2010). Faculty Scholarship. 343.
https://scholarship.law.upenn.edu/faculty_scholarship/343
Included in
American Politics Commons, Economic Policy Commons, Economic Theory Commons, Law and Economics Commons, Public Economics Commons, Taxation-State and Local Commons
Publication Citation
58 State Tax Notes 679 (Dec. 6, 2010).