Many states are considering cutting or repealing personal income taxes (or not raising them) under the assumption that high tax rates harm economic growth. Recently, one of the most visible proponents of this idea in the states has been Arthur "Laffer Curve" Laffer. The Institute on Taxation and Economic Policy (ITEP) has just released a pair of new reports that rebut Laffer’s claims, and show that states with “high rate” personal income taxes are actually outperforming non-income tax states.
The first report is titled “’High Rate’ Income Tax States Are Outperforming No-Tax States”. It shows that the nine states with the highest top marginal tax rates are outperforming the nine states without income taxes, both in terms of growth in economic output per person and changes in median income levels. Moreover, unemployment rates across both types of states have been virtually identical. The report also explains why Laffer’s analysis, which claims to show higher growth in no-tax states, is seriously flawed in its failure to account for huge regional population trends and the natural resource advantages enjoyed by many no-tax states. http://www.itepnet.org/pdf/
The second report is titled “Athur Laffer Regression Analysis is Fundamentally Flawed, Offers No Support for Economic Growth Claims”. This report explains the problems with a regression analysis created by Laffer attempting to show how much economic growth would result from cutting or eliminating state income taxes. In Oklahoma, for example, Laffer claims that income tax repeal would double the rate of personal income growth and state GDP growth, and would create 312,000 jobs. But Laffer’s results are driven largely by his inaccurate measure of state tax rates. And the regression also fails to account for a huge number of more important factors that contribute to state economic growth. http://www.itepnet.org/pdf/
While these studies focus on Laffer's tax fantasies, it also defies the shared tax rhetoric of Rookie Hate Group Historian Rex Sinquefield, who only a few weeks ago dumped another mil or so into his Everything Tax work group.