NCPA - National Center for Policy Analysis

Comparing Tax-Cutting States To Tax-Raising States

January 7, 1997

A study by Cato Institute researchers Dean Stansel and Stephen Moore once again confirms that tax cuts lead to healthier budget balances. The two compared the performance of ten states which raised taxes between 1990 and 1996 with ten which decreased them.

  • Tax-cutting states had healthier budget balances; their reserves averaged 7.1 percent of state expenditures compared to 1.7 percent in tax-raising states.
  • The economies of tax-cutters grew 33 percent over the five-year period -- six points higher than the tax hikers'.
  • Incomes for families of four grew $1,600 more in cutting states than in those which increased taxes.
  • Tax-cutting states gained 1.84 million jobs -- double the national average, and compared with zero net new jobs in the tax-raising states.

Moore says that the best tax incentive is "no income tax at all." Texas, Florida and Tennessee -- all states with no income tax -- are booming.

Source: Editorial, "States' Evidence," Wall Street Journal, January 7, 1997.


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