NCPA - National Center for Policy Analysis

Why Some Cities Are Growing and Others Are Shrinking

July 27, 2011

Although there are numerous factors that can influence the growth of individual economies, one finds a consistent relationship between low taxes and high economic growth in metropolitan areas, in states and in nations, says Dean Stansel, an associate professor of economics in the Lutgert College of Business at Florida Gulf Coast University.

  • In the 10 highest-tax metro areas, the state and local tax burden accounted for about 12.4 percent of personal income.
  • In those same areas, population grew by 21.3 percent from 1980 to 2007, employment grew by 40.1 percent and real personal income grew by 75.5 percent.
  • In contrast, taxes were only 8.3 percent of personal income in the 10 lowest-tax areas. The economic growth in those areas was much faster.
  • Population grew by 64.4 percent, employment by 107.6 percent and real personal income by 157.3 percent.

If high-tax, low-growth metro areas like Detroit, Milwaukee, Buffalo and Syracuse, want to be more like high-growth areas such as Dallas, Tampa, San Antonio and Austin, they should lower their onerous burden of taxation and bring spending under control, says Stansel.

Source: Dean Stansel, "Why Some Cities Are Growing and Others Shrinking," Cato Institute, Summer 2011.

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