NCPA - National Center for Policy Analysis

Taxes and Population

October 29, 2002

Whether it is federal, state or local taxes, people are working harder and longer just to pay their tax bill. For example, Texans' tax burden is 11 times larger today than in 1972. Some politicians believe a growth in population requires higher taxes, because the cost of providing essential government services increases with each new citizen. But economists disagree.

  • New residents who participate in the labor force at high levels tend to raise more revenue at the margin for governments than they cost in incremental spending -- in other words, population growth in low-tax states adds revenues that exceed the cost of serving more people.
  • As population increases the cost per person of providing government services decreases -- put simply, the costs are spread among more people.
  • In fact, the tax burden in low-population-growth states is 12 percent higher (per $1,000 in personal income) than in high-growth-states.
  • While increasing population does require new infrastructure -- roads, schools, and utilities -- the costs do not out-weigh the added benefits those individuals bring to local and state economies, and therefore tax rolls.

Businesses and people want low taxes more than big government, and vote with their feet by moving to low-tax havens like Texas. When they are asked to consider new taxing schemes, and increased burdens, they should demand that elected officials account for every expense and keep spending low, observers say.

Source: Richard Vedder, "Growing Population Requires Less Taxation," Texas Public Policy Foundation, April 2002


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