Will cuts to a state’s top income tax rate boost growth? Not necessarily. In a new TPC paper, Bill Gale, Aaron Krupkin, and Kim Rueben find little evidence linking state-level economic growth and taxes, especially income tax policy. Neither tax revenues nor top income tax rates have a steady relationship with economic growth or employment across states over time. However, the authors conclude that property taxes may be a different matter and urge further study.
Pennsylvania Governor Tom Wolf’s tax plan gets a closer look. The state’s Independent Fiscal Office finds that the Democrat’s $4.6 billion revenue plan would raise taxes for all Pennsylvanians, but households making more than $100,000 a year would pay significantly more than lower income households.
In budget-challenged Delaware, tax changes may be on the horizon. As leaders from both parties consider increases to Delaware's per-gallon gas tax, motor vehicle fees, and other fuel taxes for infrastructure improvements, a separate bipartisan panel is about to endorse a very different package of tax reforms including repeal of the estate tax, a 9 percent personal income tax cut, and elimination of itemized deductions including mortgage interest and charitable contributions. Combining these changes with new fuel levies is likely to be extremely regressive.
The Texas Senate approves a sales tax holiday for firearms. It would be the last weekend of August if you are looking for a tax-free AR-15 or similar heat. If the plan advances, Texas would lose more than $11 million in revenue during the state’s two-year budget cycle. The bill moves on to the House. The bill’s sponsor says Louisiana has a tax-free gun weekend in September, and Texas wants to compete. Texas already has annual sales tax holidays for school supplies and energy-efficient appliances. Sales tax holidays make sense in some situations, according to TPC’s Richard Auxier. “But generally, they’re bad tax policy unless the alternative is large tax cuts with dubious growth assumptions, and not just for a weekend but for the whole year.”
In Louisiana, a US Senate Field Hearing. The Senate Committee on Small Business and Entrepreneurship holds a hearing in Livingston Parish this morning on “Reducing the Federal Tax Burden for America’s Small Businesses.”
Interested in subscribing to the Daily Deduction, the Urban-Brookings Tax Policy Center summary of the day’s tax news? Sign-up here to get the Daily Deduction delivered to your inbox every morning. If you’d like to tell us about a new research paper or have any comments about our feature, write us at email@example.com.
Posts and comments are solely the opinion of the author and not that of the Tax Policy Center, Urban Institute, or Brookings Institution.
- © Urban Institute, Brookings Institution, and individual authors, 2021.