Know the Facts: Personal Income Tax and the Economic Growth of States

Who Grows?

  1. From 2001 to 2011, states without a personal income tax of any kind experienced average annual GSP[1] growth of 4.81%, whereas states with a tax structure similar to that of present-day Louisiana experienced average annual GSP growth of 3.69%.[2]
  2. States without personal income tax grew their economies on average 1.13% more each year than those structured like present-day Louisiana.
  3. Had Louisiana’s economy grown 1.13% more each year between 2001 and 2011, it would have been 6% larger (about $15 billion or more than 100,000 jobs) than its actual size at the end of 2011. [3]
  4. Texas, a state with no personal income tax, grew at an average annual rate of 5.15% between 2001 and 2011.  New York, a state with a relatively high personal income tax, grew at an average annual rate of 3.49%. 
  5. In 2001, Texas’s economy was $42 billion smaller than New York’s economy.  By 2011, Texas’s economy was $151 billion larger than New York’s because of its faster economic growth.
  6. From 2002 to 2012, 62% of the three million net new jobs in America were created in the nine states without an income tax.[4]

 


[1] GSP, or Gross State Product, is a measure of the economic output of a state.  It is analogous to GDP, or Gross Domestic Product, which is the measure of the economic output of a nation.

[2] 2001-2011 Bureau of Economic Analysis, Public Domain. http://www.bea.gov/

[3] Louisiana Workforce Commission, Civilian Labor Force, December 2012.

[4] The Wall Street Journal, Jan. 30, 2013, on page A12 in some U.S. editions of The Wall Street Journal, with the headline: The State Tax Reformers.

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