Taxes Really Do Matter: A Look at the States

Barack Obama and the Democrats in Congress are betting the future of the U.S. economy on a gamble that tax rates don’t matter, so raising income taxes, dividend taxes and capital gains taxes in 2013 won’t hurt the economy. The evidence from the states, however, suggests just the opposite is true. We’ve looked at the evidence for more than two decades, with data dating back to 1960, and we’ve found that in any 10-year period you look at, the no-income tax states consistently outperform the equivalent number of the highest income tax states (see Figure 1).