Which states would you guess had stronger economic growth in recent years: those without an income tax, or those with the highest marginal income tax rates?
If you guessed those without an income tax, you’d be wrong.
The Institute on Taxation and Economic Policy (ITEP) recently released a paper showing that, as a group, the nine states with the highest top income tax rates — including Oregon — are experiencing more favorable economic conditions than the nine states without a broad income tax.
Specifically, ITEP found that the states with the highest marginal income tax rates are enjoying:
- faster economic growth, including growth on a per person basis;
- faster growth in average incomes; and
- lower unemployment rates.
These findings may not surprise those who have followed the work of the Oregon Center for Public Policy. We have long pointed out that Oregon has one of the nation’s top performing economies.
This is not to say that the higher marginal tax rates necessarily cause better economic conditions. Rather, the findings confirm that a strong economy can go hand in hand with higher marginal income tax rates.
