Lower Taxes and Economic Growth: Response to a Flawed Analysis

Publication Date: March 2007

Publisher: Center on Budget and Policy Priorities (Washington, D.C.)

Author(s): Iris J. Lav; Kim S. Reuben; Iris J. Lav

Research Area: Banking and finance; Economics

Keywords: Tax code; State budgets; Economic projections

Type: Report

Coverage: Florida

Abstract:

When the Speaker and other leaders of Florida’s House of Representatives released their plan to roll back property taxes and place a tight growth limit on state and local revenues, they included a report in their release by the firm of Arduin, Laffer & Moore that claims lower taxes will lead to higher economic growth. This report takes an extremely limited and simplistic view of what makes a state grow and the incomes of its residents increase. It looks only at taxes, and ignores all other factors. Yet businesses well understand that the other side of the equation — the public K-12 and higher education programs that provide an educated and productive workforce; roads and infrastructure; health care and environmental preservation and protection; public safety; and the quality of life that taxes buy — are equally important in determining the growth of a state and the decisions business leaders make on where to locate, grow and expand their businesses. Even on the issue of taxes, there are many problems with this report and its use of data. "