Are High Taxes Restricting Indiana’s Growth?

Tatom, John (2006): Are High Taxes Restricting Indiana’s Growth? Published in: Research Buzz , Vol. 2, No. 9 (31 October 2006): pp. 1-3.

Abstract

The “Hoosier Comeback” program, sponsored by the Indiana Economic Development Corporation, is part of a strategy to boost economic growth, in this case through increasing the quantity and quality of available human resources by providing subsidies to encourage the return of former residents. Whether emigration rates could be boosted more by cuts in income tax rates or by cuts in the corporate, sales or property taxes is an open issue, but the taxes that have risen most in recent years have been sales and property taxes. The Tax Foundation’s State Business Climate Index suggests that more bang would come from cutting the individual income tax. Economic theory would also suggest that cutting taxes on corporate capital income, or property (structures) would have the largest efficiency gains because the underlying resources are the most mobile.

• Item Type: MPRA Paper
• Language: English
• Keywords: Tax rates and migration; tax policy and growth
• Subjects: O - Economic Development, Innovation, Technological Change, and Growth > O1 - Economic Development > O11 - Macroeconomic Analyses of Economic Development; E - Macroeconomics and Monetary Economics > E6 - Macroeconomic Policy, Macroeconomic Aspects of Public Finance, and General Outlook > E62 - Fiscal Policy; O - Economic Development, Innovation, Technological Change, and Growth > O4 - Economic Growth and Aggregate Productivity > O43 - Institutions and Growth

References

Dubay, Curtis S. and Chris Atkins, “2007 State Business Tax Climate Index,” Tax Foundation Background Paper No. 52, October 2006.

Epple, Dennis, Thomas Romer and Holger Sieg, “Interjurisdictional Sorting and Majority Rule: An Empirical Analysis,” Econometrica, vol. 69(6), November 2001, pages 1437-1465.

Indiana Economic Development Commission, Accelerating Growth: Indiana’s Strategic Economic Development Plan, 2006, April 2006.

Tiebout, Charles, “A Pure Theory of Local Government Expenditure,” Journal of Political Economy, 64, (1956), pp. 416-24.