![]() The bulk of mainstream academic research finds that interstate differences in taxes, including differences in top personal income tax rates, have minimal effects on state economic growth.Only one state that raised its state income tax rates, Connecticut, has seen markedly weaker growth than its neighbors, likely for reasons other than state tax levels. Seven of the eight states had per capita growth in personal incomes at least as strong as nearby states, and five of the eight added jobs at least as quickly as their neighbors. In six of eight states (including the District of Columbia) that enacted millionaires’ taxes since 2000, private-sector economic growth met or exceeded that of neighboring states since enacting the tax increases. Real-world experience suggests that raising top income tax rates is unlikely to harm state economies in the short run, contrary to some claims.Evidence indicates that sustained support for public building blocks of growth can help states improve their residents’ well-being, expand opportunity and racial equity, and build more prosperous economies over time. Raising personal income tax rates has allowed states to prevent or minimize harmful budget cuts or invest in ambitious new initiatives such as expanding early education, boosting access to college, improving infrastructure, and strengthening “rainy day” funds to prepare for the next recession. High-income tax increases can generate substantial revenues for investments in people and communities that provide economic and social benefits over the long term.One way to raise the necessary funds is to raise personal income tax rates on the highest incomes, a policy choice sometimes referred to as a “millionaires’ tax. ![]() One way to raise the necessary funds is to raise personal income tax rates on the highest incomes, a policy choice sometimes referred to as a “millionaires’ tax.” This approach makes sense: evidence indicates it can generate substantial revenue for public investments that boost a state’s productivity in the long run, without harming economic growth in the short term. Policymakers in several states are reviewing options to strengthen support for public investments crucial to state economies and residents’ well-being, such as quality early education, affordable college, and modern infrastructure. ![]()
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