Taxes, Incentives, and Economic Growth: Assessing the Impact of Pro-business Taxes on U.S. State Economies Academic Article uri icon


  • State fiscal policy frequently focuses on stimulating a healthy business environment with the assumption that this is linked with long-term economic growth. The conventional wisdom is that a state's tax rates are negatively correlated with economic development, prompting states to decrease business-targeted taxes to stimulate the economy. Surprisingly, however, very few studies have documented the long-term effects of these tax policies on different facets of the state economy and overall business atmosphere. In short, we do not know how the level of business taxation actually affects the economies of states. Using panel data for all 50 U.S. states from 1977 to 2005, this article examines the impact of state business taxes on the overall economic position of the state, specifically looking at their effect on economic development and business growth. With an elaborate set of controls, the article finds that state business tax cuts have little to no positive impact on gross state product, job creation, personal income, poverty rates, and business establishments. Copyright Southern Political Science Association 2014.

published proceedings


altmetric score

  • 51.43

author list (cited authors)

  • Prillaman, S. A., & Meier, K. J.

citation count

  • 31

complete list of authors

  • Prillaman, Soledad Artiz||Meier, Kenneth J

publication date

  • April 2014