"Public Policy Leadership in the Virginia Tradition"
The Virginia Institute for Public Policy is an independent, nonpartisan, education and research organization committed to the goals of individual opportunity and economic growth. Through research, policy recommendations, and symposia, the Institute works ahead of the political process to lay the intellectual foundation for a society dedicated to individual liberty, free enterprise, private property, the rule of law, and constitutionally limited government.
Speaking to the Politics Practica seminar at Christendom College, February 9, 2015.
The Virginia Institute for Public Policy
releases a new policy report:
by Dean Stansel, Ph.D.
States with high income taxes tend to have worse economic outcomes than states with low (or no) income tax. Since the recession ended in 2009, the nine states with no income tax saw personal income grow one-third faster than the nine states with the highest income tax burdens. Employment growth was 50 percent faster, and population growth was more than twice as fast.
This disparity in economic performance is no coincidence. Income taxes levy a penalty on productive activity, and discourage saving and investment. In contrast, sales taxes have a more benign effect. By discouraging consumption, sales taxes encourage saving, which increases the funds available for lending, thereby making it easier for businesses to borrow, invest and expand their operations. Such higher levels of business investment lead directly to higher job growth.
Because of that distinct difference between income taxes and sales taxes, the worst possible policy would be to have a high income tax and a low sales tax. Unfortunately, that is exactly what Virginia has. Its income tax is well above average and its sales tax is well below average.
While Virginia is a low-tax state, the state has a distinctly anti-growth tax system. Switching to a tax code that places a lighter burden on income-producing activity would create a stronger climate for economic growth. That would make Virginia more competitive with its neighbors and the other states with which it competes for residents and jobs.
Download your copy of A Pro-Growth Tax Reform Agenda for Virginia today!
About the Author
Dean Stansel, Ph.D. is an associate professor of economics at Florida Gulf Coast University, an adjunct fellow at the Reason Foundation, and the primary author of the Fraser Institute's annual Economic Freedom of North America report, which ranks the states and provinces in the U.S., Canada, and Mexico. Prior to entering academia, Dr. Stansel worked for seven years at the Cato Institute, where he authored (or co-authored) more than 60 publications on fiscal policy issues. His academic research has focused on the impact of competition between local governments on fiscal and economic outcomes, the relationship between the size of government and economic growth, state fiscal crises, and a variety of other issues in the areas of public economics and urban economics. Professor Stansel earned a B.A. in economics and political science from Wake Forest University in 1991 and a Ph.D. in economics from George Mason University in 2002.
Virginia Institute for Public Policy