February 4, 2013

Memo To The Post-Dispatch: Taxes Kill Growth

The St. Louis Post-Dispatch published an editorial this weekend that attacked the Show-Me Institute and one of its founders, Rex Sinquefield, calling Show-Me a “believe-tank” (contrast to “think tank”) whose purpose is to propagate the “free-market gospel” of Mr. Sinquefield. Presumably a follow-up to a story published last week in Gateway Journalism Review (GatewayJr.org), the Post-Dispatch’s editorial exhibits the sort of ill-considered economic assessments that have become the hallmark of Saint Louis’ daily in recent years. The Editorial Board’s latest addition to this unfortunate pantheon can be read here.

But the Post-Dispatch’s readers deserve better than what the newspaper delivered Saturday. There is nothing “theological” about the proposition that income taxes are destructive to growth. For the sake of transparency, I encourage the Post-Dispatch to point its readers to a report summarizing the academic literature on taxes and growth that the Tax Foundation published last year. Notably (emphasis mine):

So what does the academic literature say about the empirical relationship between taxes and economic growth? While there are a variety of methods and data sources, the results consistently point to significant negative effects of taxes on economic growth even after controlling for various other factors such as government spending, business cycle conditions, and monetary policy. In this review of the literature, I find twenty-six such studies going back to 1983, and all but three of those studies, and every study in the last fifteen years, find a negative effect of taxes on growth. Of those studies that distinguish between types of taxes, corporate income taxes are found to be most harmful, followed by personal income taxes, consumption taxes and property taxes.

The Show-Me Institute will continue to advocate for substantive reforms to improve the economic fortunes of this state. Instead of deriding that movement, the Post-Dispatch should join the good-faith effort — which a constellation of countless citizen activists are spearheading in Missouri with assistance from Show-Me Institute research — to translate the outcomes of decades of economic research into a robust and prosperous economic reality. We invite the Post-Dispatch to join us in this pursuit.

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