STATE INCOME-TAX ADOPTION AND ECONOMIC-GROWTH

Objective. In recent years political scientists and economists have co ntentiously debated the effects of income taxation on economic growth, particularly income taxation by states in a competitive federal syste m. This article seeks to identify whether states adopting a personal i ncome tax experienced less growth in personal income than those states not taxing income. Methods. A pooled cross-sectional time series anal ysis of the U.S. states from 1950 to 1989 is used to examine the effec ts of tax adoption on per capita income. Results. The findings indicat e that, while national economic conditions were the most important det erminant of state economic growth, adoption of an income tax had a sig nificant negative effect on state personal income. Conclusions. The re sults reported here shift the burden of proof to those who argue that the adoption of state income tax has no disincentive effects on person al income growth.