EXECUTIVE SUMMARY

A new analysis shows U.S. metropolitan areas with lower taxes exhibit higher employment growth, faster population growth, and greater increases in real personal income than areas with a higher tax burden. These findings are particularly relevant at a time when many states and cities are proposing to raise taxes to address short and long-term budget problems. This research found areas with higher taxes had lower employment growth, smaller personal income gains and slower growth of population. Among the findings of the research:- Employment growth between 2000-2006 was 54 percent higher in the 50 metropolitan areas with the lowest tax burden than in the 50 highest-tax metro areas (measuring the tax burden as state and local taxes as a percent of personal income in 1997 for all 381 metropolitan areas).- Real personal income growth was 80 percent higher between 2000 and 2006 in the 50 areas with the lowest state and local tax burden (as a percent of personal income in 1997) than in the 50 highest-tax metro areas.- In the 50 lowest-tax areas, population growth at 8.6 percent (between 2000 and 2007) was more than three times higher than in high-tax metro areas (2.6 percent).- The results suggest a clear negative relationship between state and local tax burdens and local economic growth.- The tax burden was nearly 50 percent higher in the 50 highest-tax areas than in the 50 lowest tax area