Changes to state taxes have
little influence on business location decisions, the creation of small
businesses or other economic activity, according to Increasing the Income Tax Won't
Hurt Colorado's Economy, an analysis released by the Colorado Center on Law
and Policy, Bell Policy Center and the Colorado Fiscal Institute. Other
factors, like how the nation is faring economically and how much consumers are
spending, are far more important to the economic health of states.
"An extensive body of
academic research clearly shows that state tax rates have little to no effect
on economic growth," said Rich Jones, director of policy and research at
the Bell Policy Center. "In fact, targeted tax increases that finance
better quality education strengthen the economy. Amendment 66 will help ensure
we produce the type of well educated workers businesses need."
The study, Increasing the Income Tax Won't
Hurt Colorado's Economy, finds that:
- State tax levels
only have a minor effect on economic growth.
- Businesses do
not make location or relocation decisions based on state and local taxes,
in part because they make up a very small portion of business costs.
- Businesses are
far more likely to consider access to suppliers, labor costs, the quality
of the workforce and the reliability of public services like schools,
transportation, and public safety when making important decisions about
their companies.
- Taxes also have
a minimal effect on the creation of small businesses in a state. States
that have income tax rates that rise along with income - another feature
of Amendment 66 - actually had increasing rates of entrepreneurship,
according to a nationwide study.
- National
economic trends have a greater impact on Colorado's economic growth than
state-level tax policies. Colorado's income growth closely tracks national
income growth, not changes in the state income tax. Economic growth in
Colorado has fluctuated whether the highest individual tax rate was 8
percent or 4.63 percent.
- Colorado has
very little control over the national economy. However, state policymakers
have a lot of control over education, and investing in education can have
widespread economic benefits for all, such as higher median wages,
stronger personal income growth and increased business investments.
This is the second installment in
a three-part series outlining
the economic benefits of Amendment 66. The first issue brief (Investing in education will
boost Colorado economy) showed that investments in education actually spur
economic growth. The final brief will demonstrate how Amendment 66 will improve
our state tax system.
Contact:
Terry Scanlon
Public Affairs Manager
303-573-5669 ext. 311
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