There are lots of other things that affect state growth besides state taxes. However, the reason I look at taxes is because these are policy variables that can be changed by state governments in order to get better results than they otherwise had.

The income effects in an economy always sum to zero.

There are lots of other things that affect state growth besides state taxes. However, the reason I look at taxes is because these are policy variables that can be changed by state governments in order to get better results than they otherwise had.

There are several states that move from Karl Marx-like policies to Adam Smith-like policies and back again in a weekend. So for the states with huge volatility in their income tax policies over time, the differences in growth rates in those periods are really amazingly consistent with tax rates really mattering.

The zero-income-tax-rate states have far faster growth in tax revenues than did the states with highest income tax rate over this period.

If you look at the performance of the zero-income-tax-rate states and the highest-income-tax-rate states, I believe a large amount of their difference is due to taxes. Not only is it true of the last decade, but I took these numbers back 50 years. And, there's not one year in the last 50 where the zero-income-tax-rate states have not outperformed the highest-income-tax-rate states.

It has always amazed me how tax cuts don't work until they take effect. Mr. Obama's experience with deferred tax rate increases will be the reverse. The economy will collapse in 2011.