JLF president documents for Reason magazine the success of free-market policies in promoting states’ prosperity

The latest issue of Reason magazine devotes six pages to John Hood’s analysis of empirical research into the policies that are most likely to foster economic prosperity in the states.

A recent change in our state’s political leadership prompted us to assemble a summary of all that diverse academic research for legislative leaders and our new governor, Pat McCrory. Setting aside studies published by think tanks, we limited ourselves to scholarly articles about economic policy published in academic or professional journals. At present our database contains 528 articles published between 1992 and 2013. On balance, their findings offer strong empirical support for the idea that limited government is good for economic progress.

Of the 112 academic studies we found on overall state or local tax burdens, for example, 72 of them-64 percent-showed a negative association with economic performance. Only two studies linked higher overall tax burdens with stronger growth, while the rest yielded mixed or statistically insignificant findings.

On smaller categories of taxation, the trend was similar: There was a negative association between economic growth and higher personal income taxes in 67 percent of the studies. The proportion rose to 74 percent for higher marginal tax rates or tax code progressivity, and 69 percent for higher business or corporate taxes. …

… [T]he empirical evidence isn’t overwhelmingly friendly toward “investments” in education and infrastructure either. While most relevant studies found that measures of education outcomes, such as test scores or college attainment, are correlated with economic growth, the same can’t be said for expenditures. Of 79 research findings on the relationship between education spending and economic growth, only 30 were positive, with 34 findings of mixed or insignificant results and 15 negative. (In the latter cases, any economic gains from additional education spending are more than offset by the economic losses from the taxes required.) Of the 84 studies examining infrastructure spending, 44 percent found positive results, but most studies still found either inconclusive or negative relationships.

Hood discussed many of these same issue in depth during a September 2013 presentation to the John Locke Foundation’s Shaftesbury Society.

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