State Tax Rankings: What Do They and Don’t They Tell Us?
National Tax Journal, 2012, vol. 65, issue 4, 985-1010
This study examines some of the prominent state tax rankings that have been developed in recent years, with a focus on the indices that are specifically attempting to measure state and local taxes in some way. Each index is reviewed to determine what aspect of state tax systems are being measured and how. The article begins with a theoretical framework that informs the question of what tax rates should be measured, depending on the purpose of the intended index. It is important to distinguish, for example, whether tax rates are measured as average tax rates, marginal tax rates, statutory tax rates, or effective marginal tax rates. After analysis of the way several prototypical indices are constructed, this study also considers whether the indices actually have economic explanatory power. The Tax Foundation’s State Business Tax Climate Index is used as an explanatory variable in several estimated state GDP growth models. While the index has a statistically significant effect on state GDP growth in simple models, once more state-specific factors are included in the growth models the significance of the index disappears. Research suggestions are made for techniques that can be used to more effectively assess the explanatory power of state tax rankings. The conclusion of the analysis is that caution on the use and interpretation of such indices is warranted.
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (4) Track citations by RSS feed
Downloads: (external link)
Access is restricted to subscribers and members of the National Tax Association.
This item may be available elsewhere in EconPapers: Search for items with the same title.
Export reference: BibTeX
RIS (EndNote, ProCite, RefMan)
Persistent link: https://EconPapers.repec.org/RePEc:ntj:journl:v:65:y:2012:i:4:p:985-1010
Access Statistics for this article
National Tax Journal is currently edited by Stacy Dickert-Conlin and William M. Gentry
More articles in National Tax Journal from National Tax Association, National Tax Journal Contact information at EDIRC.
Bibliographic data for series maintained by The University of Chicago Press ().