Abstract
This paper analyzes the impact of state-local tax structures on state economic performance. Specifically, growth rates in Gross State Product over the 1969–1986 period are related to several measures of a state's marginal tax environment in addition to more traditional growth determinants. Estimates of marginal tax rates for individual states are derived and utilized alternately with other tax climate surrogates in explaining variations in economic growth. We report both output and productivity equations in order to distinguish separate impacts resulting from taxation; the endogeneity problem is also addressed in this fashion. The findings suggest that, after controlling for overall tax burdens, higher marginal tax rates impede output growth.
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