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August 21, 2003

state taxes and personal wealth

I was wondering whether the states that tax their residents at high rates tend to have higher or lower income levels. I suppose a crude form of free-market economics would predict that states with lower taxes would tend to generate more personal income. This is not the case. Although the relationship between tax rates and per capita income is not significant, generally the states that take the biggest portion of income in state and local taxes also have the most per capita wealth. States like Alabama have been low-tax zones for at least a hundred years, yet they remain among the poorest of all states.

This isn't "social science." It's just playing with a computer to get a quick answer to a simplistic question. Still, the graph poses a real question for supporters of laissez-faire economics: if low taxes create wealth, what explains Alabama? (Sources for the tax rates and the per capita income stats.)

August 21, 2003 12:12 PM | category: revitalizing the left | Comments


Look at the growth in wealth over the past 50 years. Fifty years ago, most of the states had low state and local tax burden. The wealth differentials, however, were already established.

April 12, 2004 5:30 PM | Comments (1) | posted by John Williams

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