By Edwin McLenaghan
Public Policy Analyst, BTC
- A strong body of economic research has shown that tax‐financed state and local public investments in education, transportation, public safety, and health care can create jobs and increase household incomes.
- Most independent econometric studies have shown only small positive economic effects from reducing state and local taxes on businesses. And unlike temporary federal tax cuts, state and local tax cuts must typically be paid for with cuts to public investments that support jobs and strengthen the state’s economy.
- Most of the in‐state benefits of increasing public investments also contribute to regional and national economic growth, but most of the in‐state benefits of tax cuts result from shifting economic activity away from other states.
- Targeted, tax‐financed investments in education, transportation, public safety, and health are likely to prove more cost‐effective than tax cuts for creating jobs and increasing state residents’ personal incomes.