Policymakers in several states are reviewing options to strengthen support for public investments crucial to state economies and residents’ well-being, such as quality early education, affordable college, and modern infrastructure. One way to raise the necessary funds is to raise personal income tax rates on the highest incomes, a policy choice sometimes referred to as a “millionaires’ tax.” This approach makes sense: evidence indicates it can generate substantial revenue for public investments that boost a state’s productivity in the long run, without harming economic growth in the short term.
- High-income tax increases can generate substantial revenues for investments in people and communities that provide economic and social benefits over the long term
- Real-world experience suggests that raising top income tax rates is unlikely to harm state economies in the short run, contrary to some claims.
- The bulk of mainstream academic research finds that interstate differences in taxes, including differences in top personal income tax rates, have minimal effects on state economic growth.
– Center on Budget and Policy Priorities