Economic Development Strategies

State governments have a range of policies available to spur economic development including tax incentives, cash grants, workforce training, and building and maintaining reliable infrastructure. But which programs lure and maintain businesses and help drive outcomes such as more and better jobs, higher wages and incomes, and higher tax revenue? This project examines what states are doing, what works, what doesn't, and how better policy analysis and government coordination can improve results.

Taxes and Growth

When states cut taxes does it create economic growth? Research offers mixed evidence but policymakers often face very strong pressures from the business community to create and maintain generous tax breaks. This project investigates how state taxes affect economic growth by analyzing relationships among marginal tax rates, employment, earnings, and investments.

State Spending and Revenues

As state and local governments recover from budget problems caused by the Great Recession, they face competing challenges: Creating a solid fiscal footing that satisfies balanced budget rules and continuing to provide valued services such as K-12 education and infrastructure. In light of these challenges, it will be more important than ever for state and local officials and their constituents to have the most timely, relevant, and accessible budget information. This project will develop several tools to aid budget decisions, including new measures of state fiscal capacity and an interactive web tool highlighting how policy choices, economic conditions, and demographic trends all drive tax and spending outcomes.

Modeling State Taxes and Federal Interactions

The Tax Policy Center (TPC) uses its state-of-the-art microsimulation model to provide comprehensive, rigorous, and objective analyses of federal tax policy changes and major tax reform proposals. The State & Local Finance Initiative is expanding the TPC model to include effects of state tax policies and interactions between the state and federal tax systems. These enhancements will allow us to answer questions such as how proposed federal tax changes affect residents of individual states and what is the combined effect of federal and state taxes on families of various sizes and income levels.

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