Rep. Sue Wismer (D-1/Britton) knows as well as anyone else that we're not going to convince South Dakota Republicans to accept a state income tax any time soon.
But it doesn't hurt to keep poking the Republican mythology that keeps us from adopting rational tax policy. Think Progress points to this new report from the Institute on Taxation and Economic Policy that finds states with high-rate income taxes can outperform no-tax states economically:
In reality, states that levy personal income taxes, including the states with the highest top rates, have seen more economic growth per capita and less decline in their median income level over the last ten years than the nine states that do not tax income. Unemployment rates have been nearly identical across states with and without income taxes ["States with 'High Rate' Income Taxes are Still Outperforming No-Tax States," ITEP, Feb. 2013].
ITEP cites all sorts of economic research backing this contention [Wayne! Check out the third paragraph! It backs what you were talking about a couple weeks ago!]:
Alm and Rogers (2011), for example, tested the impact of more than 130 explanatory variables in attempting to explain state economic growth, including not just tax and spending factors, but many geographic and demographic variables as well. They found that neither corporate nor personal income taxes reduced state economic growth, and that in some cases higher taxes are actually associated with stronger growth.
Reed and Rogers (2004) studied a personal income tax cut enacted in New Jersey in the mid-1990’s. Using a difference-in-difference approach to compare growth rates in New Jersey counties with those in nearby counties, the authors concluded that “this study’s analysis does not support the hypothesis that tax cuts stimulated employment growth in New Jersey.” Using state data spanning nearly two decades, Chernick (2010) found that “income tax burdens do not have a [statistically] significant effect on growth,” and that “the progressivity of a state’s tax structure does not have a statistically significant effect on the rate of growth of personal income.”
Tomljanovich (2004) examined developments in the states from 1972 to 1998. While the study found some evidence that state tax cuts can be stimulative for the economy in the short-run, it also found that “long-run growth is unaffected by changes in state tax rates, even after adjusting for the effects of initial per capita output levels, state expenditures, and aid from the federal government” [ITEP, Feb. 2103].
Now this report does not say that passing a state income tax would automatically make South Dakota a better place. But it does sweep the leg on South Dakota Republicans who claim that the absence of a state income tax makes South Dakota's economy fart rainbows.