Back to top

Knowledge Base

Why Businesses and People Move to New States

Why are low tax rates important to economic growth?

Marginal tax rates—how much someone is taxed on the next dollar they earn—are extremely important to economic growth. They affect how much we work, save, and spend, whether we start businesses, and how we run them. Higher marginal tax rates make it less profitable to work, hire, or invest more, leading to slower economic growth. Lower marginal tax rates allow you to keep most of what you earn, thereby making it more profitable to work, hire, and invest. Ultimately, lower marginal tax rates lead to more rapid economic growth.

Furthermore, as tax rates go up, taxpayers have more of a reason to avoid paying those taxes. Loopholes go hand in hand with higher tax rates, which is why lower rates on a broader base of income leads to a more equitable system. Learn more about the importance of tax rates in these PolicyEd videos:

How does regulation affect housing opportunities?

Although many housing policies were created to promote safe and appropriate construction projects, they now inhibit housing growth. Strict zoning rules are used to stop all new construction, while environmental laws have given lawyers the power to file frivolous lawsuits that stifle development. When current homeowners use housing policies to delay or halt new construction, their property values rise dramatically as housing demand outpaces supply. This makes it difficult for low- and middle-income families to afford buying or renting a home. With few housing options, workers are left with less incentive to move to locations where they would earn more and be more productive. Relaxing land-use rules would lead to the creation of more housing options and to higher wages, more job opportunities, and higher standards of living.

Learn more about what steps we can take to create more economic opportunities for American families and a growing economy for all in “Addressing the Housing Crisis,” with Lee Ohanian.