Empirical Evidence on the Impact of City Taxes

An important issue is whether cities can influence their own economic growths through municipal-level tax policy. There is little evidence on this to date, nor is there a clear a priori answer to this question. This study first documents municipal business tax rates across the United States, and finds they are a relatively significant cost to business. Next, using very a unique and precise government data set, the study examines the economic impacts of two previous tax cuts in Los Angeles and finds that these cuts generally resulted in growth in both the number of jobs and establishments.