Table 3

GDP growth is about 1 percentage point higher by year four of flat tax adoption

Estimated effect of having a flat income tax on annual GDP growth, by years after adoption

Note: Annual growth is the percentage point increase in growth rate. Year 1 is the first year a flat tax is in effect. Red rows are statistically indistinguishable from zero. The R2 values vary between [0.40, 0.44]. Each year’s coefficient is from a separate regression of state GDP growth on a lagged binary flat-tax indicator, controlling for the average state income tax rate, including state and year fixed effects. Sample restricted to states with income taxes, 1980–2025. Standard errors clustered by state. Observations from 41 states.