Payroll Taxes and Growth

 

Based on OECD data on 34 member countries between 2000 and 2010, there is no significant relationship between payroll taxes and long-term economic growth. In contrast, corporate income taxes have a highly significant and negative effect on long-term growth. The estimates suggest that cutting the corporate rate by 10 percentage points is associated with an increase in total real GDP growth of 11.1 percentage points over the period.

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