Take Gross Domestic Product (GDP). According to the Tax Foundation’s Facts & Figures for 2010 and 2019 (the last year before COVID-19 hit), in both years the same seven states had no state income tax: Alaska, Florida, Nevada, South Dakota, Texas, Washington, and Wyoming. In 2010, these seven states accounted for 17% of U.S. GDP. In 2019, they accounted for 19% of U.S. GDP. In other words, over those years their economies grew faster, on average, than those of states with a state income tax.
Indeed, as Figure 1 shows, states without a state income tax – which accounted for 17% of national GDP in 2010 – accounted for 25% of the economic growth of the United States between 2010 and 2019.
Figure 1: 2010 GDP and 2010 to 2019 GDP growth, United States
The task of eliminating Minnesota’s state income tax should not be downplayed, our state government relies heavily on it for revenues. But it simply isn’t true that the state couldn’t survive — or even thrive — without it, as the experience of other states demonstrates.