A Transparent Look at How Taxes Affect Growth: Evidence from Cross-Country Panel Data

Abstract We evaluate how different methodological choices affect the conclusions drawn about the effect of tax policy on economic growth using cross-country panel data. These analyses do not credibly support claims that tax rate changes have a statistically robust medium-term impact on national income. We then re-assess this literature in light of the recent econometric insights on estimation with staggered treatments, and find that a causal estimate of the effect of the first tax change again yields no statistically significant effect of taxes on economic growth. JEL Classification: H24, H25, E62, N10, O47