The influence of taxes on employment and population growth: Evidence from the Washington, DC metropolitan area

We examine whether personal and business fares are an important determinant of economic development in a metropolitan area. We estimate determinants of the location of private employment and population across the D.C. metropolitan area over the period 1969-94. After controlling for jurisdiction and time effect , we find that higher rates of two business taxes-sales and personal property-reduce annual employment growth by a significant amount. Higher levels of nonwelfare public service expenditures are estimated to increase employment growth. We do not find local property taxes to be a significant factor.