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Are tax-rate concerns overstated?

Evidence suggests there is little correlation between a state's tax rate and its overall economic health, Associated Press reported. Low-tax, low-regulation states such as Texas have gotten clobbered by the recession, just like nearly every other state. And though tax rates are one factor in business relocation decisions, businesses also are concerned about labor costs, K-12 education and infrastructure. "Concerns about taxes are overstated," said Matt Murray, a professor of economics at the University of Tennessee who studies state finance. But Kail Padgitt, an economist with the Tax Foundation, contends that though a state's tax burden might not have affected its performance during the recession, it will affect the pace of its recovery. "Where businesses are going to expand operations, where new investments are going to be made — a lot of these companies want to know what their taxes are going to be," he said.

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