Tax policy and economic growth: does it really matter?

We study the relationship between per capita GDP, overall tax revenue and tax composition. We find that there is some evidence of a negative and statistically significant relationship between tax revenue and economic growth, while there are no robust relationships between revenue-neutral tax shifts and economic growth. The results hold in different samples of OECD countries for different time periods. We also identify different relationships between the short run and long run. Overall, our results cast doubts on the potential growth enhancing effects of a shift from direct to indirect taxation, with paramount consequences on tax policy.