Modeling the Impact of Taxes on Economic Growth with Regional Resource Potential

Abstract

This study deals with estimation problems for optimal tax burdens in relation to regional economic growth. Theoretical, methodological and empirical base of the research were the concept of the Laffer curve, the materials of the National Research University, Higher School of Economics of the Russian Federation, Ministry of Natural Resources and Environment of the Russian Federation, Federal Service of State Statistics of the Russian Federation, Bureau of Economic Analysis of the United States, National Science Foundation of the United States and California Department of Finance. We propose a classification of subjects of the Russian Federation in accordance with their resource potential. This classification involves a division of regions on commodity and innovation regions. Using this classification and a linear non-homogeneous production function, we develop a model of the impact of the tax burden on regional economic growth. We test the model on the Russian Federation's regional economies. In addition, we use it to calculate optimal values of the tax burden, define the main principles of the impact of taxes on economic growth in the state of California and make proposals for regulating tax legislation. The application our toolkit will help to draw the attention of state authorities at the regional level and will provide an opportunity to form the value of the tax burden involving integration and harmonization of fiscal interests of the state and businesses.