High Taxes or Low Taxes?

There was an interesting debate regarding the impact of taxation on regional economic development at MSU. Here it is.

Andy Henion's article, "MSU researcher says high taxes can spur growth", introduced Igor Vojnovic's research, which challenges the belief that low taxes are a good policy direction for promoting regional economic development. His researches are available from the following sources:

Igor Vojnovic, 2007, Government and urban management in the 20th century: policies, contradictions, and weaknesses of the New Right, GeoJournal, 69(4), 271-300.
Igor Vojnovic, 2008, "Urban Settlements: Suburbanization and the Future," Randall Schaetzl, Joe Darden, Danita Brandt (eds.), Michigan Geography and Geology, 487-507.

The research illustrates that higher taxing cities—such as New York City, San Francisco, and Los Angeles—have rich and robust urban infrastructure to support high concentrations of business and residents.

Ross Emmett, Director of The Michigan Center for Innovation & Prosperity at James Madison College, MSU wrote a response to the GeoJournal article in his blog. Vojnovic wrote a response to Emmett in his website, titled "Battling the rhetoric that broke Michigan’s competitive advantage: A response to Ross Emmett."

Mark Skidmore and Nicole Bradshaw also review the evidence regarding the relationship between taxation and economic growth in their report "Taxes and Growth: A Review of the Evidence", Show-Me Institute Policy Study, Vol. 23, 2010. Their findings suggest that high taxes are inversely related to economic activity in terms of per-capita income, new business activity, and immigration. But they also admit that government expenditure of tax dollars attract economic activity. They try to reconcile the two opposing perspectives on the effects of taxes by pointing out the fact that taxes are linked to government expenditures.

Then what is the net effect of taxation on economic growth when taxes and expenditures are both accounted for?