Later On

A blog written for those whose interests more or less match mine.

Another idea worth a shot proves to fail: State-level tax cuts to boost job growth

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I’m sort of sorry that the halfway house idea didn’t work, mainly because it seemed to make sense. But as I earlier wrote, what stands to reason frequently falls to experience, and thus it was for halfway houses. At least now the money can be better directed: to approaches that are known to work or in testing other approaches.

I earlier commented that money is the black hole of morality: by that I mean money can distort one’s values, so that (for example) one might see executives of the organization that runs the halfway houses trying to pressure the government to continue to spend the money even though the approach has been shown not to work—like people trying to get the government to fund abstinence-only sex ed programs. Or, a well known example, how the tobacco companies lied continuously about the health risks of cigarette smoking for years, simply so they could continue to make money from it. Whenever a true result is hidden, things have gone badly awry. UPDATE: A prominent example: the War on Drugs. It’s demonstrably not working, but those who make money from the war want to keep it going (on both sides of the law).

Perhaps money is like alcohol or food or the like: a certain amount is necessary, a little more can be beneficial, but at some point the benefit is outweighed by the health (physical or psychological) and social costs of consuming so much. Certainly many studies have shown that empathy and honesty and integrity show grave damage as the wealth of the individual increases: the wealthy are more willing to lie, cheat, and hurt others than those with much less money. (In fact, an item in today’s news mentioned the finding that the poor contribute more to charity, as a proportion of their income, than do the wealthy.)

If that is so, a recommended annual amount (of money) would be quite interesting, and it would also be interesting to try to find the point at which damage starts to occur. With food, one can look at weight gain to judge the amount of food one can heat (and of course one should pay attention to nutritional value), but with money we don’t have any easy objective rule of thumb of which I’m aware.

Back to the post topic and title, which refers to another approach that turns out, in practice, to fail, so presumably we’ll be smart enough not to try this again. (Just joking: of course the idea will be advanced again: it’s not about job growth, it’s about cutting taxes so the wealthy can do even less for the common welfare. Money is the black hole of morality.)

Travis Waldron writes at ThinkProgress:

A slew of Republican governors have proposed massive tax cuts that they say will help generate job and economic growth in their states, with some pushing for the abolition of income taxes altogether. That is a misguided approach, though, according to an analysis of past tax cuts from the Center on Budget and Policy Priorities.

The five states that implemented deep tax cuts during the 1990s experienced slower job growth over the next economic cycle than states that did not, and none of those states experienced income growth that exceeded inflation, CBPP found:

statetaxcuts

Similarly, the five states that enacted the deepest tax cuts during the boom years of the middle and late 1990s saw job growth over the next full economic cycle (2000-2007) of less than 0.3 percent per year, on average, compared to 1.0 percent for the other states (see graph). They also had slower income growth than the rest of the nation on average.

CBPP’s report also noted that of eight major reports that studied the effects of state-level tax cuts on economic growth, six found that the cuts did not spur growth. Another found inconsistent results and only one supported the idea.

Still, Republicans in KansasOhioIndianaWisconsinNorth CarolinaLouisiana, and Nebraska are pushing massive tax cuts that largely benefit corporations and the wealthy under the banner of boosting economic growth. Those tax cuts will leave lower and middle class families with higher tax rates and fewer services on which they depend. What they won’t deliver, however, is a stronger state-level economy.

Written by LeisureGuy

26 March 2013 at 10:40 am

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