Friday, March 26, 2010

Read it and weep, wingers

Economist Ed Lotterman has written a couple of articles lately debunking the cherished right-wing myth that cutting taxes leads to increased tax revenue. His most recent one in the statesman says
And virtually all such researchers come to the conclusion that while lower tax rates may motivate increased work or investment, they do not add enough revenue to offset the direct effect of tax rate cuts.
His article ends with ends with this classic:
Argue that low tax rates motivate more work and investment, all other things being equal, and thousands of economists will agree with you. Argue that the size of the federal government should be slashed and you will be among hundreds. But argue that tax cuts will increase tax revenues and you will find yourself in a small group of cranks, charlatans and cable TV entertainers.
And Republican politicians in Idaho.

Recall that one of Raul Labrador's key planks (it's also a pet idea of Marv Hagedorn) is to cut taxes in Idaho because that will somehow stimulate growth and with that an overall increase in tax revenue. From Labrador's web site:
Raul proposed comprehensive legislation that would have helped grow Idaho’s economy with broad based tax cuts for all Idaho businesses
Granted, that quote talks of growing the economy, not increasing tax revenue, but Labrador has offered statements that the way out of Idaho's budget crisis - i.e., insufficient revenue to meet budget needs - is by the increased tax revenue stimulated by budget cuts.

Cutting taxes thereby stimulating growth thereby raising more tax revenue is classic supply side (aka voodoo) economics. I'd wager that not a single Idaho Republican politician will publicly disagree with supply side economics. It's almost an article of faith with Republicans nationwide. And it's wrong.

1 comment:

Michael said...

Well put. One of the things we're going to have to do to bring back some sense of balance in this debate is not only to debunk the supply side cant, but to encourage that setting aside a percentage of income for the maintenance of social and physical infrastructure can as accurately be defined as "investment" as it can "tax". Few people argue that we are collectively saving enough as a society.