Dean Baker’s take on tax cuts

Like my parents used to tell me – “don’t believe everything you hear.”

Dean Baker provides some profound insight regarding  erroneous information about tax cuts.

Excerpts from Dean Baker’s article: “The Corporate Tax Cut Bonanza” – January 22, 2018

” . . . . .  what is perhaps most disturbing about the Republican tax plan is that it seems to steer the United States in the opposite direction of proven paths to growth. Looking back in the past, whether across states or across countries, low tax rates have never been the spur to growth. The spur to growth has been a well-trained and well-educated workforce, coupled with the infrastructure needed to support growth.

Today, the booming areas are not low-tax states like Arkansas and Mississippi, but relatively high-tax states like New York, Massachusetts and California.

For example, the long boom that followed World War II was associated with a huge increase in college enrollment and high school graduation rates, not tax cuts. We built the national highway system, which was the basis for the suburbanization of this period and was associated with the explosion of the automobile sector and a wide variety of related industries. In addition, publicly-funded research had massive spinoffs in everything from aerospace to the internet.

If we look across states today, the booming areas are not low-tax states like Arkansas and Mississippi. Rather, we see the greatest prosperity in relatively high-tax states like New York, Massachusetts and California. Businesses are attracted by the highly skilled workers in these states. And, while some of these workers are educated in these states, workers come from around the country and around the world because these are considered desirable places for highly educated people to both work and live.

The same is true comparing countries across the globe; in fact, the countries in which workers are most prosperous all have much larger government sectors than the United States. In Germany, whose workers enjoy high pay and long vacations, government spending accounts for 43.8 percent of GDP compared to just 37.6 percent in the United States, according to the OECD.

Instead of focusing on tax cuts, it would be good if the Republicans can look to the economic success stories of the present and recent past.

In France, where workers have enjoyed substantial wage gains over the last four decades and rank near the top in productivity per hour, the government accounts for 56.6 percent of the economy. There is a similar story for the prosperous Scandinavian countries: In Norway, President Trump’s apparent preferred country of origin for new immigrants, government spending accounts for 48.8 percent of the economy.

Instead of focusing on tax cuts, it would be good if the Republicans can look to the economic success stories of the present and recent past. Spending more to promote clean technologies can help keep U.S. companies among the world leaders in the area. Additional support for installing solar or wind energy and buying electric cars would also help. And, new funding to make college tuition free and reduce the student loan debt of recent grads would also help to expand the supply of skilled labor, as would more support for community colleges and other forms of training.

This route might not be the current orthodoxy among Republicans, but, unlike tax cuts, it is a proven path to broadly shared prosperity, and not just short-term profits.”

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