Tax cuts and prosperity: new US evidence

   1   0 Aid, Tax & State-building, Blog

Updated with an additional story

From the New York Times:

“How can America’s leaders foster broad prosperity? For most Republicans — including Donald J. Trump — the main answer is to “cut and extract”: Cut taxes and business regulations, including pesky restrictions on the extraction of natural resources, and the economy will boom. Mr. Trump and House Speaker Paul Ryan are united by the conviction that cutting taxes — especially on corporations and the wealthy — is what drives growth.”

The NYT provides a handy graphic, using political party affiliation as a proxy for tax-and-spend policies. The red states tend to favour “cut and extract”, while the blue states tend to favour more tax and public investment.

Which states have fared better on quality of life indicators? Click on the article to see the graphic.

There’s a question of causation here (do people vote for certain parties because they’re deprived – or are they deprived because of the policies these parties enact?). But it’s still a powerful set of observations, complementing a whole lot of other research elsewhere.

Also see Ed Kleinbard’s excellent “tour de forceWe are Better Than This: How Government Should Spend Our Money, about tax and spending in the U.S.

Update: There’s another new New York Times story, The Case for More Government, that’s also relevant here.

“Last month, four academics — Jeff Madrick from the Century Foundation, Jon Bakija of Williams College, Lane Kenworthy of the University of California, San Diego, and Peter Lindert of the University of California, Davis — published a manual of sorts. It is titled “How Big Should Our Government Be?” (University of California Press).

. . .

Here are some other things Europeans got from their trade-off: lower poverty rates, lower income inequality, longer life spans, lower infant mortality rates, lower teenage pregnancy rates and lower rates of preventable death. And the coolest part, according to Mr. Lindert — one of the authors of the case for big government — is that they achieved this “without any clear loss in G.D.P.”

Now read on.

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One thought on “Tax cuts and prosperity: new US evidence

  1. Tax cuts mean that less government workers can be employed although those who are less taxed have more to spend. By looking on both sides of the situation it becomes clear that tax cuts are politically accepted because those who pay them are those who support the politicians involved. This is not a fair and balance situation and it is gradually resulting in the bias toward taxation hurting the lower-paid parts of the middle class, in comparison to the rest. If the taxation system were made to bear most heavily on those who are exploiting the national economy the most, a greater degree of social justice would result, but this kind of a change is maliciously labeled “politically unacceptable” whilst it should be called “beneficial to far more than it penalizes”. Somebody needs to pay, so why should it not be set at a number of monopolists and speculators, whose insistence on land withholding is spoiling the opportunities of the rest of us. Tax land not people, tax takings not makings!

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