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NC Budget and Tax Center

Jobs11-5During the debate over last year’s billion-dollar-a-year tax cut plan, supporters made a lot of big promises about the supposed economic benefits of cutting corporate and personal income taxes for wealthy individuals and highly profitable corporations. The problem—as many warned at the time—is that tax cuts almost never live up to their promises.

And that’s the point made in a recent piece by the well-respected Fiscal Times. In order for the tax proponents’ claims to be true, North Carolina would have needed to generate job growth that is significantly better than other states and the national average. According to the Fiscal Times:

The trouble is that the promised job growth hasn’t really materialized.

To be sure, with the U.S. economy as a whole adding jobs at a pace of 250,000 per month, there aren’t many states seeing a downturn in employment anymore. But the promises that went along with the tax cuts and reduced spending weren’t about keeping up with the rest of the country, but about surging ahead.

The Fiscal Times examined the job creation record of North Carolina and two other states that have experimented with deep tax cuts—Kansas and Wisconsin—and found that:

The dramatic tax cutting doesn’t appear to have done nearly as much for job growth as promised.

Wisconsin and Kansas, for example, have actually lagged the national average in job creation since their big tax cuts and budget cuts were enacted:

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A recent Washington Post story confirms once more that the anti-taxes, anti-government policies of the conservative leaders running Kansas continue to backfire.

“Gov. Sam Brownback of Kansas took to the pages of the Wall Street Journal last month to tout the success of his economic program, particularly several rounds of income tax cuts amounting to the largest in the state’s history. ‘We supported small business by taking away all income taxes on small businesses,’ Brownback wrote, ‘allowing them to reinvest in their businesses, creating jobs and growth. … By giving these companies more money to reinvest in their businesses, we are enabling them to hire more people and invest in needed equipment.’

The only problem? That job growth hasn’t exactly materialized. In fact, as Josh Barro notes in a must-read over at The Upshot today, job growth in Kansas has actually lagged behind the U.S. average, especially in the years following the first round of Brownback tax cuts in 2012.

As the story also notes, the latest finding echo those of a March report from the Center on Budget and Policy Priorities which found that: Read More

NC Budget and Tax Center

Tax cuts never live up to the extravagant promises of job creation and economic growth so often made by their supporters, and last year’s tax reductions are unlikely to turn out any differently. The most recent example is Kansas, which enacted massive tax cuts in 2011. Two years later the state has experienced slower job growth than the national average, contraction in the number of businesses employing people, and loss of its AAA bond rating resulting from its catastrophic, 50% loss in revenue.

While there remains no consensus among academic economists that tax cuts are a strategy to grow the economy—instead, evidence is mounting of their harm—some think tanks keep trying to play the same hand to get a different result. One example is the Beacon Hill Institute, which has frequently deployed its State Tax Analysis Modeling Program (STAMP) during tax cut debates in various states across the country, including last year in North Carolina. Using this model, Beacon Hill claims to show that lowering taxes, or refusing to raise them, will benefit state economies. In the case of North Carolina, they also went a step further to claim that all income groups get a tax cut on average.

A new report from the Institute on Taxation and Economic Policy reveals a number of serious flaws in the STAMP approach that undermine the accuracy of its claims. In doing so, it calls into question the rosy scenario Beacon Hill paints for tax-cutting states like North Carolina.

Follow me below the fold for are some of the problems identified by ITEP:

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