Kentucky Economic Justice Alliance -- Tax Cuts Cost Jobs

Some Truths About Taxes, Jobs & Economic Growth

The Reality: Tax Cuts Eliminate Revenue

A recent Washington Post editorial cited a number of studies on the real impact of tax cuts:

Harvard's N. Gregory Mankiw, an economic conservative who served as chairman of Mr. Bush's Council of Economic Advisers, looked at the extent to which tax cuts stimulate extra growth and the extent to which that growth generates extra tax revenue to offset revenue lost due to the cuts. His findings: a $100 billion cut in taxes on capital widens the budget deficit by $50 billion, and a $100 billion cut in income taxes widens the budget deficit by $83 billion.

On the most optimistic assumptions it could muster, the Congressional Budget Office found that tax cuts would stimulate enough economic growth to replace 22 percent of lost revenue in the first five years and 32 percent in the second five. On pessimistic assumptions, the growth effects of tax cuts did nothing to offset revenue loss.

The Reality: Tax Cuts Cost Jobs

According to a report released January 12, 2005 by the Center on Budget and Policy Priorities, “Claims that tax cuts might boost jobs and wages in a state should be scrutinized with a great deal of skepticism.”

In fact, the 16 states that cut taxes most during the 1990’s:

Lost more jobs. The sixteen states that cut taxes the most between 1994 and 2001 had larger drops in employment from 2001 to 2003 than the 34 other states.
Had slower income growth. The 16 biggest tax-cutting states also had less personal income growth (4.4% vs. 5.8%) than other states and a larger increase in unemployment (1.4 vs. 1.0 percentage points) between 2001 and 2003.
Had deeper economic distress during the recent downturn. Those states that cut taxes the most in the 1990’s lost more jobs and had less income growth during the downturn, wiping out any earlier short term job growth.
Had greater budget shortfalls and budget cuts. The 16 states that cut taxes the most during the 1990’s had an average budget deficit in 2004 of 14.9%, compared with 8.9% in the other 34 states. Those 16 states cut per capita spending by 2.5% between 2002 and 2004, compared with 1.1% in the other 34 states.

Beware of claims that tax cuts for corporations are good for our economy! For the full report go to the Center on Budget and Policy Priorities

The Great American Jobs Scam: Corporate Tax Dodging & the Myth of Job Creation

What do Wal-Mart, Dell, Fidelity Investments, Boeing, and Cabela’s have in common? They’re all part of a $50 billion a year scam in which—in the name of "job creation"—corporations play states and cities against each other to win hefty taxpayer subsidies that routinely exceed $100,000 per job. But do they provide more jobs, higher wages, or improved living standards in exchange? In his new book, Greg LeRoy exposes these deals for what they are—no-strings-attached free rides for corporations that rarely create any new jobs. In fact, after securing these packages, many companies lay people off, pay poverty wages, or even relocate to other states. Find out more

Do Taxes Thwart Growth? Prove It

Despite the widespread notion that taxes harm the economy, no one has actually been able to back that up. Read the report by New York Times Business writer Anna Bernasek (4/3/05)