"Supply-side guru: Wrong again" By Andrew Leonard at Salon

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Supply-side guru: Wrong again

By Andrew Leonard at Salon

http://www.salon.com/2012/06/26/supply_side_guru_wrong_again/singleton/

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Guess what? High income tax states are better off — “the nine states with the highest personal income taxes on residents outperformed or kept pace on average with the nine that don’t tax their residents’ incomes.”

Strangely, such a claim is exactly the opposite of what we have been hearing from Republican governors of such states as Kansas and Oklahoma, who have moved to repeal state income taxes on the basis of Laffer’s claim that states without such taxes grow faster than states laboring under a heavier burden. ITEP’s study explains the context:

These claims are based largely on misleading analyses generated by Arthur Laffer, long-time spokesman of a supply-side economic theory that President George H. W. Bush once called “voodoo economics” because of its bizarre insistence that tax cuts very often lead to higher revenues. Recently, Laffer’s consulting firm has been very successful (with the help of the American Legislative Exchange Council, Americans for Prosperity, and the Wall Street Journal’s editorial page) in spreading the talking point that the nine states without personal income taxes have economies that far outperform those in the nine states with the highest top tax rates.

But according to ITEP, those talking points are misguided because they rely on statistics for economic growth that are mainly propelled by population growth, and the factors pushing population growth (geography, weather, immigration) are not meaningfully correlated with high or low taxes. If you look at more accurate measures — like GDP growth per capita, the high tax states are doing fine, or better, than the lower tax states.


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