Andrea Neal’s editorial in the Indianapolis Star yesterday was a reminder that evidence is no match for strongly-held beliefs.
Neal seconded Governor Pence’s ill-considered call for a ten percent reduction in Indiana’s income tax. Even the Republicans in the General Assembly have recognized how harmful such a tax cut would be in a state where cities and towns are already strangling, thanks to the even more ill-considered tax caps Mitch Daniels managed to enshrine in the Indiana constitution. Neal made a familiar argument: lower taxes will lead to more economic growth and more job creation.
This argument sounds logical. Leave businesses with more cash and they’ll spend it to expand and hire. I remember being persuaded by that theory myself when I first became involved in policy and political life. The problem is, the evidence refutes it.
#1 by Don Sherfick - March 7th, 2013 at 07:38
And for an increasing number of employers, it seems, the ability to attract and retain diverse talent is high on the scale. Meaning that the Indiana General Assembly should be looking at more than a couple of Supreme Court decisions when it considers whether an amendment to it’s constitution banning same-sex unions or anything “substantially similar”.
#2 by JoAnn Green - March 7th, 2013 at 08:02
Regarding Daniels; property tax caps – I knew what was coming so waited and sure enough it came. I received my property reassessment statement and it was increased by $5,000 which means, no matter the tax cap, I will pay higher property taxes this year. Being almost 76, deaf and disabled, I can’t wait to see what my exemptions will be – I am sure they will not be higher.
#3 by Pat McC - March 7th, 2013 at 09:08
For the last 30 years the R’s have been telling anyone who will listen that we can have everything we want AND lower taxes. How’s that been working? First time EVER we did not raise taxes to pay for a massively expensive war and reconstruction…just borrowed it ALL. (BTW: We now know we got virtually NOTHING of value for the billions we borrowed and spent on reconstruction. Good Job Halliburton!!)How’s that working? Now IN wants to do the same thing. What could possibly go wrong?
#4 by Jim Brown - March 7th, 2013 at 09:21
The NYT reported today that businesses are sitting on cash, have open positions and are not hiring. Businesses cannot trusted to be rational. Policy that is proposed counter to evidence is just plain stupid.
#5 by Eugene - March 7th, 2013 at 11:45
One reason for lowering taxes is that government tends to piss away whatever money it has. Locally, the mass transit backers plan on railroads to Zionsville and Franklin. It would be cheaper to subsidize taxis so poor people can get to work.
On a national scale, the government spends as much as it possibly can, including its never-ending wars.
#6 by Marco - March 7th, 2013 at 15:05
I think there are multiple problems with looking at economic growth as a function of tax policy.
First of all, and I’ll get it out of the way, I have a strong dislike for tax incentives, tax abatements, etc. Typically areas with tax codes that impact businesses will use exemptions to lure new growth, and then make everybody else foot the bill (actually we use that here so I think it’s safe to say everybody does it.) So oftentimes businesses will grow or relocate under circumstances independent of local taxes because they don’t have to pay them. A good example of this is our failed attempt to lure the CME with lots of tax breaks. Chicago kept them there with, yes, even more tax breaks. I understand the economic logic behind this tactic, but again you HAVE to raise taxes because your base shrinks. And it’s incredibly rare to hear about local government lowering taxes.
Ideally there is a “sweet spot,” where taxes are high enough to meet the demands of local government without disproportionately taxing it’s base. Unfortunately, with the proliferation of sealed and no-bid contracts this is a fudgy number. TIFS are a big part of the problem, too, but there are so few people that follow local budgets I’m sure there are a lot of things I’m missing. I’ve spoken with several people who have submitted contract bids through municipalities and they’ve said it’s usually a slow-motion train wreck.
#7 by backstab - March 8th, 2013 at 00:57
The bigger question is, why does the government think it is entitled to take your money by force to advance any agenda, no matter how “moral” it’s claimed to be?
#8 by Bob Small - March 8th, 2013 at 12:53
“Insanity: doing the same thing over and over and expecting different results.” Albert Einstein