Find out more →

Get unlimited access. Become a digital member!

Tuesday, July 15, 2014

The failure of tax cutting as economic stimulus

Posted By on Tue, Jul 15, 2014 at 10:50 AM

click to enlarge NO CIGAR: Ronald Reagan, shown here predicting the trickle-down benefit of a big tax cut, was forced to raise taxes when his plan failed. - WIKIPEDIA
  • Wikipedia
  • NO CIGAR: Ronald Reagan, shown here predicting the trickle-down benefit of a big tax cut, was forced to raise taxes when his plan failed.
Ernie Dumas is back this week with another lesson on the historic failure of tax cuts — Ronald Reagan's or those of many states — to produce the promised economic bonanzas.

It's occasioned by tax cutting promises by the major candidates for governor, Mike Ross and Asa Hutchinson. He finds flaws with both men's plans, though calls Hutchinson's "more draconian." Both are perilous, he writes, because of tax cuts from the recent legislative session.

If Hutchinson and Ross get around to applying much math, they will worry about the consequences if the theory breaks down. If there is no spurt of growth what happens when another $150 million of revenue loss occurs in 2016 as the existing tax cuts for unearned income phase in if lawmakers enact the new governor’s tax cuts and perhaps some of their own? How will they meet the mammoth costs of prison expansion as the convict population soars past 20,000, keep up with the constitutional mandate to furnish a suitable education for all children or bail out the school  health insurance program when it collapses from inattention?

How will they counter the huge increase in state spending on medical care for indigents if Republican legislators (and presumably Hutchinson) end state participation in Obamacare’s Medicaid option and expenses are shifted back to the state?

Sure, Arkansas has enjoyed a surplus every year, but that has largely been the result of Obamacare’s absorption of a large share of existing Medicaid costs and Obama’s 2009 stimulus program, which saved the state  treasury some $825 million in medical expenses over four years.

But the math from a few sister states that have gone through the process ought to be the most chilling. 

Kansas, North Carolina and Wisconsin are all suffering from Republican-sponsored major tax cut initiatives. Job growth? Still in the theoretical.

Here's the full column.

Tags: , , ,


Speaking of...

Comments (16)

Showing 1-16 of 16

Add a comment

Subscribe to this thread:
Showing 1-16 of 16

Add a comment

More by Max Brantley

Most Shared

Most Viewed

  • ASU quarterback says someone killed his dog

    Arkansas State University Quarterback Fredi Knighten posted a photo recently on the Internet that said his dog had been stolen and killed, then returned to him. ASU thinks the episode is unrelated to the university or football.
  • Arkansas auditor finds friendlier court for $160 million U.S. savings bond claim

    State Auditor Andrea Lea this week found a friendlier court for her claim to take state possessionof perhaps $160 million in unclaimed U.S. savings bonds for the state's benefit.
  • Task force appears set to move forward with tweaked private option; battle looms over managed care

    The Health Reform Task Force had its penultimate meeting today; by law, it must issue a report with recommendations by the end of this year. All indications are that the task force will recommend continuing the private option with a few GOP-friendly tweaks. The governor will be negotiating with the federal government on just what shape the private option (perhaps with a snappy new name) will take in 2017 and beyond, once the state's current agreement with the feds comes to an end. The once hotly controversial issue has been fairly muted in task force discussions. The fireworks, instead, have come with how to handle the rest of the Medicaid program, with the state's consultant, the Stephen Group, suggesting that the state could save hundreds of millions of dollars by moving to managed care.
  • Tuesday's open line and news roundup

    Here's the open line and news roundup.

Most Recent Comments



© 2015 Arkansas Times | 201 East Markham, Suite 200, Little Rock, AR 72201
Powered by Foundation