Economist Randall J. Podenza from the conservative Cascade Policy Institute makes some interesting (although totally predictable) predictions about the effects of HB 3405, which raises corporate tax rates in Oregon.
“Raising tax rates of any kind risks impairing the private sector’s motivation to invest in activities that support job and income growth,” Podenza writes. “However, the taxation of corporate income is particularly injurious to growth.”
Based on “comparisons of the effects of differential tax rates across countries,” Podenza comes up with the following dire forecast:
“Oregon’s growth rate will slip by 0.1 to 0.2 percentage points per year for as long as the tax increase is in place,” and
“over a ten-year period, Oregon will lose between 22,000 and 43,000 jobs, and $1.6 and $3.2 billion in personal income.”
It’s not clear from this whether Podenza is saying Oregon will experience an ACTUAL loss of jobs and growth, or a loss of jobs and growth relative to the gains that conservatives think Oregon WOULD see if the tax increases didn’t happen. That’s a bit of sleight of hand right-wing economists have been known to employ before.
The whole thing reminds us of how conservatives back in 1993 loudly and unanimously predicted that President Bill Clinton’s tax increase would lead to economic disaster. To hear them tell it, breadlines would appear in our cities and grass would grow in the streets.
Of course, what happened instead was the biggest and longest economic expansion since World War II. (And what happened after the George W. Bush tax cuts, in case anybody needs reminding, was the worst economic collapse since 1929.) But in the election campaign of 1996, Republican Bob Dole tried to argue that the boom would have been EVEN BIGGER without the tax increase.
It didn’t work.
The truth is the story isn’t as simple as “higher taxes = less jobs.” A corporation’s decision to locate, or stay, in a state depends on many factors besides the tax rate: natural resources, energy costs, the availability of the kind of workforce it needs, the quality of transportation and other infrastructure elements, the quality of the education system – even, yes, the “quality of life.” That helps explain why many states with a heavier corporate tax burden than Oregon – Washington, for instance – are in better economic shape than we are.
If you look at the big picture, in fact, Oregon’s tax policies are not really unfriendly to business. The Tax Foundation – a non-partisan but definitely pro-business outfit – ranks Oregon ninth in the nation in its “State Business Tax Climate Index,” which “compares the states in five areas of taxation that impact business: corporate taxes; individual income taxes; sales taxes; unemployment insurance taxes; and taxes on property, including residential and commercial property.” Washington ranks 12th.
And can anybody doubt that the economy of Michigan (ranked 20th) would be in the crapper even if its corporate tax rate was zero?
As The Oregonian’s David Sarasohn once wrote (paraphrasing here): “If low taxes were the engine of prosperity, Mississippi would be the economic powerhouse of America.” Or maybe Wyoming (Number One in the Tax Foundation index) would be.
Here’s our own prediction: If the Oregon economy does continue to slow down (as it’s likely to do for another year or more) the conservatives will blame it on the tax increase. If it bounces back, they’ll say the bounce would have been higher without the tax increase. You just can’t win against that kind of “logic.”
This article appears in Jun 25 – Jul 1, 2009.
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Oregon legislators and county officials must step back and take a deep breath about over-taxing property owners or Oregon will experience a mass exodus and find itself in chaotic economic demise the same as California is experiencing. It’s time to reign in socialized freebies for illegal aliens.
Miller completely ignored the facts during the Clinton era. High tech experienced phenominal growth which lead to Clinton having excess revenue. This will not occur with Obama or the Oregon Dems who only know how to tax and spend. Obama promised 3.5 million jobs and even the liberal economists say that will not happen. Other states that have raised taxes on the rich are suddenly finding they are bringing in fewer dollars as those people more to other more tax friendly states.
Although history in general supports less taxes for success ie. FDR. After reading this I’m supposed to support government taxes because I hate conservatives?
As long as Bend is riddled with elitist snobs keeping real union scale jobs out of this area to protect the “good ole boy” system Oregon is going to suffer job loses as city council and other “protectionist” politicians are stifling the growth in this area not allowing paying companies to come into this area. Bill Gates was originally going to set up his MS campus in Beaverton, but the Good ole boys did not want to have to compete with MS salaries. The powers be also chased Cessna out of this town.
Podenza is a quack like Economist Laffer during the Reagan Era, now and then the laughing stock of economists globally. The reality for Economists like Podenza and the main fact they seem to ignore is that if there are no new jobs created, then there will be no growth period.
Guys like Dennis Luke are the reason our area is still backwoods and hillbilly. He is supported by his Good ole boys who do not want to have em city slickers coming into this area to pay living wages.
“Miller completely ignored the facts during the Clinton era. High tech experienced phenominal [sic] growth which lead [sic] to Clinton having excess revenue.”
You’re right; the Clinton-era prosperity was largely based on the dot-com bubble, and the Bush-era prosperity (while it lasted, which wasn’t long) was based on the real estate bubble. Both were illusory. My point was that it’s simplistic to claim that higher taxes = economic collapse and lower taxes = economic boom. There are many other factors involved, most of which are beyond the control of presidents, Congress, governors and legislatures.
“The reality for Economists like Podenza and the main fact they seem to ignore is that if there are no new jobs created, then there will be no growth period.”
Right-wing economists like Podenza believe that the rich are the creators of prosperity. I’ve never been able to figure out how they think the rich get the money to do that. Do they think it just falls on them like manna from heaven and then they generously dole it out to the rest of us?
People make money by selling services and goods to other people. That means the owners of businesses need workers to produce their goods and services and customers to buy them. Without both (unless they’re running one-man or one-woman businesses, which play a pretty small role in the economy) they can’t survive. And since workers are also customers, it’s in the long-term best interest of business to pay them decent wages.
Henry Ford — hardly anybody’s idea of a socialist — understood this when he raised the wages of his workers to a then-unheard-of $5 a day. He wanted his workers to be able to buy his cars. But today’s conservatives just can’t seem to grasp this simple idea.
yeah aren’t you liberals supposed to be solving the problem of the ever increasing national debt. When you gettin on that?
Why does it always have to be “left” or “right”? Why can’t we just do what’s best for “our” state, “our” country and “our” people. Enough with different parties how about working for the good of all.
Love the nonsensical rants, keep it up.
The tax cuts of 2001 and 2003 caused the credit crisis? I thought it was a butterfly flapping its wings in the Amazon that caused the credit crisis. Hey it happened before the credit crisis, it must have been the cause. A single anecdotal observation indicating correlation does not make for causality.
There is such an overwhelming mountain of data that indicates that tax cuts increases net incomes, which increases monetary velocity, which spurs economic growth, which leads to higher tax revenue, and lower unemployment, that it boggles the mind that those who support larger government choose to ignore it.
How the statements by Podenza leads to a nonsensical bunch of mumbo jumbo like this is beyond me;
“Right-wing economists like Podenza believe that the rich are the creators of prosperity. I’ve never been able to figure out how they think the rich get the money to do that. Do they think it just falls on them like manna from heaven and then they generously dole it out to the rest of us?”
Your ignorance is beyond the pale, get a clue.
MA: Nice idea … except that there are disagreements about “what’s best,” always have been and always will be. And I don’t know of any way to resolve these differences except through the political process.
“The tax cuts of 2001 and 2003 caused the credit crisis?”
Nope, and I never said they did. But the tax cuts (combined with a completely unnecessary multi-trillion-dollar war) created a huge deficit that crippled the country’s ability to respond to the crisis. How many other US presidents have cut taxes in wartime? (Hint: The answer is a number between zero and zero.)
My argument is with the right-wing dogma that says it is ALWAYS the right time to cut taxes and NEVER the right time to raise taxes.
“After watching this administration destroy the economy and try to turn this country into Europe”
Re the first point, the economy was already destroyed when Obama got it. He’s trying to fix it. Nobody said it would be easy.
Re the second point: Considering that the quality of life for ordinary working people is better in many ways in Europe than it is here, with better health care, better public education, better public transportation and beter wages and benefits, “turning this country into Europe” doesn’t sound like such a bad idea. Have you ever spent any time in Europe? I bet you haven’t — you probably get your ideas about it from Limbaugh, Coulter, Hannity and Beck.
Let me quote you directly…
“(And what happened after the George W. Bush tax cuts, in case anybody needs reminding, was the worst economic collapse since 1929.)”
Say credit crisis or worst economic collapse since 1929, and we are saying the same thing. So while you desire to use semantics to wiggle out of what you said, you still said it. You have no documented facts that support the notion the tax cuts lead to or made the credit crisis worse. You have no basis for making the clear inference you were making. It is nothing but lazy partisan hackery.
The credit crisis was a result of a completely different set of policies and actions, and the correlation does not indicate or prove causation. A butterfly can flap away in the Amazon, but that doesn’t mean it caused a hurricane.
The notion that the deficits of 2001 through 2009 crippled our nations ability to respond to the crisis is again unsupported by any facts. What specifically were we unable to do, because of the existing tax rates? Come on name one thing that this administration was unable to do, because of the high deficits of the Bush years? Those tax cuts had zero impact on the Obama agenda, and had no impact whatsoever on any actions taken in response to the credit crisis.
Economics 101: When a tax change happens it takes 4 to 6 years before it is usually implemented and makes an impact to our economy (as a general rule). The changes that President Regan made and the #1 Bush put in place was the cause of the Clinton era economy growth. During the Clinton era, only low paying service jobs increased in number. Blue collar jobs started to leave. The country was ready for colapse prior to Bush #2 because of tax laws and governmental spending habits. The effects of Clinton era laws first appeared during the Bush#2 era. Which agreed with the downward spiral. Oh sure, Bush let things get out of hand and the war stuff didn’t help but the ecomimy was already in big trouble. We are starting to see some of the Bush #2 effects now and we will see the real results of Obamas activities in another 2 to 4 years at the earlist. I have watch the 786 Billion dispersment and I can say that my company will not qualify for any of it. It is mostly going to Obama supporters that are educators. Little will produce real jobs. I have regular contact with many businesses and other agencies and we all are seeing the same thing. No real job creation in numbers that will matter. Governmental work like the forest industry is spending the money and those workers will be out of a job after the money is gone. I know this from the forest management people. I am looking to move my company out of Oregon/Bend because of the tax changes that will come. You decide if I am a greedy jurk or just a regular businessman. Business always works the same, we need to hit a margin or our investors do not get their return. Our Oregon government is making it harder to do that and the economy of Oregon shows that today.
“You have no documented facts that support the notion the tax cuts lead [sic] to or made the credit crisis worse.”
I did not say they did. The point was that conservative politicians and pundits unanimously predicted that the Clinton tax increases would produce a severe recession and they did not. The conservatives were WRONG — just as they were WRONG about Bush’s tax cuts leading to sustained prosperity. Conservatives have been WRONG about economic matters time after time after time after time ever since the 1900s, and yet they cling desperately to the same simplistic and discredited dogmas.
The larger point was that economics is not as simple as higher taxes = recession and lower taxes = prosperity. You can quote theory at me until hell freezes over but you have not yet offered one bit of empirical evidence to back that theory up.
You are employing a tactic right out of the standard right-wing bag of tricks: Take one sentence out of a post more than 500 words long and deliberately distort its meaning to try to make the writer look foolish. I’m wise to this little game and I won’t play it with you.
Business Man: You are quoting from Republicanomics 101, which holds these truths to be self-evident:
A. When times are good during a Democratic presidency, the most recent Republican president deserves the credit.
B. When times are bad during a Republican presidency, the most recent Democratic president deserves the blame.
Thus the George W. Bush recession was actually the Clinton recession (eight years delayed) and the Clinton boom was actually the Reagan boom (seven years delayed). (Republicans prefer not to mention the George H.W. Bush recession.)
Orwell would admire you.
http://spectator.org/archives/2009/02/06/unemployment-and-spending
Unemployment and Stimulus
By Brian Wesbury on 2.6.09 @ 5:37PM
The strangest thing happened on Friday. It was reported that the U.S. economy lost 600,000 jobs in January and the unemployment rate jumped to 7.6%, but the stock market rallied anyway. Partly, this was because the stock market is a forward-looking indicator and employment is a backward-looking indicator. If the economy is near a turning point, the stock market will reflect it well before the employment report.
But there is another explanation — one that is believed by most of the journalistic punditry — and that is that a bad employment report makes a stimulus package more likely. As Christina Romer (Chairwoman of the President’s Council of Economic Advisors) said on Friday, “these numbers…reinforce the need for bold fiscal action.” What’s interesting about this is that there is absolutely no long-term economic evidence that higher government spending creates jobs.
Academic economists will debate this until the end of time, but because they have their eyes glued to the computer screen, calculating multipliers (whether a dollar of government spending means more than a dollar of growth for the economy), they rarely look out the window. So let’s do it for them. The chart below compares the unemployment rate back to 1960 with federal government spending as a share of GDP.
Clearly, the chart shows that more government spending does not create jobs. In fact, it is exactly the opposite. More government spending is correlated with higher levels of unemployment. In 1965, federal government spending was 17.2% of GDP and the unemployment rate was 4%. By 1982, spending had increased to 23.1% of GDP and unemployment had climbed to almost 11%.
Government spending then fell from its early-1980s peak back to a new low of 18.4% of GDP in 2000, and the unemployment rate fell back to a low of 3.8% in 2000. Lately, due mostly to the profligate spending of the Bush Administration, government spending has increased to 20.7% of GDP. And guess what, the unemployment rate is up, not down. In fact, for the first time in over 25 years, the unemployment rate is higher today than it was at its peak during the last recession.
And this is a very interesting development. During the quarter-century after 1982, when government spending was shrinking as a share of GDP and tax rates were cut, the unemployment rate experienced lower peaks and lower troughs during each business cycle. This was the opposite of the 1960s and 1970s, when government was growing and tax rates were rising. Then, each peak and each trough in the unemployment rate was higher in each successive business cycle.
The reality is that every dollar the federal government spends must be borrowed or taxed from the private sector. And the more resources the government usurps from the private sector, the less job creation occurs.
It is also true that most government spending is less efficient than private sector spending. While there may be a few areas that government spending makes sense — let’s say defense or some R&D — the vast majority of government spending has nothing to do with creating new wealth. It often competes against the private sector — the postal service and Amtrak — and much of it is pure re-distribution.
So, this raises a serious question. Why is the government trying the same old spending stimulus that the evidence clearly shows does not work? President Carter spent billions of dollars on alternative energy plans, but unemployment rose anyway. If the U.S. and the new administration are serious about “change” and “getting rid of the old ways of doing things,” why not try something truly new?
With nearly $1 trillion dollars to spend, the government could do some astounding and positive things. The U.S. could rewrite its tax code and move to a flat tax that would make the U.S. much more competitive in the global economy. Or, we could rethink and rework the entire entitlement system, so that it wouldn’t eat our budget and economy alive like Pac-Man in the next few decades. Charles Murray, in his 2006 book, In Our Hands, laid out a plan to give every American over 21 years old $10,000 per year for life in exchange for giving up Social Security, Medicare and every other welfare state program.
We can see the problems that the welfare state is causing in just about every other major industrial country around the world that is ahead of the U.S. on the demographic aging scale. Why not change our course right now and implement true change so that we don’t end up like Japan or much of Western Europe? It’s a shame that the U.S. is not thinking along these lines.