The Hidden Tradeoff: Tax Cuts Now or Real Economic Growth in the Future


CEOs and conservatives—often linked to the largesse of the Koch brothers and backed up by their string of think tanks that unfailingly generate right-wing conclusions—have an all-season solution economic growth: cutting taxes.

Cutting taxes has become “the Republican brand,” as Jeb Bush recently put it.

However, it turns out that this element of trickle-down strategy is actually counter-productive when it comes to economic growth. Lower taxes have come at the cost of better education and broadly-shared prosperity over the long run. But a new study shows that tax-cutting at the state level, often conducted in the name of becoming more competitive than other states, is a self-defeating strategy for economic uplift.

Lower taxes and resulting lower education spending and lower educational outcomes help to produce low wages and suppress economic growth, Noah Berger and Peter Fisher of the Economic Policy Institute found in a new study looking at the relationship between education and economic growth during the 1979-2012 period.

Berger and Fisher maintain that educational spending, when utilized by sound public educational systems to produce a well-educated workforce, benefit all citizens by lifting up skill levels and overall economic development.

The alternative approach—using a chainsaw to radically cut taxes—especially for job creators” in the top 1%—means cuts in educational programs needed for higher skills and long-term growth. Blind to this reality, no less than 47 states have opted for the chainsaw approach to education. “Savings have gone to finance tax cuts,” observes financial journalist Tom Saler. America’s 50 states hand out at least $80 billion a year in corporate tax cuts, plus a wide array of subsidies, mostly to the biggest corporations without insisting upon strict accountability on actual job creation and wage levels, Louise Story of the New York Times has detailed.

States confront a stark choice in the trade-off between tax cuts championed by Walker and dozens of other governors, backed by the most vocal corporate leaders in their states—often their biggest campaign donors, and genuine long-term economic development. Berger and Fisher express this choice plainly:

“There are no states with a relatively well-educated workforce and relatively low wages, and virtually no states with low levels of education and relatively high wages.”

Would average citizens—as opposed to corporate-sponsored governors and legislators—really choose less money for education, low educational attainment, low wages and sluggish growth over the short term? Or would they favor using public revenues to improve education for a more highly-educated workforce, higher wages, and stronger long-term economic growth?

In the immediate future, we are likely to keep witnessing CEOs and conservative governors welded together behind a program of short-term, short-sighted cuts to education that will toss aside the potential for broad economic uplift and widely-shared prosperity. They are supported by Republican legislators (and some Democratic conservatives) who are shamefully insulated from public pressure because of a highly-partisan Republican re-districting plan which has been implemented in many states.

Without feeling democratic pressure from ordinary citizens, legislators feel free to vote for a long list of corporate subsidies that directly lead to cuts in education.

“In these states, the focus is on luring employers from other states with strategies that do not lead to rising incomes because they do not make the workforce more productive,” noted Berger and Fisher. “Even worse, the focus drains resources from the most important, proven, path to increasing productivity: investments in education.”

However, the CEOs and public officials like Wisconsin Gov. Scott Walker, Florida Gov. Rick Scott, North Carolina’s Pat McCreary and countless others who promote an immediate boost to corporate coffers at the expense of education, may be treading on thin ice. Parents want better opportunities for their kids, and they know that reductions in K-12 offerings and higher tuitions and sharply-cut university availabilities to vital classes mean less hopeful futures for their kids.

Moreover, taxpayers are showing signs of weariness with subsidizing corporations who show no commitment to creating family-supporting jobs in the US. Instead, giant firms—which now produce some 50% of their goods overseas—are showing that subsidies simply give them the opportunity to “take the money and run”— to China, Mexico, or elsewhere.

The public is starting to see that these massive corporate subsidies come at the expense of their kids’ education, and their states’ long-term economic futures.

Roger Bybee is a Milwaukee-based writer and University of Illinois. He edited The Racine Labor weekly for 14 years. Email

From The Progressive Populist, October 15, 2015

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