WASHINGTON — In his new budget proposal, Ohio Republican Gov. John Kasich calls for extending a generous 21 percent cut in state income taxes. The measure was originally part of a sweeping 2005 tax overhaul that abolished the state corporate income tax and phased out a business property tax.
The tax cuts were supposed to stimulate Ohio's economy and create jobs. But that never happened once the economy tanked. Instead, the changes ended up costing Ohio more than $2 billion a year in lost tax revenue; money that would go a long way toward closing the state's $8 billion budget gap for fiscal year 2012.
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States cut taxes in hopes of spurring economic growth, but in state after state, it hasn't worked.
There's no question that mammoth state budget problems resulted largely from falling tax revenues, rising costs and greater demand for state services during the recession. But questionable tax reductions at the state and local level made the budget gaps larger — and resulting spending cuts deeper — than they otherwise would have been in many states.
A 2008 study by Arizona State University found that that state's structural deficits could be traced to 15 years of tax cuts, mainly income-tax reductions that "were not matched by spending cuts of a commensurate size."
In Texas, which faces a $27 billion budget deficit over the next two years, about one-third of the shortage stems from a 2006 property tax reduction that was linked to an underperforming business tax.
In Louisiana, lawmakers essentially passed the largest tax cut in state history by rolling back an income-tax hike for high earners in 2007 and again in 2008.
Without those tax reductions, Louisiana wouldn't have had a budget deficit in fiscal year 2010, the 2011 deficit would've been 50 percent less and the 2012 deficit of $1.6 billion would be reduced by about one-third, said Edward Ashworth, the director of the Louisiana Budget Project, a watchdog group.
But it's okay - because what these conservative geniuses are really doing is broadening the base and creating more revenue by cutting it. I don't think it speaks very highly of conservative policymakers that Arizona State can figure this out but they can't. Just saying. But what does history have to say about this Republican fetish? You know - historical data, facts, and figures. Those evil liberally biased boogeymen:
After the nation recovered from the 1990-91 recession, 43 states made sizable tax cuts from 1994 to 2001 as the economy surged. Twenty-eight states, in fact, reduced their unemployment insurance payroll taxes after 1995.
But states that cut taxes the most ended up with the largest budget shortfalls and higher job losses when the economy slowed again in 2001, according to research by the Center on Budget and Policy Priorities.
So in other words, that study is bullshit because it focused on too narrow of a time period and the tax cuts just haven't trickled down yet. Republicans cut taxes for long-term growth, not short term gains...duh.
It's good to see that actual journalism still exists today, however rare it might be. There is no credible evidence whatsoever that tax cuts stimulate the economy and provide endless prosperity for all in the manner that Republicans claim they do. Our economy has thrived just fine even during periods of much higher taxation, even under Republican rock stars like Eisenhower (I know, I know - he doesn't count because his name isn't Reagan). But regardless, expect this to continue to be a major facet in our national economic policy for years to come. As we saw in December, not even the Democrats can be counted on to oppose regressive economic policies.
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