The false promise of tax cuts

The false promise of tax cuts

While supply-side thinking has been thoroughly discredited as a federal policy, it is even less viable at the state level. That’s because state governments – unlike the federal government – have to balance their budget every year. Nonetheless, the two leading Republican candidates for governor are promising to roll back taxes if elected, and are pointing to the 2017 federal tax cut law as an economic model for Louisiana. The Advocate’s Mark Ballard explains why this is a terrible idea: 

Federal lawmakers can borrow or print more money to pay utility bills until the tax cut promises come to pass. In Louisiana, every reduction in revenues, be it cutting taxes or dropping oil prices, must be balanced now, not down the road, with either higher taxes or cuts in services. Kansas discovered that truth after Republican Gov. Sam Brownback conducted a “real live experiment” that he promised would prove that lower taxes fuels economic growth. It didn’t.

 

The richest Americans pay the lowest tax rates
For the first time on record, the wealthiest 400 Americans pay a lower percentage of their income in taxes than people in any other income group. The ultra-rich pay an average of 23% of their income to federal, state and local governments – down from a rate of more than 50% as recently as the early 1980s. The data comes from a new book by a pair of University of California at Berkeley economists, brought to life with a remarkable graphic by The New York Times. David Leonhart explains why we should all be worried:

The American economy just doesn’t function very well when tax rates on the rich are low and inequality is sky high. It was true in the lead-up to the Great Depression, and it’s been true recently. Which means that raising high-end taxes isn’t about punishing the rich (who, by the way, will still be rich). It’s about creating an economy that works better for the vast majority of Americans.

 

The trade war is hurting Louisiana
President Donald Trump’s tariffs disproportionately hurt Louisiana’s economy, which is heavily dependent on trade with foreign countries thanks to its location at the mouth of the Mississippi River. Soybean farmers, chemical manufacturers, steel makers and even the Koch brothers’ Louisiana mouthpiece are all crying foul. But the three leading candidates for governor are all keeping a stiff upper lip and supporting the president, as Mark Ballard reports:

If President Donald Trump loses the war, the nation can expect dramatically higher prices for goods and the nation’s already sliding income will fall into recession. It’ll be a lot worse in Louisiana because international shipping accounts for 39 percent of the state’s $243 billion gross domestic product, in 2017, and 553,200 jobs. Louisiana is looking at massive layoffs and $7.1 billion worth of lost business, according to the U.S. Chamber of Commerce, the lobbyists for major industries in Washington, D.C.


Automation could widen the racial wealth gap

The median white family in America holds about 10 times the wealth of the median black family. Closing this wealth gap would net the U.S. economy up to $1.5 trillion by 2028. But a new analysis by McKinsey & Co. – first reported by Axios – finds that this wealth gap could actually widen in the coming decades, as black workers are likely to be hurt more than others by the coming wave of workplace automation. 

By 2030, the employment outlook for African Americans — particularly men, younger workers (ages 18 – 35), and those without a college degree — may worsen dramatically. Additionally, we find that African Americans are geographically removed from future job growth centers and more likely to be concentrated in areas of job decline.

These outcomes are not set in stone. Policymakers can improve outcomes for black workers with strategic investments in education and training programs, and transition assistance for those who are displaced by technological change. 

 

Number of the Day
61% – Drop in the value of Louisiana’s exports to China from 2017 to 2018 – from $7.7 billion to $3 billion. (Source: Louisiana Economic Development via The Advocate)