"Supply-siders say tax cuts spur jobs and higher pay while tax hikes do the opposite. True? Kansas and California offer a good experiment. Two years ago, Kansas Governor Sam Brownback cut the state’s top income tax rate and eliminated taxes on many businesses. Meanwhile, tax rates were hiked in California: They went up about 30% on those making $500,000 or more, and the state sales tax rose to 7.5 percent, the nation’s highest.
So how have the two states done? From January 2013 through September 2014, the latest data, California grew jobs 3.4 times the rate of Kansas, and wages also grew faster in the golden state. California’s credit rating improved while Kansas’s credit rating dropped. Opponents of California’s tax hike predicted rich entrepreneurs would flee the state. They didn’t; they could do better remaining in rapidly-growing California. In fact, entrepreneurs have flooded into the state. Meanwhile, cuts in state spending weakened the Kansas economy. (Not to worry, though. The Kochs remain in Kansas.)
Conclusion?" (12/3/14)
Similar to what Mr. Stewart was saying about needing to make sure workers for companies like Ford were able to buy their products:
"Black Friday. Small-business Saturday. Today’s Cyber Monday. It’s all hype to get us to spend, but it’s not working. Friday’s sales were down from a year ago and this weekend saw 5.3% fewer shoppers and 11% less spending, according to estimates by the National Retail Federation. Americans simply don’t have the dough. Why? Because 90% are earning less, and two-thirds are living paycheck-to-paycheck. Every CEO in America should repeat these words over and over: Workers are customers."
Wow, this is a very interesting post! Do you think the status of each state has to do with money flow? California kept the money flow going by keeping a lot of money in circulation. On the other hand, Kansas cut taxes, doing little to help the unemployment rates, consequently slowing the flow of money. Could this be related back to the Dawes and Young plan and the U.S. trying to keep the flow of money going? Just a though, please let me know what you think!
ReplyDeleteThis experiment with California and Kansas gives proof as to why states with higher income taxes and tax hikes generally have upward moving economies. I think people are spending less money on Black Friday not because people have less money, but rather people have more money and are not as "deal-hungry" to rush in on black-friday and are more willing to spend their money on a less hectic day even if it means that they aren't going to get as good of a deal. Evidence to this is that during the recession of 2008 there was an increase of about 30 million dollars spent on black friday. US News provides an interesting article on this, you should check it out. Link below.
ReplyDeletehttp://www.usnews.com/news/blogs/data-mine/2014/11/27/black-friday-shopping-may-show-improving-economy
Caroline - I never made that connection but I think there's a lot to it!! I'll definitely think about that a little more.
ReplyDeleteJohnny - I think that's a very valid point! I'll have to do more research into the general trends of consumer spending (although I think the stock market does represent an artificially inflated economy that doesn't really represent the individual purchasing power of middle class families).
Are there other examples tax hikes increasing job growth and tax cuts strangling it? How does California compare to other states, not just Kansas, in this situation? And how does the fact about this view being from a believer in Keynesian economics change it? My understanding of Keynesian economics is that a country increases spending during good years and saving during bad ones. I'm curious as to how a Keynesian aspect factors into this situation. I don't mean any of this in an argumentative way, just out of curiosity.
ReplyDelete