Here’s another study that shows that one of the central ideological arguments of conservatives and Republicans, that tax cuts are the key to spurring job growth, is false. The Center on Budget and Policy Priorities tracked the effects of state tax cuts in the 90s and found that the states that cut taxes had less than one-third the job growth of states that did not.
Policymakers in a number of states including Arkansas, Kansas, Missouri, North Carolina, Ohio, and Wisconsin are promoting deep cuts in personal income taxes as a prescription for economic growth — an approach that has not worked particularly well in the past and is not supported by the preponderance of the relevant academic literature.
States that enacted major personal income tax cuts in the 2000s, before the most recent recession hit, were as likely to lose economic ground as to gain it.
* Of the six states that enacted large personal income tax cuts in the years before the recession, three states saw their economies grow more slowly than the nation’s in subsequent years, and the other three saw their economies grow more quickly.
* The three that grew quickly are all major oil-producing states that benefitted from a sharp rise in oil prices in the years after they implemented their tax cuts. In other words, all of the lesser- and non-oil-producing states that enacted big personal income tax cuts in the 2000s grew more slowly than the national average.
Similarly, the biggest tax cutting states of the 1990s — all of which enacted substantial personal income tax cuts — also did not perform particularly well in later years.
* States with the biggest 1990s tax cuts grew jobs during the next economic cycle at an average rate one-third the rate of states that were more cautious.
* The biggest tax-cutting states also had slower income growth. In none of these states did personal income growth in the next economic cycle exceed inflation.
The same thing is true on the national level. Tax cuts are not usually followed by a surge in economic growth or jobs and this has been true for the last 60 years. Yet this is one of the most fundamental beliefs of every conservative.