So Much for Supply Side
The Sierra Sun Times reported that California’s unemployment rate has fallen to 5.2 percent and the state added 15, 200 non – farm payroll jobs in May 2016 “according to data released today by the California Employment Development Department (EDD) from two separate surveys.” California raised its state taxes in 2012, circumventing Republican opposition by resorting to a ballot referendum. It also raised income taxes on the wealthiest 2 percent of Californians.
Meanwhile, according to an article in May 16, 2016 The New York Daily News, “Jeff Blackwood, the founder of Kansas City-area healthcare technology firm Pathfinder Health Innovations, wrote on the company’s blog that he plans to relocate its offices from suburban Overland Park, Kan., to downtown Kansas City, Mo. A $600 million budget shortfall and accompanying cuts by the Republican governor have slashed funding for schools and services for developmentally disabled people, Blackwood wrote.” In 2012, Kansas cut individual tax rates by 25 percent, and repealed the state tax on sole proprietorships. In 2013, the state cut taxes even more by gradually lowering tax rates over the next five years. The policy was explicitly based on the belief that tax cuts would bring jobs and increased state revenues to the state. But Kansas gained only 10,900 total nonfarm over the last twelve months, less than California added in a month. The state has been in the bottom 10 for job creation.
These are exactly the opposite results of what is predicted by proponents of supply-side economics exemplified by the Laffer Curve. This theory describes a presumed relationship between tax levels and government revenues. Initially, as tax rates increase, tax revenues also rise, but once tax rates exceed some threshold, tax revenues fall again, as work incentives and investment incentives are squelched by the high rates. This has been the bedrock of Republican tax policy for decades and drives their case for tax cuts and resistance to tax increases.
Attributed to Mark Twain, "It ain't what you don't know that gets you into trouble. It's what you know for sure that just ain't so."