Your Opinion: Trickling down to Magic Land
Sunday, March 27, 2011
Let’s all climb up the beanstalk to Magic Land.
That is where all rich people are entrepreneurs and all entrepreneurs start and grow businesses creating lots of jobs. Therefore, the best way to create jobs is to nourish rich people by eliminating state income taxes.
That is the thesis of a March 17 letter consisting mainly of a long quotation from a conservative policy analyst in “Forbes” magazine. The analyst was Peter Ferrara, formerly on Jack Abramoff’s payroll (see Wikipedia.)
Give tax breaks to the rich and let the benefits trickle down to the rest of us. That is a favorite argument of the rich. The trouble is that we don’t live in Magic Land. We live in a land where rich people don’t always invest to create American jobs.
The rich put a lot on money into gold, a non-productive asset. They send a lot of investment money abroad, e.g. to China, Brazil and India. They buy a lot of U.S. treasury bonds. They invest in hedge funds that, in turn, speculate on currencies, commodities, derivatives and other things, but rarely on a struggling entrepreneur.
The trouble with the trickle down theory is that not much will actually trickle down.
And it is not just a matter of theory. There are those inconvenient facts. Of the four states with the highest economic growth from 1997 through 2009 two of the top four had no income taxes and two had income taxes. In that period Missouri ranked 46th in growth.
Of the four with worse growth rates than Missouri only one, Georgia, had a slightly higher income tax rate than Missouri. The others’ tax rates were lower. (see “Dispelling the Myth: State Individual Income Taxes Do Not Control Economic Growth.”) www.mobudget.org.
At the end of the March 17 letter the writer asks you to call your legislator and share the Magic Land nonsense. Don’t bother. Most of our legislators don’t need such advice. They are all stocked up.
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