Trying to tune a broken guitar:
"For a group of people who claim to believe in empirical study and higher learning, liberal politicians and other critics of North Carolina’s new conservative leaders seem remarkably uninformed or contemptuous of the research basis for the policy initiatives now being debated in Raleigh,'' writes John Hood of the John Locke Foundation in his column at johnlocke.org.
That's because the bulk of the research used to justify their actions is tainted beyond credibility by dubious "experts" who are beholden to corporate-funded "foundations", whose primary goal is to wrest control of government away from the people and move it into their board rooms. And it's a good bet John Hood has come to realize this, because he's too embarassed to cite a single study in this piece, knowing they are easily refutable, so he falls back on generalities:
...this proposal is not only imminently sensible but also consistent with decades of research suggesting...this fact is widely accepted by education researchers...This is not a conservative talking point – it is a conclusion shared by scholars of all stripes...is well supported by the available data...Regardless of which of these conclusions you find more persuasive, you should know that the evidence for the following two propositions is actually stronger...
I've read a lot of John's stuff over the years and, although I've disagreed with many of his views, I've found he seldom states absolutes, and often presents verifiable studies that (he feels) back up what claims he does make. If this piece reflects a change of behavior on his part, I doubt I'll be taking him seriously anymore. As to this claim:
At any given level of overall taxation, economies fare better when their governments avoid high marginal tax rates, particularly on savings, private investment, and corporate income.
The fact that one of the worst (and sustained) recessions in our country's history followed closely on the tail of the Bush tax cuts should lead even the slowest of readers to conclude that Hood has tumbled off the deep end with this declaration, but even that simple conclusion should have some research to back it up:
A useful summary measure of such changes’ supply-side effects is the sensitivity of reported income to marginal rates. If people work and invest more in response to tax cuts, their reported income will rise when marginal rates fall. True supply-siders believe that this sensitivity is well over a value of 1, implying that cuts in marginal rates raise reported income enough that government tax revenues nevertheless rise. But a critical review of several natural-experiment studies concluded that the best available estimates of this sensitivity range from 0.12 to 0.40. The midpoint of the range, 0.25, implies that if the marginal tax rate for high earners decreased from its current level of 35 percent to 28 percent (which Mr. Romney proposes), reported income would rise by just 2 1/2 percent.
We found that an increase in marginal rates on an income group leads to a decrease in its reported taxable income relative to other groups. Indeed, because the variation is so large, the effect can be pinned down much more precisely than in most postwar studies. But the estimated impact is very small — almost at the bottom of the postwar studies’ range. One likely reason is that the tax system between the two world wars was very simple — all the instructions and tax forms for the personal income tax fit on just six pages. As a result, there were few legal methods of shielding income.
Where does this leave us? I can’t say marginal rates don’t matter at all. They have some impact on reported income, and it’s possible they have other effects through subtle channels not captured in the studies I’ve described. But the strong conclusion from available evidence is that their effects are small.
While reducing marginal tax rates may not have a substantial impact on long-term economic growth, there is one area in which it has a profound effect: wealth accumulation in the top 1%. Ideologues like John Hood and Art Pope would have us believe that tiny group holds the key to our recovery. If they do, they've so far refused to turn said key. In reality, it's the millions of small business owners who could (and hopefully will) make the difference. Unfortunately, the needed capital is under the control of a handful of misanthropes who would rather throw away billions on dubious money-shuffling schemes than release said capital into the wild.
One more note on the quality of information available to readers: this article is published under Rob Christensen's name, but said "veteran" reporter makes no commentary, no observations, he just surrenders his column space in its entirety to Art Pope's deputy. That's wrong on so many levels I don't know where to start.