BY JONATHAN WILLIAMS – As tax reform is discussed in Hawaii, proponents of higher taxes and bigger government have called into question the connection between free market tax policies and shared economic prosperity, a relationship demonstrated extensively in Rich States, Poor States.
However, a new report sets the record straight on these pro-growth policies and sets out a clear path for tax reform in Hawaii that paves the way to a prosperous economic future. Co-authored by economists Dr. Randall Pozdena, former vice president of the Federal Reserve Bank of San Francisco, and Dr. Eric Fruits, Tax Myths Debunked shows the fallacy of seven popular tax myths commonly used by advocates of higher taxes:
Myth 1: Increased government spending stimulates the economy during recessions
Myth 2: Lower tax rates are bad for the economy in a recession
Myth 3: Raising tax rates will not harm economic growth
Myth 4: Austerity in the form of spending cuts will harm growth and employment
Myth 5: Real household income has not grown in the past 20 years
Myth 6: The distribution of income is increasingly inequitable
Myth 7: Raising tax rates on the rich will not harm the economy
Tax Myths Debunked exposes the degree of data manipulation that “progressive” groups will use to make their case for higher taxes and larger government. For instance, the Iowa Policy Project and Good Jobs First used cherry-picked data and inaccurate statements to argue that Hawaii should raise taxes in their pamphlet, “Selling Snake Oil to the States.” They claim that the rankings in Rich States, Poor States has no impact on state economic growth. However, Dr. Randall Pozdena and Dr. Eric Fruits prove the clear relationship between Rich States, Poor States rankings and strong state economic growth.
Tax Myths Debunked is a useful source of empirical analysis and scholarly data to utilize whenever the proponents of big government or left-wing journalists try to derail the policies that have unlocked economic growth. As policymakers continue to craft tax reform legislation in Hawaii aimed at improving the state’s competitiveness, Tax Myths Debunked can serve to separate fact from fiction and arm tax reformers with a rigorous picture of the tax policy consensus that exists among economists.
Jonathan Williams is the Director of the Center for State Fiscal Reform at the American Legislative Exchange Council. Reach him at Jwilliams@alec.org