Plan B Forum

Economics is not usually thought of as an experimental science (or a science at all...but that's another topic). But, occasionally, good experiments happen.

Supply-siders say tax cuts spur jobs and higher pay while tax hikes do the opposite. True? Kansas and California offer a good experiment. Two years ago, Kansas Governor Sam Brownback cut the state’s top income tax rate and eliminated taxes on many businesses. Meanwhile, tax rates were hiked in California: They went up about 30% on those making $500,000 or more, and the state sales tax rose to 7.5 percent, the nation’s highest.

So how have the two states done? From January 2013 through September 2014, the latest data, California grew jobs 3.4 times the rate of Kansas, and wages also grew faster in the golden state. California’s credit rating improved while Kansas’s credit rating dropped. Opponents of California’s tax hike predicted rich entrepreneurs would flee the state. They didn’t; they could do better remaining in rapidly-growing California. In fact, entrepreneurs have flooded into the state. Meanwhile, cuts in state spending weakened the Kansas economy.

Conclusion?

(Credit: Robert Reich on FB, Dec.3)

Conclusion?

The plalying field did not start out level. Ca starts out with the reputation of entrepenuership, Silicon Valley etc. Even with higher taxes, cutting edge tech tstartups and businesses are more likely going to be in Ca regardless of taxes. Many startups are started by people already in Ca as they have an idea, leave a job they had in Silicon Valley, and start thier company. Plus it is probably easier to get start up money when your address is Silicon Valley than bumf#$# Kansas. (And I am not putting down Kansas in any way. I have not been to either state ).