LITTLE ROCK — THE LEDGE may yet help Arkansas catch up with our neighboring states-and competitors-when it comes to cutting the capital gains tax and so attracting investment and creating jobs. But not if the governor has his way. In this case, unlike cutting the abominable grocery tax, he would go not only slow but not at all.
A succession of presidents-John F. Kennedy, Ronald Reagan, Bill Clinton, George W. Bush-all cut taxes on capital investment and watched the economy grow, and federal tax revenues with it. And yet Mike Beebe has denounced this approach to economic growth as just “trickle-down, goofy, voodoo economics.”
Instead of making a reasoned case, the Guv mainly just hurls invective. At a time when there is quite enough bad feeling in politics already, this governor’s response is to add to it. Apparently civility is something only for the other fellow.
Not only does our governor attack-well, dismiss-the economic theory behind such tax cuts, as if the Laffer Curve had never been discovered, but the other side’s motives, too. He spoke of Republican legislators “who just got elected and they think they can just do whatever they want to, cut revenue, and [say] ‘If people get hurt, so what? Somebody else will figure that out.’ That’s what we’ve got to combat.’’ As in fight. Just in case anybody in his partisan audience didn’t get it, any more than they might have got Economics 101, and particularly the part about taxes stifling investment, he repeated himself: “That’s what we’ve got to combat.”
So, tell us, Guv, is Randy Zook, president of the state’s chamber of commerce, one of those heartless meanies out to hurt people, too, when he testifies in favor of cutting taxes on capital investment, and also on the energy used in manufacturing jobs? Or is he just making sense when he points out the obvious? Namely:
“Arkansas is out of step with our surrounding states. Capital flows where it’s welcome and well-treated. We need all the capital investment we can get to generate as many jobs as we can get.”
That sounds more like common sense than, to use the governor’s buzz words, “trickle-down, goofy, voodoo economics”. Here’s a different and better thought the governor might want to consider: Prosperity isn’t just a matter of government’s deciding which interests to favor and which not to. No matter what the governor tells us so confidently, even angrily.
(Note to Mr. Beebe: Partisan jibes don’t become you. When you experiment with them, you sound unnatural, like someone who’s had to be taught to be a knee jerk partisan by this or that Democratic national committee-rather than the Mike Beebe we’ve come to know and respect.)
The first time we heard the phrase Voodoo Economics, it was being used by Bush the First when he was running against Ronald Reagan for the GOP presidential nomination. Not till Governor Reagan’s election to the presidency in 1980, after years of Carter Era malaise, would a new economic course be set for the country, a new beginning proclaimed, and a quarter-century of steady, impressive economic growth begin. In large part because Ronald Reagan cut capital-gains taxes, and supply-side ideas replaced stagnant class-war nostrums.
Ronald Reagan’s example was followed with similar success by other presidents. Or are we really to believe, to lapse into Sovpeak, that Bill Clinton, too, was just another capitalist tool bent on oppressing the masses? This governor’s rhetoric fits neither him nor economic reality.
THIS tax cut before the Legislature isn’t exactly revolutionary. It errs, if at all, on the side of modesty. As we read it, it wouldn’t apply to investments made before the beginning of the next fiscal year. Nor would it apply to the sale of most stocks, only those in Arkansas companies with headquarters here. And even in the case of those companies, it wouldn’t apply to existing shareholders, for they would have acquired their interests before July 1, 2011.
Yet the state’s Department of Finance and Administration (and maybe Political Economics) claims the tax cuts would reduce tax revenues for state government by $40 million next year. Unlikely. Indeed, suspicious. Were these figures the products of any kind of objective study or just a partisan response to a good idea from the other side?
And how could a department of state government that’s taking so much time and having so much trouble telling the public just where our state cars are on any given day look so unerringly into the future and tell us just what the state’s economy would do under its expert supervision?
In order to balance its doleful outlook, do you think the Department of Finance and Administration took into account the jobs that new investment in Arkansas would create and the tax revenue from them? We doubt it.
Does DFA think of the economy as some zero-sum game in which every tax cut “costs” the government a like amount in revenue, or can it recognize that the economy is a dynamic system in which all can win? It doesn’t sound like it. It sounds more like an outdated John Kenneth Galbraith fighting a last, desperate rear-guard action against Milton Friedman.
Did DFA look back at past experience when taxes were cut? And forward to the burst of economic activity that can be expected when taxes on capital gains are cut? It doesn’t sound like it. DFA needs to re-examine the dubious estimate it’s just produced, and exercise some vision. Where there is no vision, the prophet said, the people perish. So does the economy.
Editorial, Pages 14 on 02/18/2011