Do tax cuts really help the economy?

Published 10:05 am Wednesday, December 27, 2017

As focuses on taxes, the Republicans say a tax cut will energize the economy and create new jobs because of a robust economy. On the other hand, the Democrats believe the economy is going well, and instead, we should be more concerned about various spending programs. They believe that tax cuts will increase the national debt, something they ignored during President Obama’s terms.

While neither can be proven right or wrong until a tax cut can be put in place and watched for a period of time, we can look at past history on the federal level and current activities just south of us in North Carolina. First, the federal level.

In 1960, John Kennedy proposed a tax cut to stimulate the economy. It worked. Through the 1960s, the economy picked up until it was dragged to a halt a decade later by the Vietnam War. In 1980, Ronald Reagan did the same, creating a roaring economy that boomed until the early 1990s.

On the state level, North Carolina’s economy generally lagged behind that of Virginia until the state decreased the state corporate income tax. They reduced their rate to below ours. It proved so successful that they cut it again. Currently, Virginia’s economy now lags that of theirs. Where Virginia was once regularly in the top five states to bring business, we have now been replaced by North Carolina. Now we are lucky if we are in the top 10 states.

North Carolina also cut the rate of personal income tax. Therefore, families, as well, received a gain in their take home pay. However, state income tax rates are small when compared with federal income tax rates.

Could they have done better on the federal level?

Sure. They considered many options, however, they ended up with a plan in which they could get the needed votes while at the same time avoiding exceeding arbitrary national deficit targets. Those targets unrealistically ignore any growth that will occur from these cuts that will surely boost the economy.

The opponents to these tax cuts also argue that the tax cuts do little or nothing for the poor and middle class. If one looks into the details, you will find that currently the poor do not pay income tax. If taxes are not paid, they cannot be reduced. For the middle class, they assume the fact that some time in future years taxes will rise. Until such time, there will be a significant tax cut for all.

Frank Ruff represents Lunenburg in the state Senate. His email address is Sen.Ruff@