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Ever since economist Arthur Laffer drew his namesake curve on a
napkin for two officials in President Richard Nixon’s administration
four decades ago, we have been told that cutting tax rates spurs jobs
and higher pay, while hiking taxes does the opposite.
Now, thanks to recent tax cuts in Kansas and tax hikes in California, we have real-world tests of this idea. So far, the results do not support Laffer’s insistence that lower tax rates always result in more and better-paying jobs. In fact, Kansas’ tax cuts produced much slower job and wage growth than in California.
The empirical evidence that the Laffer curve is not what its promoter insists joins other real-world experience undermining the widely held belief that minimum wage increases reduce employment and income.
Compensation in California also grew faster than in Kansas.
California’s average weekly wage of $1,165 in the first quarter of this
year was 13.4 percent higher than in mid-2012, while the Kansas average
of $840 was up only 10.1 percent.
California’s credit rating improved. The Golden State can borrow at lower rates, while Kansas will have to pay more to compensate investors for the risk that the Sunflower State will lack the revenue to repay its debts.
Now, thanks to recent tax cuts in Kansas and tax hikes in California, we have real-world tests of this idea. So far, the results do not support Laffer’s insistence that lower tax rates always result in more and better-paying jobs. In fact, Kansas’ tax cuts produced much slower job and wage growth than in California.
The empirical evidence that the Laffer curve is not what its promoter insists joins other real-world experience undermining the widely held belief that minimum wage increases reduce employment and income.
So how did Kansas fare against California?
From January 2013 through September 2014, the latest data, California grew jobs at 3.4 times the rate of Kansas. Total nonfarm payroll jobs in Kansas increased 2.1 percent, in California 7.2 percent. The rate of cutting government jobs was also larger in California than in Kansas, Bureau of Labor Statistics data show.
From January 2013 through September 2014, the latest data, California grew jobs at 3.4 times the rate of Kansas. Total nonfarm payroll jobs in Kansas increased 2.1 percent, in California 7.2 percent. The rate of cutting government jobs was also larger in California than in Kansas, Bureau of Labor Statistics data show.
Tax hikes did not hurt California job growth because the taxes were not on jobs but on high incomes.
California’s credit rating improved. The Golden State can borrow at lower rates, while Kansas will have to pay more to compensate investors for the risk that the Sunflower State will lack the revenue to repay its debts.
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