American Politics in the Age of Ignorance: Why Lawmakers by D. Schultz

By D. Schultz

American Politics within the Age of Ignoranc e seems at ten coverage myths and undesirable principles that governments and public officers - ordinarilly conservatives - continually repeat and re-enact. performing on those myths, the rules unavoidably fail and thereby toughen preconceived ideals that govt is useless at fixing difficulties.

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No such pattern emerges between high taxes and GDP growth over 80 years. During the Depression era of the 1930s corporate and individual taxes rates increased but in 1934 through 1937 the GDP grew by 17%, 11%, and 14% annually. Top corporate tax rates climbed to over 50% through the 1960s, again with no discernible pattern associated with decreased economic growth. The same is true with top tax rates on the richest, which were as high as 91% into the 1960s. Conversely, since the 1980s after KempÔÇôRoth tax bill (a 1981 law decreasing taxes for many in the United States) and then after 2001 with the Bush era tax cuts, there is no real indication that the economy grew more rapidly than in eras with significantly higher tax rates on the wealthy and corporations.

But by the 1980s even these programs were not viewed favorably and during the Reagan Administration enterprise zones became a popular idea for economic development. These zones came to be seen as development tools not just for urban cores, but for any depressed community needing an influx of capital investment. This belief in their efficacy has led to the claim that enterprise zones are an efficient means to encourage economic development. Much of the logic of enterprise zones relies upon the assumptions of using tax abatements as incentives for business relocations or development or to encourage employment decisions.

The logic of enterprise zones rests upon the same premises as the overall strategy of using taxes as a driver to induce development or relocation. This means enterprise zones are subject to the same criticisms as were described earlier in the chapter when it comes to taxes as a factor affecting business investment decisions. To repeat, as Bartik (1991; 1994), Wasylenko, (1997) and others have shown, taxes are far down on the list of factors that influence economic location decisions. They are far less important than the quality of the workforce, access to supplies and markets, and a host of other factors.

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