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Not only have tax cuts failed to deliver on the promise of increased prosperity, but they have actually hurt working people and starved the public sector.
Ottawa (22 Jan. 2020) — Conservative governments and pundits continue to peddle the generations-old myth that tax cuts for the rich and for big business will “trickle down,” benefiting all of society in the long run. To combat this myth, NUPGE has compiled the evidence in a paper entitled, The Myths About Tax Cuts.
New context, same old debate
Despite the glaring lack of evidence, these claims about tax cuts are re-surfacing across Canada—from Kenney to Pallister to Ford—as well as, south of the border. In this new political landscape, we find ourselves once again needing to re-hash this old debate.
In its new paper, The Myths About Tax Cuts, NUPGE surveys the research on this topic to help combat the tax cuts narrative.
Empty promises
Neoliberal governments and theorists continue to argue that low taxation, austerity, and privatization agendas are the way to foster prosperity for all of society.
Low taxation is often sold as a necessary tool for economic growth. Known as supply-side economics, the rationale behind it is that by keeping taxes on businesses and wealthy individuals low, the money will instead be invested, spurring economic activity. In turn, it will supposedly contribute to new jobs, rising incomes, economic growth, and prosperity for all. Proponents argue, therefore, that low taxes should be governments’ main tool for stimulating growth.
However, numerous studies and experts around the world have long debunked these myths. As the paper outlines, there is little empirical evidence that tax cuts spur economic growth, job creation, or rising wages.
Actual outcome: rising inequality
Not only have tax cuts failed to deliver on the promise of increased prosperity, but they have actually hurt working people and starved the public sector.
In practice, a tax system characterized by low income tax, low corporate tax, tax credits as substitutes for public spending, and tax loopholes has fueled income and wealth inequality. Income and wealth inequality within Canada and around the world is well documented, and has been increasingly recognized across the political spectrum.
Tax cuts and tax loopholes in recent decades have also resulted in weakened, underfunded, or altogether eliminated public services, social programs, and infrastructure due to lost government revenues.
A better approach
Given the evidence, it is time governments ditch the discredited tax cuts approach.
In fact, research shows that it is fair and progressive taxation, along with investing in public and social services, that leads to more widespread benefit and a more equitable society.
Read the paper here.