No politician has ever been booed for promising to cut taxes. So what happened when two politicians promised to raise them?
Jerry Brown became governor of California in 2011. He inherited Republican Gov. Arnold Schwarzenegger’s budget deficit of $27 billion and a moribund economy still reeling from the 2008 Crash. He raised taxes on millionaires. Conservatives predicted a disaster.
Yet California’s economy grew by 3.1 percent in 2014 and by 4.1 percent in 2015 (Bureau of Economic Analysis). By 2015 it had gone from the world’s eighth-largest economy to the world’s sixth-largest economy.
How can California have some of the highest business taxes and regulations in America, and yet be so successful? Reason One: Taxes do not vanish into a black hole. They are invested in infrastructure, research and higher education. Technology companies need educated workers. They do not want uneducated rednecks, howsoever low their wages. Reason Two: Environmental regulations expanded the fast-growing field of renewable energy. Technology companies moved to the Golden State and hit gold.
The Deal Professor at the New York Times concluded (Public Companies See Gold in California): “A state with 12 percent of our population now accounts for a fifth of all public companies.” A business analyst at Bloomberg added: “Maybe high taxes and strong regulations don’t daunt business leaders if well spent and well aimed.” This is why Republican Gov. Rick Perry of Texas stopped touting his superior economic model and stopped coming to California to poach jobs.
In his 2017 State of the State Address, Brown announced that California had created 2 million net new jobs since 2011. This was one-sixth of the entire nation’s 12.4 million net new jobs created. California led the nation in economic growth, at more than twice the national average rate. This is scarcely the disaster predicted by conservatives.
Secondly, Democratic Gov. Mark Dayton in Minnesota inherited a mess in 2011 from his Republican predecessor, namely a $6.2 billion deficit and a 7 percent unemployment rate. During his first four years, Dayton raised state taxes by $2.1 billion. As usual, conservatives predicted disaster.
Yet by 2013, Minnesota’s private sector job growth exceeded its pre-recession level and its economy was the fifth fastest-growing in the nation. It has one of the lowest unemployment rates, currently 3.8 percent. Even though its top income tax rate is the fourth highest in the country, Forbes magazine ranked Minnesota the ninth best state for business. Businesses need a functioning infrastructure.
California and Minnesota have intelligent voters and politicians who recognize that tax increases can repair the ravages resulting from Reaganomics.
Republicans claim that taxes cannot be raised on the wealthy because they are “job creators.” This is hogwash. My friends, you create jobs when you spend your money. Economist John Keynes showed that money is round to go-round the economy, not flat to pile up in the Cayman Islands. That is why America’s economy performed so well from 1945 to 1975. Moreover, top tax rates were much higher than today’s rates. Even Republican President Eisenhower supported strong unions, to negotiate decent wages from the growing prosperity.
Is it really all that hard to return to the good old days of a successful economic policy?
Raising taxes does not lead to the dreaded socialism. Former Secretary of Labor, Robert Reich, now an economics professor, explains it thus: “The capitalist juggernaut that is California helps explain why the state’s per capita income increased 9.5 percent since 2015, the most of any state and the most since 2012, according to data compiled by Bloomberg. Far from losing jobs overseas, California keeps creating them with an unemployment rate declining to 4.9 percent from 5.7 percent in 2016, faster than the national average.”
We close with Bill Maher’s comments on Real Time in July 2016. What happened when California abandoned Reaganomics? “The sky didn’t fall; unemployment did. And growth shot up to 4 percent. And a $26 billion deficit became an $11 billion surplus. And that is mostly because we, horror of horrors, raised taxes on the rich.” (Maher first gave tribute to the success of Republican propaganda.)
“Republicans love to talk about small government, cutting taxes on the rich and shrinking government spending. But what do they have to show for it? In the cases of GOP-led Kansas and Louisiana, they have huge deficits and struggling economies.” (This is true for most southern states.)
“Democrats control every office and voting body in California. So we can really study what happens when liberal policies are tried unimpeded. And the only thing I have to say to Republicans about that is (his emphasis): SCOREBOARD, BITCHES!”
The ravages resulting from Reaganomics can be repaired by raising tax revenues. A comedian could get this point across. Democrats could not.