
Evaluating State and Local Business Tax Incentives [pdf] - plickdixon
https://scholar.princeton.edu/sites/default/files/zidar/files/slattery-zidar-taxincentives-2020.pdf
======
dang
The submitted title ('“No evidence” that tax incentives given to companies
increased economic growth') broke the site guidelines, which say: " _Please
use the original title, unless it is misleading or linkbait; don 't
editorialize._"

Cherry-picking the detail you think is most important from an article is a
form of editorializing. If you want to say what you think is important about
an article, do not do so by cherry-picking a detail to put in the title.
Instead, post it is a comment in the thread. Then your view will be on a level
playing field with everyone else's.

[https://hn.algolia.com/?dateRange=all&page=0&prefix=false&qu...](https://hn.algolia.com/?dateRange=all&page=0&prefix=false&query=by%3Adang%20%22level%20playing%20field%22&sort=byDate&type=comment)

Edit: on top of that, it looks like the article is behind a hard paywall, so
no one can actually read it. That means the thread is reacting mostly to the
title, and mostly to the heavily editorialized title before we changed it.
That isn't nearly enough information for a substantive discussion. Please
don't make submissions like that to HN.

Edit 2: scratch that last point—there's a link to the paper downthread.

~~~
Bostonian
The paywall is not hard, since the paper is at
[https://scholar.princeton.edu/sites/default/files/zidar/file...](https://scholar.princeton.edu/sites/default/files/zidar/files/slattery-
zidar-taxincentives-2020.pdf) , found by Googling "pdf Evaluating State and
Local Business Tax Incentives".

~~~
dang
Oh good. Thanks!

Edit: seems reasonable to change the URL to that. Submitted URL was
[https://www.nber.org/papers/w26603](https://www.nber.org/papers/w26603).

------
save_ferris
This sort of reminds me of a conversation I had with a guy with a stake in a
restaurant close to a major sports arena development where I grew up. It
totally changed the way I looked at economic impact reports on commercial
developments, particularly sports arenas.

The city put up millions in taxpayer funds to get the arena built for the
local high-profile college basketball team, and numerous reports were
published around the positive economic impact of the stadium, citing increased
spending around downtown, etc.

However, the report failed to account for "micro" details that can have a
major impact on local business, like traffic congestion, entertainment
capacity, etc. On game days, his restaurant is overcrowded and turning away
patrons, which negatively impacts his staff and quality of experience. But
there are only 15 or so games per year, and the off-season attractions are
hit-or-miss in terms of attendance. And when nothing is going on, business is
even more varied.

It's relatively easy to calculate how many people come to town for a big event
and how much they spend, extrapolating that out to some great figure, but a
restaurant can't reasonably rely on ~15 big days per year. Quite often,
economic impact reports are commissioned by folks who have business or
political interests at stake, thereby overlooking the potential bottlenecks
that such developments expose. And because most of the public doesn't
understand finance or real estate, and yet they love the basketball team, a
more nuanced conversation around the topic is harder to find.

~~~
pcurve
As a non-sports person, I never understood our country's obsession,
preferential treatment, and worshiping of anything that has to do with NFL,
NBA, NHL, and MLB, be it tax subsidies of stadium, cable bundling of sports
channel, or looking down on people who are not into sports.

~~~
cmrdporcupine
Politics itself has become sports, too. Red team or blue team.

From up here in Canada the weird fusion of school and sport down there is also
bizarre. Yes, people play sports in our schools... but wow is it cultish down
there.

~~~
ratsmack
This describes the majority of voters which do not have a clue as to what they
are voting for, or the platform that their favorite candidate stand on. The
just blindly vote the party ticket because that's their team. Generally, it is
the swing voters that are more informed on politics and don't necessarily vote
the party ticket.

~~~
taborj
I heard this argument _a lot_ , and perhaps the people I find myself around
are abnormal, but I'm trying and failing to come up with people I know who
vote along party lines simply because it's one party or the other. Just about
everyone has at least one major issue that keeps them from voting the other
way, and most have multiple reasons.

I guess I have seen something like it, now that I'm thinking about it -- but
it's generally a negative condition, i.e. "I'm _not_ voting for X simply
because they are part of party Y." They're not necessarily voting for their
party because it's their party, but they're doing it because it's _not_
another party, or more specifically, not a particular candidate.

------
zdragnar
> While we find some evidence of direct employment gains from attracting a
> firm, we do not find strong evidence that firm-specific tax incentives
> increase broader economic growth at the state and local level. Although
> these incentives are often intended to attract and retain high-spillover
> firms, the evidence on spillovers and productivity effects of incentives
> appears mixed.

So, would this mean that the study is analogous to a null result being spun to
mean a negative result in the title? "We do not find strong evidence" is not
the same as "no evidence".

I wonder if this is what would happen should more failure to reproduce papers
were published to fix the reproducibility crisis- instead of encouraging more
critical analysis, the abstracts will just get summed up into clickbait titles
that continue to mislead.

~~~
martincmartin
"Absence of evidence is not evidence of absence."

[https://en.wikipedia.org/wiki/Evidence_of_absence](https://en.wikipedia.org/wiki/Evidence_of_absence)

~~~
sicromoft
Yes, but saying "there is no evidence of X" is not claiming evidence of
absence. That would be "There is evidence of not X", which the paper does not
claim.

------
gojomo
Current submission headline: "“no evidence” that tax incentives given to
companies increased economic growth"

Such incentives usually aren't directly premised on "increased growth", but
rather "local jobs" – and the linked study's abstract reports "we find that
average employment within the 3-digit industry of the deal increases by
roughly 1,500 jobs".

The abstract also reports "mixed" results "on spillovers and productivity
effects of incentives", and "unclear" effects on "equity".

Now, I'm not a fan of such locality-vs-locality targeted-incentive competition
– which is likely zero-sum or negative-sum across all localities. And without
broader growth, the costs may be too expensive for the narrow employment
gains.

But the current editorialized, excerpted headline makes it sound like the
thrust of this study was to find no benefits at all for such deals, and that's
not the mixed story it's actually reporting.

~~~
Barrin92
>Now, I'm not a fan of such locality-vs-locality targeted-incentive
competition, and without broader growth, the costs may be too expensive for
the narrow employment gains.

I can't even see how you can theoretically expect growth from this because by
definition in a common market like the US tax incentives of localities are
zero sum. It doesn't really matter if jobs or growth are created in X or Y
because the US has a federal government to even out imbalances anyway.

So to allow this regulatory race to the bottom _within a country or a market_
makes no sense to me at all. Only if the firm would move abroad would there be
a net loss.

~~~
NickM
_So to allow this regulatory race to the bottom within a country or a market
makes no sense to me at all. Only if the firm would move abroad would there be
a net loss._

I think part of the trouble is that tax rates are very different across
different states. If the US were to ban all state and local tax incentives,
then that would very much hurt high-tax states, as they'd then have fewer
tools left to compete with low-tax states in attracting businesses.

~~~
wasdfff
If business was only about taxes, all of silicon valley would relocate to
Cleveland yesterday.

------
howmayiannoyyou
Tax incentives in the US happen (a) where an entrenched industry negotiates it
using its existing jobs as leverage; and (b) where a depressed region hopes to
attract new investment. In the latter case offsetting problems conspire to
prevent economic growth. That tends to be labor pool mismatch, poor regulatory
environment as compared to other states, and overseas competition that offers
supply chain and labor advantages. In other words, tax incentives aren't
enough, period.

~~~
merpnderp
Labor advantages are the biggest deal. The US spends a mind boggling amount of
money on education and still gets out-competed by struggling poor countries.

My company just hired two H1B's to do Sharepoint work because there was
literally no one in my part of the state qualified who didn't already have a
job doing something more fun, and no one else wanted to move to the middle of
nowhere. And we already pay 10% above market for the state to attract people
to our little backwater locale.

~~~
learc83
10% above the rest of the state to move to the middle of nowhere obviously
wasn't enough. When a company says they can't find anyone to hire, what they
really mean most of the time is "we can't find anyone to hire for the mostly
arbitrary price we want to hire them at."

My guess is the company is making far more off of those employees than the
labor cost, so if you didn't have access to H-1B employees you would have kept
increasing the salary 20%, 30%, 50% until you found someone.

~~~
xnyan
I can't tell you how many times I've heard an org say that did a market
analysis and the offered wage is "competitive" so clearly it's a labor supply
issue and not possible that they are not offering enough compensation.
Competitive does not mean "we're offering a little more than the minimum
salary we saw on glassdoor," but often that's exactly how they determined it.

------
aqme28
I highly recommend this talk on corporate tax breaks and poverty in Louisiana:
[https://www.youtube.com/watch?v=RWTic9btP38](https://www.youtube.com/watch?v=RWTic9btP38)

------
greenie_beans
Mississippian here, where this sort of policy is just another day. Here's more
evidence that supports this paper:
[https://mississippitoday.org/2017/05/02/how-much-have-tax-
cu...](https://mississippitoday.org/2017/05/02/how-much-have-tax-cuts-cost-
mississippi-577m-since-2012/)

------
enad
You can read the full paper here:

[https://scholar.princeton.edu/sites/default/files/zidar/file...](https://scholar.princeton.edu/sites/default/files/zidar/files/slattery-
zidar-taxincentives-2020.pdf)

Additionally, here are the slides:

[https://scholar.princeton.edu/sites/default/files/zidar/file...](https://scholar.princeton.edu/sites/default/files/zidar/files/slides_jep_20200103.pdf)

And the non-technical summary:

[https://scholar.princeton.edu/sites/default/files/zidar/file...](https://scholar.princeton.edu/sites/default/files/zidar/files/bizincentivessummary_20-01-03.pdf)

------
cestith
Profit can be gamed and there are all sorts of little write-offs here,
exceptions there, and loopholes besides.

What we need is a lower rate against more receipts, and incentives only on
things actually likely to spur growth. Imagine if every publicly traded
company paid %2 on revenue minus payroll, employee training and healthcare,
and maybe depreciation. The only way to pay less tax is to pay your workers
and vendors more, but you don't need to shift things to this expense or that
expense to dodge a profit tax.

------
minikites
"Trickle down" economics is a scam and doesn't work:

[https://www.nber.org/papers/w21035](https://www.nber.org/papers/w21035)

[https://www.theguardian.com/business/2012/jul/21/offshore-
we...](https://www.theguardian.com/business/2012/jul/21/offshore-wealth-
global-economy-tax-havens)

~~~
Bostonian
Do you think companies don't consider taxes when locating new factories and
offices? I don't support tax incentives for individual companies, but I do
support keeping state corporate and personal income taxes low to attract
businesses.

~~~
0xff00ffee
I think you meant "companies" and not "states".

Problem is it becomes a bidding war that causes states to forego tax revenue
with ZERO recourse if that company decides to pack up and move somewhere else.
This is especially true of companies that are not bound by development costs
(e.g., Amazon warehouse vs. a semiconductor fab). Several New England state
economies are fucked because they gave away tons of money in tax breaks hoping
increased sales tax and income tax (on workers for those companies!!!) would
offset the tax giveaway. E.g., CT is fucked for this very reason.

Eventually the state has no recourse if the company changes its mind. Go look
at what's happening with Foxconn's multibillion dollar scam in Wisconsin. Or
Hillsboro oregon where intel gets 30 years without paying taxes. (Granted,
Intel can't pack up and move easily because they invested 10's of billions in
a big ugly fab that pollutes [see the "waivers" they "negotiated" to allow
them to continue dumping fluorine emissions to avoid costly fab retrofits]).

One solution is to allow states to sue if a company breaches contracts. But
many states are just piss poor and cannot afford to take on a trillion dollar
company (Amazon, Facebook), or a company from another country (Foxconn).

Another solution is to actually tax corporations federally, since the
government already redistributes blue-state wealth to red-state welfare.

Warren has a great idea: tax companies on their SEC revenue CLAIMS rather than
their IRS filings, which tend to differ by billions.

~~~
refurb
_Eventually the state has no recourse if the company changes its mind._

Sounds like the states suck at negotiating contracts.

Why would you to give something of value, with no recourse if the other party
doesn’t deliver?

~~~
0xff00ffee
If you look at what happened with Wisconson and Foxconn, you basically had a
web of corruption at the highest levels of government with support from the
POTUS. They deliberately negotiated a shitty deal because they are all
corrupt. It's not that hard to see, unless you happen to be a Trump supporter.

------
andrei_says_
Maybe we can look for a relationship between tax incentives and campaign
donations?

------
throwawaysea
This is probably highly variant depending on the jurisdiction, the company,
the specific terms of a deal, and so on. The Wisconsin Foxconn deal was
terribly structured, and it left taxpayers holding the bag with little
protection. However, the NY Amazon deal was a good one, with the city's own
projections showing a 27:1 ROI. That deal was comprised mostly of existing
programs like Excelsior, ICAP, and REAP. These programs only provide a subsidy
for prior results, rather than up-front lumpsums. IIRC only $500M of the total
subsidy package for Amazon was in the form of a grant, and it was itself tied
to investments Amazon would be obligated to make contractually. The
aforementioned NY/NYC programs have been used for numerous companies, and
presumably the city and state agencies operating these programs view them as
successful, since they continue to offer them.

------
sequoia
TFA does not say "No evidence"

~~~
thebigshane
I see that the abstract doesn't say "no evidence". Did anyone download the
full paper to see if "no evidence" was quoted there?

------
kryogen1c
>In 2014, states spent between $5 and $216 per capita... Collectively, these
incentives amounted to nearly 40% of state corporate tax revenues for the
typical state, but some states' incentive spending exceeded their corporate
tax revenues

studies that need a painfully clear understanding of statistics that start off
making muddy, unclear statements like this are really hard to take seriously.
What is a typical state? are you comparing california and vermont? is typical
a median or mean? the tax incentive data involving faang and walmart is going
to be preposterously different than single-location small businesses.

This abstract strongly incentivizes me to not read the article.

~~~
dsr_
The odds of a random HN reader eventually writing an economic paper are fairly
low, while the odds of the original authors writing another paper are high.
Perhaps you should tell them what you think.

------
jellicle
As a reminder: every business, everywhere, already gets a 100% tax exemption
on every cent spent on hiring employees, buying new equipment, etc. ANY money
invested into ANY business equipment, hiring more staff, or whatever you might
do to expand the business is completely tax-free and always has been.

Tax incentives or corporate tax breaks apply only to money retained by the
owners as profits. Therefore, any tax incentives you give are encouraging the
owners to keep more of the business's money as profits and to invest less in
the growth of the business.

~~~
newguy1234
Right but the problem with business is that it is risky. If there are no
profits, why risk your capital in the first place? Might as well just buy gold
bars or art.

------
mbesto
_" There is not conclusive evidence, however, to substantiate a clear
relationship between the 65-year steady reduction in the top tax rates and
economic growth."_

However:

 _" However, the top tax rate reductions appear to be associated with the
increasing concentration of income at the top of the income distribution."_

[https://graphics8.nytimes.com/news/business/0915taxesandecon...](https://graphics8.nytimes.com/news/business/0915taxesandeconomy.pdf)

------
acd
The tax money given to companies through tax incentives means that there is
not schools being built. There is not roads being paved since those taxes
where never collected. If there was no tax incentives the same amount of
people would be employees. States are competing with the best tax bids. Public
hospitals and universities are not being funded. All that lost revenue may
lead to worse development of society as a whole.

------
rolltiide
Someone actually did a report on this? Its obvious what needs to be said to
gain consensus vs actual benefits.

The actual benefit was reducing the tax burden on various entities, because
thats what they wanted to happen.

Gaining consensus on that means saying whatever is necessary.

Who is this report for? The governments revenues or budget constraints aren’t
really affected by anything as long as it is willing to spend it all on
military and obligations.

Lower taxes just for fun!

------
bediger4000
Interesting conclusion from the "National Bureau of Economic Research", which
is not a government agency as its name suggests, but rather a private think-
tank like thing. Krugman calls it "the old-boy network of economics made
flesh". That is, it's conservative in the sense of favoring the status quo,
it's old and stodgy, etc etc.

~~~
newguy1234
This happens on both sides. Most of these "think tanks" just craft up bogus
research to push some agenda. It happens on both sides of the debate.

------
LaserToy
Just finished reading Dictator Handbook.

So, the catch is - it doesn’t matter for the politicians. They want to give
those tax incentives to get re-elected. Whether it is proven or not is
irrelevant as they will find another reason to do it.

~~~
papito
It's almost like big money in politics is a bad thing. Citizens United will
finish this country as we know it, and soon. "Money equals free speech" is
just such a cynical and intellectually dishonest argument. "If you want MORE
free speech, maybe you should be more rich".

~~~
useragent86
It seems unfair that those who have more money may have more influence--and in
a sense, it is.

But as it is, you have the freedom to speak, to collaborate with others to
speak, and to gather more resources to speak more effectively--and the
government may not restrict you from doing so.

And what is the alternative? Allow the government to decide how much speech
you may have? How much speech is worth? Catalog and index everyone's speech to
ensure they aren't exceeding their quota? Disallow citizens from freely
collaborating and associating for the purpose of speech? That's not freedom.
We know where censorship leads.

One can recognize the drawbacks of big PACs and corporate political spending,
while at the same time recognizing that those are natural consequences of
liberty.

As they say, freedom of speech is the worst--except for the alternatives.

~~~
clairity
but freedom of speech is really incidental to the core issue of the
disproportionate influence of money in politics. yes, no one should be
deprived of the fundamental right of speech (against the government). but
that's the important bit--it's a freedom from the _tyranny of a government_.

the same foundational principle applies to money in politics. a money-driven
influence campaign is an exercise of power, not simply of speech (against the
government), and that has tyrannical implications because the moneyed
interests behind the campaigns seek political power over the rest of us.

to counter that, we insist on transparency in the exercise of any kind of
power, including the people ultimately behind the money (no matter how
removed). the danger of citizens united, as i understand it, is not that it
sanctioned money in power, but that it did not required full and absolute
transparency all the way down the line.

~~~
useragent86
If I understand you correctly, you would seem to advocate for a positive right
of a citizen to know how another citizen has freely spent his own money.

And not only citizens, but the government would know as well, for "full and
absolute transparency" would not prevent the government from seeing and using
such information. As we have already seen, the Executive can misuse federal
agencies to impede the financial efforts of his political opponents, so
granting that right would not seem wise.

For the same reason that we vote by secret ballot, not allowing citizens to
spend their money secretly for political advocacy would also lead to a form of
social tyranny. Consider Brendan Eich.

~~~
clairity
it's a bedrock principle of our constitutional framework that we know who is
exercising political power, to avoid corruption and tyranny. it's why we have
3 co-equal branches of government that must make their deliberations and
decisions known to the public.

and scale matters. PACs with millions of dollars can exercise political power
in a way that regular individuals cannot. the public needs to know who is
exercising power (that it's in the form of spending money is incidental).

no one can (or should) protect you from all repercussions, and social pressure
is better than (destabilizing) violence.

~~~
useragent86
> it's a bedrock principle of our constitutional framework that we know who is
> exercising political power, to avoid corruption and tyranny.

A statement so vague could justify anything.

> it's why we have 3 co-equal branches of government that must make their
> deliberations and decisions known to the public.

In fact, they aren't so required.

> and scale matters. PACs with millions of dollars can exercise political
> power in a way that regular individuals cannot. the public needs to know who
> is exercising power (that it's in the form of spending money is incidental).

You've ignored every point I've made and have repeated yourself.

> no one can (or should) protect you from all repercussions

An argument I did not make.

> and social pressure is better than (destabilizing) violence.

The former tends to cause the latter.

If you just want to speak without listening, you could write a blog.

------
beat
Since when are political decisions evidence-based? Serious question. Tax
incentives aren't there because they work, but rather because lots of people
believe they work. Politics works on beliefs, not facts.

~~~
wffurr
How can you even begin to counter a mistaken belief without evidence that the
belief is indeed mistaken?

~~~
beat
You substitute one belief system for another. No evidence needed. It's not
hard to find people who have done just that.

------
freen
Imagine you run a company that makes a million dollars a year in profit and
that there is a flat 10% tax on that profit.

Run the thought experiment of what you'd do if that taxes doubled or halved.

I don't know about you, but in the case of taxes doubling I'd reduce my profit
margin by investing in the business to increase top-line revenue and profit in
the future rather than pay more taxes now.

If taxes halved, well, then I just take home more money now! Simple.

Granted, this is a massive over-simplification, but the basic principle holds:
taxes on profit literally force businesses to decide between reinvestment and
cashing out.

~~~
scottjg
i think this oversimplification may obfuscate the issue in a way that's a
little misleading. in reality, the two choices are not only taking a tax hit
or reinvesting in the business. there are a pretty wide array of tax avoidance
schemes that are utilized in the united states.

if my corporate tax rate is low, but personal tax rate is high, as in your
example. i may choose to invest in a SEP, or a deferred compensation plan,
kicking the taxes down the road. potentially, because of the estate tax laws,
my heirs may inherit these investments with no tax penalty due to step up
basis rules.

if you were making a million dollars a year in profit, you probably wouldn't
need ordinary income anyway. there are so many different types of credit
vehicles you could leverage at a lower interest rate than the tax rate. though
i suppose, arguably this is a type of economic growth. it grows profit in the
financial services industry.

~~~
freen
My example is intentionally simplified, and doesn't consider either a high or
low personal tax rate. It also doesn't consider tax avoidance because,
frankly, legislation that enables tax avoidance is equivalent to lowering
effective taxes.

Statutory vs Effective tax rates are what actually count in terms of the long
term choices companies make and the outcomes for the rest of us. In my
example, imagine that there are absolutely no tax dodges whatsoever. The
statutory rate is the effective rate.

If it were impossible to pay accountants to dodge taxes, i.e. the middle class
income tax bracket, then my example holds.

Note for the casual reader: please be aware that there is a HUGE difference
between statutory and effective tax rates. Politicians and Corporations hope
you don't catch on.

[https://www.npr.org/2017/08/07/541797699/fact-check-does-
the...](https://www.npr.org/2017/08/07/541797699/fact-check-does-the-u-s-have-
the-highest-corporate-tax-rate-in-the-world)

------
cs702
The same appears to be true for individual income taxes too.

I've looked at the income taxes versus growth in the US... and I've been
unable to find any obvious relationship. As one of many possible examples,
below is a table showing the highest marginal federal income tax rate and
year-over-year real GDP growth in the US since 1950.

My conclusion, so far: There's a tremendous amount of theory, and rhetoric,
and posturing, and straw-man arguments... but very little or ZERO actual
evidence that national economic growth is impacted one way or another. If
anything, the data seems to show _higher economic growth during periods of
higher taxation_!

    
    
             Highest   US Real
      Year  Tax Rate   GDP Chg
      1950:    84.4%      8.7%
      1951:    91.0%      8.0%
      1952:    92.0%      4.1%
      1953:    92.0%      4.7%
      1954:    91.0%     -0.6%
      1955:    91.0%      7.1%
      1956:    91.0%      2.1%
      1957:    91.0%      2.1%
      1958:    91.0%     -0.7%
      1959:    91.0%      6.9%
      1960:    91.0%      2.6%
      1961:    91.0%      2.6%
      1962:    91.0%      6.1%
      1963:    91.0%      4.4%
      1964:    77.0%      5.8%
      1965:    70.0%      6.5%
      1966:    70.0%      6.6%
      1967:    70.0%      2.7%
      1968:    75.3%      4.9%
      1969:    77.0%      3.1%
      1970:    71.8%      0.2%
      1971:    70.0%      3.3%
      1972:    70.0%      5.3%
      1973:    70.0%      5.6%
      1974:    70.0%     -0.5%
      1975:    70.0%     -0.2%
      1976:    70.0%      5.4%
      1977:    70.0%      4.6%
      1978:    70.0%      5.5%
      1979:    70.0%      3.2%
      1980:    70.0%     -0.3%
      1981:    69.1%      2.5%
      1982:    50.0%     -1.8%
      1983:    50.0%      4.6%
      1984:    50.0%      7.2%
      1985:    50.0%      4.2%
      1986:    50.0%      3.5%
      1987:    38.5%      3.5%
      1988:    28.0%      4.2%
      1989:    28.0%      3.7%
      1990:    28.0%      1.9%
      1991:    31.0%     -0.1%
      1992:    31.0%      3.5%
      1993:    39.6%      2.8%
      1994:    39.6%      4.0%
      1995:    39.6%      2.7%
      1996:    39.6%      3.8%
      1997:    39.6%      4.4%
      1998:    39.6%      4.5%
      1999:    39.6%      4.8%
      2000:    39.6%      4.1%
      2001:    39.1%      1.0%
      2002:    38.6%      1.7%
      2003:    35.0%      2.9%
      2004:    35.0%      3.8%
      2005:    35.0%      3.5%
      2006:    35.0%      2.9%
      2007:    35.0%      1.9%
      2008:    35.0%     -0.1%
      2009:    35.0%     -2.5%
      2010:    35.0%      2.6%
      2011:    35.0%      1.6%
      2012:    35.0%      2.2%
      2013:    39.6%      1.8%
      2014:    39.6%      2.5%
      2015:    39.6%      2.9%
      2016:    39.6%      1.6%
      2017:    39.6%      2.4%
      2018:    37.0%      2.9%
    

Sources:

Year-over-year real GDP growth:
[https://fred.stlouisfed.org/graph/?g=pssP](https://fred.stlouisfed.org/graph/?g=pssP)

Tax rates: [https://www.taxpolicycenter.org/statistics/historical-
highes...](https://www.taxpolicycenter.org/statistics/historical-highest-
marginal-income-tax-rates)

~~~
csa
That’s a great idea, but the simplified data is grossly misleading.

I don’t know all of the details specifically, but I know that the tax reform
act of 1986 did two things: 1) closed a lot of tax loopholes/deductions, and
2) lowered the tax rates.

Pre-1986, the scope of what could be done to avoid taxes was insane. No one
who made money was paying the headline rate on any amount of their income —
any decent accountant would pay for themselves instantly with the savings they
could produce.

If you want to use this type of data, it might be more prudent to look at
different numbers — maybe effective tax rates (i.e., actual tax paid divided
by actual income earned). The numbers might tell a slightly different story.

~~~
newguy1234
Completely agree, was also going to point out the same thing. Comparing the
top tax bracket next to GDP growth is just a very bad comparison to say the
least. The tax reforms over the years distort it so much that the comparison
is effectively useless.

If anything, the only thing it does show is that the people using that metric
(top tax bracket vs GDP growth rate) don't really understand how the tax
system has changed over the decades.

It also clearly shows why you need to have a full and complete understanding
of tax reforms/laws over the decades to really be able to debate the issue
effectively. Most people seem to only have an understanding from google
searches or news articles. It is no surprise that politicians use this
ignorance to their advantage.

------
mikelyons
If I owned a business, and suddenly paid way less in tax, I would want to just
pocket that money as profit and increase my personal wealth, why would any
other business do anything different? We're self-biased at the end of the day,
it's survival.

~~~
spectrum1234
Because of competition. Your competitor who lowered prices by 1% would
eventually drive you out of business.

There is a lagging effect, but these taxes are just a reduction in cost which
eventually get passed to consumers. Assuming the market is competitive of
course.

~~~
chungus_khan
Unless there are pressures to do otherwise, your competitor is likely to do
the same as you. If customers accept the current price and there is no
external pressure to lower it, lowering it is likely not a good idea, and
unless the market is unusually competitive, sales are unlikely to increase
without a substantial drop.

------
naiveprogrammer
__State and local business tax incentives __

------
Bostonian
You are supposed to post with the actual title, "Evaluating State and Local
Business Tax Incentives", unless it is too long.

------
LatteLazy
They don't, they give money to boomers. Billionaires and CEOs get some too.
That is the only thing going on here: redistribution of wealth away from
anyone under 40.

~~~
newguy1234
Don't worry, once you're over 65 you'll be off to vote for social security
increases in every election.

~~~
LatteLazy
It won't matter, demographics made boomers a permanent majority. They make my
generation a permanent minority. I'll vote but may as well not.

------
p0nce
So why increase spending ? Tax it.

------
0xff00ffee
My portfolio manager told me in Dec 2018 that our 2019 strategy would depend
on if companies invested their tax returns for growth or handed them out to
shareholders and execs. He followed the latter path.

TL;DR: My portfolio manager adjusted my strategy because tax plan was a
giveaway for the rich

EDIT: So many downvotes. Truth is truth, man. Truth is truth.

------
boyadjian
Why wanting to increase economic growth ? Economic growth is polluting.

~~~
mrlala
Because apparently trying to increase GDP from 2.5% to 2.6% is worth more to a
party of people than providing health care to everyone and not putting young
people into tremendous debt #justrepublicanthings

------
lasermike026
When did ever use evidence to make economic, political, or social decisions?

------
billions
Tell that to the contractors affected by AB-5

------
gnicholas
Just to clarify, the scope of the article is state and local tax incentives.
The federal government has many more tax incentives (basically anything that
you can get a deduction or credit for), and these definitely shape behavior
because the rate is so much higher than state/local taxes.

Perhaps the title could be updated to say "state/local tax incentives".

~~~
dragonwriter
> The federal government has many more tax incentives (basically anything that
> you can get a deduction or credit for),

Only credits are really business tax incentives, since business expenses, as
such, are generally deductible.

> and these definitely shape behavior because the rate is so much higher than
> state/local taxes

That doesn't follow. It would make sense that if state/local incentives did
shape behavior, larger federal incentives would do more to shape behavior. But
if state/local incentives have no evident effect, what amounts to more of the
same could plausibly also have no effect.

~~~
gnicholas
> _Only credits are really business tax incentives_

Credits are definitely not the only business tax incentives. Accelerated
depreciation or amortization is one easy example. Also, the decision to treat
something as an immediately-deductible expense as opposed to something that
has to be capitalized is itself a tax incentive.

> _But if state /local incentives have no evident effect, what amounts to more
> of the same could plausibly also have no effect._

Sure, it could. But the paper doesn't even try to establish that. It's like
saying that speeding doesn't cause traffic accidents, based on an article that
only looked at bicycles that speed.

It's a bit odd to have attracted downvotes here, while at the same time the
title was updated in the way that I suggested.

------
nodesocket
What about stock market gains for 2019? S&P was up 30% last year which was
fantastic. Before y'all reply that the stock market only benefits the wealthy,
that's patently false. Weather it's your parents retirement account, pensions,
your company stock options, your own trading account, nearly everybody has
money in the market and beneifts from gains.

~~~
tclancy
It's nice that you have such a great perspective on who "everyone" is. It's
self-reported and thus probably well underestimated, but only 55% of Americans
say they own stock[0]. And 84% of the total stock belongs to 10% of the
people[1].

[0] [https://www.financialsamurai.com/what-percent-of-
americans-o...](https://www.financialsamurai.com/what-percent-of-americans-
own-stocks/) [1]
[https://www.nytimes.com/2018/02/08/business/economy/stocks-e...](https://www.nytimes.com/2018/02/08/business/economy/stocks-
economy.html)

~~~
refurb
Looks like “owning stock” in your data doesn’t include thing like pensions
(public or private).

A lot of people own stock indirectly.

~~~
tclancy
Agreed, that's why I said it was "probably well underestimated"; but even then
if 20% of Americans don't have $500 in savings[0], it feels like "everyone" is
at best something between 50-80%.

[0] [https://www.marketwatch.com/story/half-of-americans-are-
just...](https://www.marketwatch.com/story/half-of-americans-are-just-one-
paycheck-away-from-financial-disaster-2019-05-16)

