Greg Gerritt March 29 2021
I want to apologize to Mr DiBiase, his sins are really not his sins, but rather are the sins of his class, the rich and powerful who believe that if the economy is run for the benefit of the rich, that everything is for the best, and to insure that it continues to work on their behalf turn their financial power into political power to maintain their power to manage the economy. The problem is that what works well for the ruling class often fails miserably for the rest of us. The approach offered by Mr DiBiase in his op ed was simply a recitation of the same old song and dance that we are offered so often telling us if we do not obey the rich we shall starve and freeze in the dark. It is a big lie, but one that is beamed at the American People day and night, to our severe detriment. So my comments are not personal, but Mr DiBiase has made himself a convenient target for a written commentary on the sins of his class.
I have not included the links within the essay for the statements included, but I do offer a few links at the end to papers that include all the links to the research. You can look it up.
Michael DiBiase, CEO of the RI Public Expenditure Council and former Director of the State Department of Administration published a column in the Providence Journal recently that while sort of based on facts, is completely devoid of context and presents a very biased picture of how economies work. Part of his problem, and a problem with much of the discussion around business climates, is that DiBiase cherry picks his data while ignoring the big picture. The big picture has several components. One is that there is no data at all that shows that lower tax rates increase economic growth rates. Zero . None. This is clear at the national level and at the state level. The fastest growth period in US history came when income tax rates on the wealthy were highest, and the data is also very clear that a more equitable economy, one in which wage gaps between the lowest wage workers and the highest wage workers are smallest creates the most prosperity. One reason for this is that when taxes on the rich are higher, more money is available to be invested in public infrastructure.
A second point that DiBiase ignores is that study after study has demonstrated that in addition to the Tax Foundation being a bunch of paid off liars who say what their paymasters (donors) tell them to say, there is no serious statistically valid evidence that what governors and legislatures do actually has any significant effect on growth rates. The wisdom that they have no effect is becoming more widespread, but out of favor with RIPEC’s donors and constituencies. The history of a place and its natural resources are a much better indicator of what the growth rate will be. Business climates are a club used by the rich to beat communities and not at all correlated with growth rates.
DiBiase’s argument might be stronger if after Rhode Island had cut income tax rates our growth rate had trended much closer to the national average. That is clearly not the case as a review of the relative growth rates of the USA and Rhode Island show that year after year, including the period after the RI tax cuts, Rhode Island continued its trend of running about 70% of the national average,. In other words if the national growth rate goes up, RI follows, and when the national growth rate goes down, RI follows. And we run 70% of the national growth rate in both scenarios.
Finally we need to discuss what makes up the national growth rate. For this I refer everyone to the Bureau of Economic Analysis, the Federal agency that tracks all of this information. Reading the data produced by the BEA it is obvious that states with proportionally LARGER natural resource sectors will have faster growth rates than states with smaller natural resource sectors (New England is the least natural resource dependent sector of the country), and in almost all cases the growth rates are really the result of the depletion of natural resources being considered income.
Finally DiBiase completely ignores the role of population growth and megacities in economic growth. A rapidly growing population, fueled primarily by migration from rural areas leads to faster growth simply as there are more mouths to feed and clothe. With a very slow population growth , if RI had a fast economic growth rate, it would be a major anomaly, and likely the result of massive polluting industries destroying the fabric of our communities. The flip side of this is that fast growth also occurs in megacities, cities with multi millions of people that have become global financial centers. If you really look at our peers, old mid-sized industrialized cities, we are about normal and the efforts to speed up growth often lead to displacement and failing infrastructure.
In conclusion, the constant efforts by the tools of the rich to reduce their taxes pollutes the air waves as well as harms our communities. Faster growth, which is mostly a fantasy, and mostly a tool to line the pockets of the investor class, and never trickles down to the workers, on a massively depleted planet is unlikely to make our communities stronger and cutting taxes for the rich is likely to further contribute to the breakdown of our communities by making worse the climate catastrophe we are already experiencing, increasing pollution, creating greater inequality and a lack of investment in public infrastructure.
I call on RIPEC to use its power and prestige in RI to convene a discussion that is truly inclusive and much better informed than those convened by the Tax Foundation, to discuss the right kind of taxation regime for Rhode Island for the kind of economy that will help us be resilient in the chaos of the 21st Century. More money for the rich will not get our communities where they need to go. And will not cause the economy to grow faster.
Links to research