A new talking point from tax cut snake oil salesman Arthur Laffer is making the rounds. It’s been seen in the pages of The Wall Street Journal and cited by Indiana Governor Mike Pence, Iowa House Majority Whip Chris Hagenow, and Tim Barfield, Governor Jindal’s point man for income tax elimination in Louisiana.
As the Journal put it: A new analysis by economist Art Laffer for the American Legislative Exchange Council finds that, from 2002 to 2012, 62% of the three million net new jobs in America were created in the nine states without an income tax, though these states account for only about 20% of the national population.
But as they’ve done with many of Laffer’s previous analyses, the Institute on Taxation and Economic Policy (ITEP) explains why this talking point is all rhetoric and no substance. Laffer’s research is like a house of cards, depending on data selected and placed precisely to help reach the conclusion he wanted, as ITEP details:
1) Most of the states without income taxes contributed just one percent or less to the nation’s job growth over the period Laffer examines. Laffer’s claim has nothing to do with the “nine states without an income tax,” and everything to do with one of those states: Texas.
2) Texas’ economy differs from that of other states in many significant ways, and comparing its job growth to the rest of the country provides no insight into the economic impact of its tax policies. This is particularly true of the time period Laffer examines, since it includes the housing crisis that Texas largely avoided for reasons unrelated to tax policy.
3) Looking beyond the specific Recession-dominated time period chosen by Laffer, Texas’ job growth has otherwise generally been in line with its rate of population growth.
The four-page report with graphs and footnotes is here.