Tax cuts great but don’t expect much

(Fort Wayne) News-Sentinel

The Trump administration is trying to make the case that “big tax cuts” worked in Indiana to spur economic growth and would therefore work for the whole country as well.

More power to them. We’re always ready to support a tax cut, the bigger the better. And any reform that simplified and weakened the tax code would be most welcome, too.

But the administration should be careful not to overstate the effects of Indiana’s tax cuts and, especially, not to try too hard to draw a parallel between state and federal tax structures.

In the first place, Indiana’s tax cuts cannot be called “huge.” It might be accurate to label them “the biggest tax cuts in state history,” as Vice President Mike Pence does, but that does not disguise their relative modesty, 5 percent for the income tax rate, from 3.4 percent to 3.23 percent, and a gradual reduction in the corporate rate from 6.5 percent to 4.9 percent.

And while it is encouraging that Indiana’s economy is doing better than the nation’s — a GDP growth rate of 4 percent and an unemployment rate of 3.5 percent, economists have always had trouble proving a direct correlation between tax cuts and subsequent economic growth. Certainly they help — and tax hikes obviously wouldn’t do the economy any good — but there are many other factors difficult to measure.

We support whatever tax cuts might be coming our way. The money we earn belongs to us, and it is up the government to make the case that it needs to keep more of it. But whatever temporary boost that makes in the nation’s economy, it won’t matter unless it’s the beginning of a revolution that, frankly, is unlikely to happen.

Indiana’s sane taxing and spending policies, which include a requirement for a balanced budget, did not spring up overnight. They resulted from a culture carefully tended for a long time that puts government’s and the private sector’s roles in the proper perspective.

That culture is sadly lacking in the national dialogue, where the expectation is that the government must do everything, no matter what it costs and how much debt it accumulates. It will take much more than a one-time tax cut, however huge, however it is coupled with “reform,” to change the prevailing national culture.

Ronald Reagan learned that lesson. We should, too.

This was distributed by Hoosier State Press Association. Send comments to [email protected].