Will The New York Timesever understand economics? Not if a recent column by Fortunemagazine writer Anna Bernasek, published in the NYT, is any indication.
Under the headline, “Do Taxes Thwart Growth? Prove It,” Bernasek tries to show there is little relationship between taxes and economic growth. “Despite the widespread notion that taxes harm the economy, no one has actually been able to back that up,” she writes.
So how does she “back up” herassertion?
She cites the work of two economists in 1994 who wrote, “Investment in transport and communication is consistently correlated with growth while the effects of taxation are difficult to isolate empirically.”
Do you see the poor lady’s confusion? In some cases, the government does “invest” in transportation and communication, as with the Interstate Highway system and Amtrak. But what about private sector companies like American Airlines, Delta Air Lines, SBC, Verizon, ABC and CNN, which really drive those industries?
Bernasek also cites another practicing economist who found that a “rising tax burden in the United States and other developed countries went hand in hand with rising prosperity.”
The author fails to even mention the economic growth that ensued after the four major tax cuts of this century. They came under Presidents Coolidge, Kennedy, Reagan and Bush. Instead, Bernasek implicitly relies on proving a negative: “So just because taxes can discourage productive behavior doesn’t mean that they do.”
The author could just as easily, and wrongly, have said: “So just because an employer refuses to pay his employees doesn’t mean that will affect how they work—or whether they work at all.”
What the author does not understand is that taxes affect workers’ behavior just as income does. Indeed, they are two sides of the same coin.
Low, broad-based and transparent taxes provide an incentive for people to work more and harder, because they keep more of what they make. If Ms. Bernasek ever grasps that concept, she will begin to understand the relation between taxes and economic growth.
But then The New York Times wouldn’t run her articles any more.