Comment 30609

By A Smith (anonymous) | Posted April 29, 2009 at 14:53:06

Ryan >> What happened in the mid-1980s is that the economy as a whole started to grow rapidly after the stagflation of the 1970s and crushingly high inflation of 1981-2 finally gave way to low inflation and economic reinvestment.

Real GDP growth from 1970-79 averaged 3.26%, from 1980-89 it averaged 3.07%. During the seventies, before Prop 2 1/2, Boston enjoyed lots of rail transit, yet it still had high tax rates and a shrinking population. Explain this.

>> One benefit of all this new growth is that cities could afford to start cutting tax rates

Economic growth in the eighties was slower than the seventies, therefore your argument is invalid.

Ryan >> Correlation != causality.

Most reasonable people will settle for strong correlations if 100% proof is unavailable. Unfortunately, you can't even provide weak positive correlations between LRT and economic growth, let alone 100% proof.

Ryan >> Cities enjoying economic growth can afford to cut tax *rates*

Cities like Boston, that discipline their politicians with spending restrictions, enjoy greater economic growth because they give the taxpayers more say in how their money is spent (much more democratic). Prior to 1982, Boston taxpayers lived through high tax rates, imposed upon them by politicians and the result was a shrinking population and economic malaise. Only after explicit limits were imposed on government spending, did tax rates begin to drop and the city's population increase.

If LRT truly was a positive for economic growth, why were tax rates over 2% even though LRT had existed for decades? That's just a HUGE flaw in your theory.

Ryan >> What cities need to function is a given *total amount of revenue*

If cities were actually productive and not wasteful, they could provide a stable level of public services with tax increases that match inflation and population growth, which happens to be around 2.5%, like Boston. Furthermore, this spending discipline has not hurt Boston, but actually helped increase their assessment base much faster than Hamilton, where politicians are much less accountable for how they spend taxpayers money and therefore more likely to waste it.

Politicians are like kids with their parents credit card. If a parent is smart, they place limits on that card and only allow large purchases if they agree to the expenditure.

>> city interested in continued growth will cut rates accordingly to maintain some kind of revenue homeostasis.

Therefore, you accept that lower tax rates help promote economic growth. If this is the case, what is wrong with allowing voters to decide how fast government should spend their money. Boston has done this in a reasonable manner, giving government enough flexibility to take care of the basics (2.5% increase a year), but forcing other spending to be decided upon by the people. How is this a bad thing, increasing thew amount of accountability?

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