BCT Editorial – 5/25/08

This page was last updated on May 25, 2008.

Go slow; Editorial; Beaver County Times; May 25, 2008.

While I tend to agree with the editorial, keep in mind the Times isn’t a disinterested bystander. It is a business that would presumably benefit from cuts to so-called business taxes.

Note what the editorial didn’t mention, spending cuts. Instead, the editorial only referred to “tax cuts and spending increases.” If tax rate cuts are to be effective, they need to be matched with spending cuts, at least initially. Why? First, without spending cuts, the reduced tax revenue from the business tax rate cuts would need to be offset by tax rate increases elsewhere. That kind of tax shifting won’t help. Second, while reduced rates eventually result in greater tax revenue due to increased economic activity, it doesn’t happen overnight because before they react positively to the cuts, businesses need to gain confidence the cuts won’t be rolled back on a whim. If you’ll recall, PA instituted rate cuts in the Capital Stock and Franchise tax only to slow down the rollback when things got “tough.” Actions like these obviously make business owners wary of making investments that hinge on lower tax rates.

This is at least the third time since 2005 the Times has used the title “Go slow/slowly” regarding tax rate cuts.