Press Release

New Report Aimed at Dispelling Tax ‘Myths’ |

In a new report released February 6, the American Legislative Exchange Council (ALEC) seeks to debunk tax reform “myths” while calling on states to cut taxes.

The report condemns progressive policies that it says are responsible for the Great Recession and for slowing an economic recovery, and it encourages free-market approaches for economic growth.

The report also highlights seven widely circulated beliefs about fiscal policy that it says are “mythological or, at a minimum, are open to serious debate.” They include the ideas that lowering taxes during a recession is bad for the economy and that raising tax rates on the rich will not harm the economy.

“Prominent economists are counseling the states to move away from high tax policies that discourage growth and instead consider policies that stimulate business, investment, and job growth,” the report says, referencing the work of such economists as Arthur Laffer.

The report also calls out Peter Fisher, research director with the Iowa Policy Project, for his critique of ALEC’s “Rich States, Poor States,” an annual report that ranks states’ pro-market policies. (Prior coverage .)

“We find that Fisher’s findings — though widely distributed as authoritative — in fact are the result of amateurish and incorrect analysis and misinterpretation of data,” the report says.

In an e-mail to Tax Analysts, Fisher said ALEC officials clearly do not understand the regression analyses he used to challenge their assertions.

ALEC claims that its “policies lead to prosperity,” Fisher said. “They don’t, and ALEC’s staff has not provided any evidence that they do, or any counter evidence to my arguments and analysis that show that ALEC policies are a prescription for lower incomes and higher poverty rates.”

Jonathan Williams, director of ALEC’s Center for State Fiscal Reform, said he would be surprised if Randall Pozdena, one of the report’s authors and a former vice president of the Federal Reserve Bank of San Francisco, doesn’t understand regression analysis.

Further, Williams said, the report references a large amount of academic evidence that “backs up the point of view that lower taxes and reasonable tax policy does bring about better economic results, regardless of what Peter Fisher and his study would show.”

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