Tax Cuts: Will They Help Local Economies?

Cleveland's very own Senator George Voinovich has the guts to question whether the Bush Administration's proposed tax cut plan is good for our economy. I have known and worked closely with Voinovich as Cleveland's mayor and Ohio's governor. He is a frugal man that believes government should be of 100% service to people and businesses, but it should also live within its means. I agree with Voinovich's direction. We need to be careful how much we compromise government's fiscal capacity to deliver services. It will hurt our competitiveness!

I have been doing some research on this tax cut issue and came up with two studies that reflect the "for" and "against" perspectives of the Bush Administration's proposed tax cut plan. For the "against" position, read the Committee for Economic Development's (CED's) position on the Federal deficit and what that has to say about tax cuts. For the "for" position, read the study report prepared by PricewaterhouseCoopers. Both reports reinforce what I said in earlier ED Futures articles about how economic development is really political economy.

Economic developers should be asking whether the proposed tax cut plan will increase the competitiveness of local economies. While many businesses may see tax cuts as a good thing in the short-term, what will they think when infrastructure, education and other public services have been cutback so severely that it erodes business competitiveness? I think this is an important perspective to bear in mind as we address ourselves to these issues.

Do opportunities exist to reduce government spending? Yes, but we need a plan to restructure service delivery before that happens. One worthwhile direction to think in is "regionalization" of public services. Many cities and counties can no longer afford to operate in the way they have been. Greater reliance on the Internet to provide more e-government services makes a lot of sense. Also, we should be increasing the use of distance education (Internet-supported education) on all educational levels. E-learning should play a greater role in educational service delivery.

We need to think about this tax cut issue and what it means to local economies. I see problems with giving back too much given our current economic situation, the rising debt caused by the War in Iraq and other factors.

Our national, regional and state economic development associations need to play a stronger role in shaping public policy on behalf of local economies. Where are they?