Monday Morning Links

Miscellaneous material for your Monday reading.

- Greg Leiseron discusses why the abject failure of Kansas' anti-social experiment with trickle-down economics shouldn't have come as a surprise to anybody:

Claims of supply-side growth from labor income tax cuts rely on the idea that people will be more willing to work when their after-tax wages are higher. This theory posits that labor income tax cuts result in growth because people who could increase their earnings choose not to because tax rates are too high, but it does not take much to see why cutting tax rates for middle- and higher-income families does not create jobs through this mechanism. Middle- and higher-income families already have jobs, even if they are not the jobs they necessarily want.

Claims of supply-side growth from tax cuts on business profits rely on the idea that those cuts will increase the level of investment and that, in turn, will increase productivity. Under this theory, a tax cut on business profits could increase employment by spurring investment, increasing wages, and attracting people into the labor force who are not willing to take a job at current wage rates. For this theory to work, however, it would need to be the case that cutting statutory business tax rates would meaningfully reduce the effective tax rate on an incremental investment such that the tax cut causes businesses to increase investment. Second, it would need to be the case that the reduced tax rate causes businesses to increase investment in a way that increases the wages they would be willing to pay to people who currently choose not to work because wages are too low. Third, it would need to be the case that this increase in wages would be large enough to spur people who currently choose not to work to enter the labor force and seek jobs. And finally, the deficits resulting from the tax cuts would need to be small enough that they increase businesses’ cost of capital by less than the reduction resulting from the lower tax rate, as a higher cost of capital would cause businesses to reduce investment rather than increase it.

These conditions are highly unlikely to hold in practice. Businesses already pay relatively little tax on the incremental return from investments in tangible capital due to tax benefits such as accelerated depreciation and interest deductibility, and they often pay no tax—or even receive a tax subsidy—on marginal investments in intangible capital. Moreover, reducing the statutory tax rate on business income actually increases the effective tax rate on debt-financed investment, which is a common source of financing for investments in tangible capital because businesses deduct interest payments from taxable income.

- Jonathan Rauch makes the case for conservatives to support collective bargaining to ensure that social stability is possible - rather than seeking to undermine labour at every turn as right-wing parties are currently wont to do. And Stephen Tweedale comments on the value of card check certification to give effect to workers' rights to organize and bargain collectively.

- CTV reports on the limits of capital's interest in a market with full information, as Montreal landlords are complaining about tenants sharing information about the rent they're paying. And Jonathan Garber examines how markets have been consistently - and systematically - off the mark in their estimates of something as basic as bond rates.

- Rob Ferguson reports on Ontario's long-overdue limitation on employer sick note requirements - which is actually meeting little objection even from employers themselves.

- Andrew Jackson examines the relationship between increasing rents and inequality in making cities unaffordable for all but the most privileged workers.

- Finally, Morna Ballantyne writes that Ontario's latest child care announcement represents a significant step forward compared to what the federal government has on offer.