Don’t cut sales tax based on flawed economic model
The good folks at the CFAP have been heavily
promoting some of the results of this model, that predict that Rhode Island
will enjoy a tremendous economic boom if only we would eliminate our sales tax.
As
I detailed in that article, the RI STAMP model is flawed not only by a host of
questionable assumptions, but also the laughable attempt to obscure those
assumptions under an absurdly over-complicated presentation of the relevant
equations. Really, there is no reason to do what they do except as a conceptual
bulwark against reporters who are easily cowed by that sort of thing.
Now
comes the Institute for Taxation and Economic Policy (ITEP) to say the same
thing as me. In an epic takedown (summary here, report here), they cite STAMP’s many assumptions that either
cannot be justified by the research literature or are completely contradicted
by that literature or by experience.