By now we are all familiar with the usual economic talking points of right-wing politicians. They tell us, with the utmost confidence, that cutting taxes for the rich will incentivize investment and job creation. The lower the corporate tax rate the more people these benevolent corporations will employ. That, in a nutshell, is the mantra of conservative economics.

Abhijit Banerjee and Esther Duflo, this year’s winners of the Nobel prize for economics, beg to differ. Their work suggests that not only does this strategy intensify economic inequality, it also doesn’t do much to induce economic growth.

As Banerjee puts it, “You don’t boost growth by cutting taxes, you do that by giving money to people.” Modest increases to the taxes paid by the wealthiest could fund welfare programs that put more money into the pockets of average folks. They, in turn, return this money into the economy in the form of consumption. It is their spending which increases demand for goods and services and boosts investment, jobs, and overall growth.

Banerjee and Duflo’s advice flies in the face of right-wing economic policy. Conservatives, in Canada and abroad, are reducing taxes for corporations and wealthy elites in the hopes that they will invest some of the cash they are hoarding.

Take the United Conservative government in Alberta for instance. This year they announced plans to slash the corporate tax rate from 12 percent down to 8 percent. They call it the “Job Creation Tax Cut”. This year a 1% reduction was implemented, which did indeed cut costs for corporations and leave them with more cash on hand. Husky Energy which had benefited to the tune of $233 million from the tax cuts, then proceeded to lay off hundreds of workers. Far from creating employment, the “Job Creation Tax Cut” did nothing to save Albertan jobs from the chopping block.

Worst yet, the tax cuts resulted in a loss of government revenues. To offset these losses, the Conservative government in Alberta is gutting welfare programs that would have left more money in the hands of consumers. If Banerjee is even slightly correct, these changes will not only do little to attract investment and employment, they will have adverse effects on economic growth and inequality.

So, on one side we have a Nobel prize-winning economists that tell us to increase taxes and give more money to average folks who will spend it. On the other side, we have Conservatives like Jason Kenney that are decreasing welfare spending and giving more money to rich folks who are hoarding it. Take your pick. It’s not a hard choice.

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