CAP Study Shows Public Investment Best Way to Stimulate State Economy

Community Action Project urges using proven fiscal tools over tax cuts to grow Oklahoma’s economy

Economic research shows that policymakers who want to grow Oklahoma’s economy should invest more in education, health and infrastructure rather than cut taxes, according to an issue brief released today by Community Action Project (CAP).

The issue brief according to CAP, is based on a thorough review of economic research, historical data and comparative studies with other states and nations. The brief considers a broad array of fiscal policy tools available to state policymakers for growing Oklahoma’s economy. It finds that public investment in education, health and infrastructure are the most effective ways to spur economic growth. Such investments stimulate the economy by lowering business costs and raising labor productivity.

“This brief clearly demonstrates that we can encourage stable, long-term economic growth in the state by investing in the priorities needed to support Oklahoma’s families, businesses and communities,” said David Blatt, Director of Public Policy for CAP, a Tulsa-area anti-poverty agency.

“Investing in public services helps those who run businesses that depend on a skilled workforce and functioning infrastructure. By helping to decrease significant business costs and improve the environment for revenue generation, Oklahoma policymakers can encourage business investment and entrepreneurial growth, significantly impacting Oklahoma’s economic growth rate.”

In contrast, the study finds that tax cuts are an extremely inefficient fiscal tool for achieving economic growth. In one study cited by the brief, researchers found that 96% of the revenue given up by a typical tax cut is wasted money, going to firms whose investment decisions were not affected by taxes.

“Research has found that public services, especially those dealing with education and infrastructure, are key determinants to business location and investment decisions,” said Jim Alexander, a policy analyst at CAP and the brief’s author.

“Likewise, policy that improves the health and the opportunity for greater educational attainment of all Oklahomans creates a more productive, better-skilled workforce that attracts businesses and high- skilled workers.”

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