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					   Send It and
They Will Spend It
The Case for Tax Cuts in California



                 By
     William L. Anderson, Ph.D.




            April, 2001
Table of Contents

Executive Summary ............................................................................................................1
Are Surpluses the Government’s Equivalent of Profits? ....................................................2
Sent It—And Spend It.........................................................................................................3
The Tax-Cut Solution ..........................................................................................................4
Conclusion ..........................................................................................................................6
Notes.................................................................................................................................10
Appendix: California’s Revenues and Expenditures.........................................................11
About the Author ..............................................................................................................12




Figures and Tables

Table 1: California Income-Tax Rates.................................................................................4
Table 2: California Income-Tax Rates Assuming
         One-Percent Income-Tax Rate Decrease .............................................................5
Table 3: Economic Change in California Assuming
         One-Percent Income-Tax Rate Decrease .............................................................5
Figure 1: Employment in California Assuming
          One-Percent Income-Tax Rate Decrease............................................................7
Figure 2: Capital Growth in California Assuming
          One-Percent Income-Tax Rate Decrease............................................................7
Table 4: California Income-Tax Rates Assuming up to
         Two-Percent Income-Tax Rate Decrease .............................................................8
Table 5: Economic Change in California Assuming up to
         Two-Percent Income-Tax Rate Decrease .............................................................8
Figure 3: Employment in California Assuming up to
          Two-Percent Income-Tax Rate Decrease ............................................................9
Figure 4. Capital Growth in California Assuming up to
          Two-Percent Income-Tax Rate Decrease ............................................................9
Send It and They Will Spend It                                                                    1




Executive Summary
At the end of this fiscal year, the government of California may, despite the energy
crisis, continue to run a budget surplus. This should surprise no one. California has run
budget surpluses—many of them quite large—in the face of calamities that have left
other states struggling to avoid red ink. In fact, California’s budget surplus has survived
wars, inept government, and ballot propositions that limit taxation, such as Proposition
13. It has also survived a number of recessions and energy crises.
   “Balanced budgets” and “fiscal responsibility” are seen almost universally as synony-
mous. Indeed, both federal and state laws require that states balance their budgets.
Further, states are not free to run deficits financed by borrowing or printing money.
   One may conclude that continuous budget surpluses are great achievements of Cali-
fornia lawmakers. Yet, nothing could be further from the truth. While there can be no
question that the legislature is legally responsible for balancing the budget, there is a
much larger issue at stake—the effect of the heavy tax burden that Californians face in
order to create these surpluses.
   This study finds that the tax system that creates large surpluses has the following effects:

  • Every $1 increase in revenues (adjusted for inflation) has led to an increase in
    spending of 75 cents, and
  • Each dollar of a surplus leads to $9.27 in new expenditures for the next
    budget year.
  • It promotes the fiction that government spending creates prosperity, when the
    opposite is true: Productive private enterprise, that same sector of California’s
    economy so often derided by many members of the legislature, creates the
    prosperity that allows for large increases in government spending.
   At the same time, this study also concludes that the legislature’s greatest act of fiscal
responsibility is not to spend the surplus or even put it in an imaginary “lockbox,” but
rather to find ways to rebate that money to the taxpayers who provided it. This paper
also shows that:

  • Even a modest one-percent income-tax rate decrease would result in more than
    $70 billion ('99 dollars) in additional capital by 2004, which is essential to
    continuing economic growth, and more than one-quarter-million new jobs in
    California by 2004.
  • A two-percent income-tax rate decrease would result in almost $130 billion ('99
    dollars) in additional capital by 2004 and about 470,000 new jobs by 2004.
2                                                                        Pacific Research Institute




    Are Surpluses the Government’s Equivalent of Profits?
    Whether at the national, state, or local level, discussion of budgets is often limited to
    abstract concepts of “fiscal responsibility.” That is, the central question becomes: Will
    tax revenues be enough to cover expenses? If the answer is yes, then the government has
    acted responsibly. If the answer is no, however, then the “responsible” course for govern-
    ment is to collect more revenue. In the case of budget surpluses, the self-congratulations
    are even greater.
       For example, the reasons pollsters cited for the high public-approval ratings for Presi-
    dent Bill Clinton was that not only did the nation have prosperity, but the federal govern-
    ment also had been running budget surpluses for the first time since 1969. In their fierce
    opposition to the modest tax cuts proposed by President George W. Bush, Democrats
    and some liberal Republicans have pointed out that the federal budget was horribly
    unbalanced during the 1980s. For much of that decade, we also had relative prosperity,
    but that prosperity was overshadowed by the budget deficits.
       However, as economists such as Thomas Sowell of the Hoover Institution have
    pointed out, while federal revenues rose continually during the 1980s, government
    expenditures rose even faster.1 The problem of deficits then was not taxation; it was
    runaway spending. Likewise, whenever the government runs large budget surpluses year
    after year, it indicates that taxes are too high.
       This last statement flies in the face of conventional wisdom. After all, judging from
    the campaign rhetoric of both Al Gore and George W. Bush, the federal surplus was
    touted as a “profit” from which programs such as prescription drug coverage and aid to
    education could be funded. One cannot compare a government budget surplus to a busi-
    ness profit, however, because the revenues are obtained in very different ways.
       In the case of the business owner, revenues are gained because that owner has
    produced something that others are willing to purchase with their own scarce funds.
    Market processes, one must remember, involve individuals who trade by choice. Govern-
    ment tax collections, on the other hand, are anything but voluntary.
       Consumers are not forced by law to make any purchases of electricity or groceries.
    But consumers are also free to change their purchase habits of electricity or anything
    else. When prices for some goods and services rise above certain levels, consumers find
    cheaper substitutes. This prevents producers of goods and services from simply passing
    on costs to consumers.
       As for profits, business owners earn them not because they “charge too much” but
    rather because certain factors of production within the process in question are temporar-
    ily under priced.2 The business owner who asks a price too high for most potential
    consumers will not receive the revenues necessary for a profit to exist. In other words,
    markets, not individual producers by themselves, ultimately determine what the price to
    consumers will be. Producers are not free to charge whatever they want in order to
    increase profits, but, instead, must be continually cutting their costs.
       In a capitalist system, individuals pay prices for things directly, at the cash register.
    Taxation, on the other hand, involves an indirect payment for goods and services the
Send It and They Will Spend It                                                                3




state produces. For example, citizens do not pay directly for police protection. Rather,
taxes are allocated through the political process to police. One can imagine the utter
chaos that would occur if people purchased groceries in this manner, yet most people
mistakenly believe that the tax and spending system allocates resources efficiently.
   Spending drives the government budget system.3 Politicians look first to spend, then
try to find the necessary funding. Voters routinely reward politicians at the voting booth
for spending money on something those voters want.
   While there are obvious constraints upon how much politicians can spend and take in
taxes (i.e., the Laffer Curve), the truth is that the legislature is able to use force to
extract taxes from citizens, unlike business owners who must rely upon voluntary
choices by customers. This reality virtually assures that politicians will spend and tax
more than they should. The much-touted California budget surpluses actually serve as a
magnet to draw further spending.


Sent It—And Spend It
USC banking and finance professor Alan C. Shapiro recently wrote that the presence of
federal budget surpluses almost surely leads to even more spending by Washington. He
writes, “On average, from 1940 to 1993, every $1 increase in (federal) revenues was
accompanied the following year by an increase of 94 cents in spending.” While he adds
that the election of a Republican Congress in 1994 temporarily changed how things were
being done, “the pattern has begun to reassert itself.”4 California has operated in much
the same pattern as Washington, D.C.
   Similar examination of the California state budget revenues and expenditures from
1968 to 1996 reveals the prospect of more revenues has simply whetted lawmakers’
appetite for spending5:

  • Every $1 increase in revenues (adjusted for inflation) has led to an increase in
    spending of 75 cents, and
  • Each dollar of a surplus leads to $9.27 in new expenditures for the next budget
    year. (See Appendix).
   Putting it another way, whenever Californians pay more in taxes, the legislature
increases state expenditures. Furthermore, the large budget surpluses have encouraged
the legislature to up the ante even more. This reveals the importance of sending back
the surpluses to their original owners—the taxpayers. Politicians show great creativity
in finding or creating needs they must fund, and many citizens believe that govern-
ment services are “free” and demand more of such services. However, the economic
future of California will be better served if the California legislature agrees to ease the
tax burden.
   There are numerous ways to “send back” the surplus to taxpayers. One way, obvi-
ously, is to spend it on new services that politicians believe people will want. The prob-
lem with this approach, however, is that large numbers of the people who have paid the
4                                                                                          Pacific Research Institute




    most for these services are either not eligible for them or do not want them. Thus, in this
    case, “rebates” of surpluses are nothing more than another transfer scheme.
       Another way to deal with budget surpluses is for the state to mail a check to taxpay-
    ers to cover their share of the overcharge. While this kind of “prorating” is equitable, it
    is not politically popular, nor is it economically efficient. Wide variations in the size of
    rebate checks would lead to claims of unfairness. For example, take someone who pays
    a million dollars in state income taxes. Even if members of the California legislature
    mustered enough political courage to send rebate checks, the time that the money
    remained in the state treasury would constitute a rather large interest-free loan from
    taxpayers to the government. While those in government might not object, it is hardly
    conducive to economic growth in California.


    The Tax-Cut Solution
    There is another way to deal with the surpluses that is both equitable and promotes
    growth of jobs and capital formation in California—the tax cut. Using the California
    State Tax Analysis Modeling Program (Cal-STAMP), this study shows that a cut in tax
    rates would:

      • Create thousands of new jobs in the private sector,
      • Increase much needed capital formation in California, and
      • Still permit California lawmakers to balance the state’s budget,
        as is required by law.
      California has some of the nation’s highest state income-tax rates, and is rather
    complex, with 10 different income categories of taxation. They are listed below in Table 1.




                        Table 1: California Income-Tax Rates

                           Taxable Income                    Statutory Tax Rate (%)
                           Under $11,000                                  1.0
                           11,000–25,000                                  2.0
                           25,000–40,000                                  4.0
                           40,000–55,000                                  6.0
                           55,000–70,000                                  8.0
                           70,000 and over                                9.3

                        Note: Tax brackets are indexed for inflation, but are rounded to the
                        nearest '000 for illustrative purposes. Source: Pacific Research Insti-
                        tute’s California State Tax Analysis Modeling Project (Cal-STAMP).
Send It and They Will Spend It                                                                                      5




                         Table 2: California Income-Tax Rates Assuming
                         One-Percent Income-Tax Rate Decrease

                            Taxable Income                   Adjusted Tax Rate (%)
                            Under $11,000                                0.00
                            11,000–25,000                                1.00
                            25,000–40,000                                3.00
                            40,000–55,000                                5.00
                            55,000–70,000                                7.00
                            70,000 and over                              8.30

                         Note: Tax brackets are indexed for inflation, but are rounded to the
                         nearest '000 for illustrative purposes. Source: Pacific Research Insti-
                         tute’s California State Tax Analysis Modeling Project (Cal-STAMP).




Table 3: Economic Change in California Assuming One-Percent Income-Tax Rate Decrease

   Category                            2001                   2002                   2003              2004
   Change in
   number employed                   147,679                212,963                244,687           262,843
   Percent change
   relative to                         0.87                    1.21                   1.35             1.40
   predicted baseline
   Change in
   capital stock                 $18.61 billion         $36.84 billion          $54.77 billion     $72.45 billion
   (1999 dollars)
   Percent change
   relative to                         1.58                    2.98                   4.22             5.32
   predicted baseline
   Change in
   real payroll                  $5.33 billion           $7.74 billion          $8.96 billion      $9.69 billion
   Percent change
   relative to                         0.87                    1.21                   1.35             1.40
   predicted baseline
   Change in net
   tax revenue                  ($4.85 billion) ($4.72 billion) ($4.74 billion) ($4.81 billion)

Source: Pacific Research Institute’s California State Tax Analysis Modeling Project (Cal-STAMP).
6                                                                        Pacific Research Institute




        When coupled with federal income-tax rates, these are clearly punitive levels of taxa-
    tion. It does not take long for a Californian to fall into a combined tax bracket of about
    50 percent. The questions one should ask are whether or not these tax rates are neces-
    sary to run an efficient state government, and what would happen if they were cut.
        Using the Cal-STAMP model, this study offers two scenarios. The first subtracts one
    percent from each tax-rate category, as shown in Table 2. The model then calculates the
    changes in the economy that occur. The results are shown in Table 3.
        There is no doubt that while the model demonstrates that lowering tax rates would
    lower tax revenues, there are a number of positive benefits to this proposal. First, and
    most important, it puts more Californians back to work. Second, it increases the poten-
    tial capital stock in the state. At the same time, the projected loss in revenues for the
    coming years would remain below $5 billion. If the legislature were simply to hold the
    surplus for the coming year in reserve, the budgets would remain in balance.6
        The model demonstrates that even a small cut in income tax rates will result in
    billions of dollars in increased capital creation, which is essential to continuing
    economic growth. Because high technology is the lifeblood of much of the California
    economy, a capital-friendly atmosphere will allow the state to be an important national
    leader in the development of new technologies. The results of lowering tax rates on
    employment and capital growth are shown in Figures 1 and 2.
        Table 4 shows a more aggressive approach, one that does lead to projected deficits,
    according to the figures of the model and government data. However, one should also
    remember, as stated at the beginning of this paper, that by insisting on spending in
    greater and greater amounts, the California legislature is also killing both employment
    and capital growth. In other words, if the legislature would cut back enough in spending,
    there would be no need for worrying about deficits.
        Table 4 shows a cut of the lower income-tax rates by one percentage point and the
    upper rates by two points. The results are demonstrated in Table 5. The results of lower-
    ing tax rates on employment and capital growth are shown in Figures 3 and 4.
        The Cal-STAMP model demonstrates that Californians would receive strong
    economic benefits by aggressively cutting the top tax rates. If a recession is coming, as
    many economic analysts believe is true, making California even more capital friendly
    would ensure a more robust recovery than would be the case without tax cuts.


    Conclusion
    Politicians are fond of using terms such as “investment” to describe increases in spend-
    ing for public schools and hospitals. True investment, however, can only be achieved by
    reductions in spending.
       By slightly cutting tax rates, the legislature would essentially rebate the surplus back
    to taxpayers. In the meantime, the results would be more employment and investment in
    the private economy. For example, in 2001 and 2002, the legislature would not have to
    cut spending at all and its budget would still balance. In the meantime, the $9.5 billion
Send It and They Will Spend It                                                                                                        7




Figure 1: Employment in California Assuming One-Percent Income-Tax Rate Decrease
    20,000,000


    19,500,000
                                                                                                                         19,023,166
    19,000,000
                                                                                                            18,760,323

    18,500,000                                                                                 18,408,600
                                                                                  18,163,913
                                                              17,799,425
    18,000,000
                                                 17,586,463
    17,500,000
                                  17,175,049
                    17,027,370
    17,000,000


    16,500,000


    16,000,000


    15,500,000
                                2001                     2002                             2003                      2004
                                                                           Year
     Baseline number employed (private sector)
     New employment level

Source: Pacific Research Institute’s California State Tax Analysis Modeling Project (Cal-STAMP).




Figure 2: Capital Growth in California Assuming One-Percent Income-Tax Rate Decrease
    1,500,000

    1,450,000                                                                                                            1,434,321


    1,400,000
                                                                                                            1,361,868
                                                                                               1,352,188
    1,350,000
                                                                                  1,297,423
    1,300,000
                                                              1,272,869
    1,250,000                                    1,236,028

                                 1,196,148
    1,200,000
                    1,177,538

    1,150,000

    1,100,000

    1,050,000

    1,000,000
                            2001                        2002                              2003                      2004
                                                                           Year
   Baseline capital stock
   New capital stock

Source: Pacific Research Institute’s California State Tax Analysis Modeling Project (Cal-STAMP).
8                                                                                                    Pacific Research Institute




                                  Table 4: California Income-Tax Rates Assuming up
                                  to Two-Percent Income-Tax Rate Decrease

                                     Taxable Income                    Adjusted Tax Rate (%)
                                     Under $11,000                                 0.00
                                     11,000–25,000                                 1.00
                                     25,000–40,000                                 3.00
                                     40,000–55,000                                 5.00
                                     55,000–70,000                                 7.00
                                     70,000 and over                               7.30

                                  Note: Tax brackets are indexed for inflation, but are rounded to the
                                  nearest '000 for illustrative purposes. Source: Pacific Research Insti-
                                  tute’s California State Tax Analysis Modeling Project (Cal-STAMP).




    Table 5: Economic Change in California Assuming up to Two-Percent Income-Tax Rate Decrease

       Category                            2001                    2002                    2003                 2004
       Change in
       number employed                   264,435                 381,333                438,139               470,648
       Percent change
       relative to                         1.55                    2.17                    2.41                 2.51
       predicted baseline
       Change in
       capital stock                 $33.32 billion         $65.97 billion          $98.06 billion $129.74 billion
       (1999 dollars)
       Percent change
       relative to                         2.83                    5.34                    7.56                 9.53
       predicted baseline
       Change in
       real payroll                  $9.55 billion          $13.86 billion          $16.04 billion          $17.35 billion
       Percent change
       relative to                         1.55                    2.17                    2.41                 2.51
       predicted baseline
       Change in net
       tax revenue                  ($8.76 billion) ($8.55 billion) ($8.61 billion) ($8.74 billion)

    Source: Pacific Research Institute’s California State Tax Analysis Modeling Project (Cal-STAMP).
Send It and They Will Spend It                                                                                                         9




Figure 3: Employment in California Assuming up to Two-Percent Income-Tax Rate Decrease
    20,000,000

    19,500,000
                                                                                                                          19,230,971

    19,000,000
                                                                                                             18,760,323
                                                                                                18,602,052
    18,500,000
                                                                                   18,163,913
                                                              17,967,795
    18,000,000
                                                17,586,463
    17,500,000                     17,291,805
                     17,027,370
    17,000,000

    16,500,000

    16,000,000

    15,500,000

    15,000,000
                                2001                        2002                           2003                      2004
                                                                            Year
    Baseline number employed (private sector)
    New employment level

Source: Pacific Research Institute’s California State Tax Analysis Modeling Project (Cal-STAMP).




Figure 4: Capital Growth in California Assuming up to Two-Percent Income-Tax Rate Decrease

    1,600,000
                                                                                                                          1,491,603
                                                                                                1,395,487    1,361,868
    1,400,000
                                                             1,301,996             1,297,423
                                  1,210,861     1,236,028
                    1,177,538
    1,200,000


    1,000,000


      800,000


      600,000


      400,000


      200,000


             0
                            2001                        2002                              2003                      2004
                                                                           Year
   Baseline capital stock
   New capital stock

Source: Pacific Research Institute’s California State Tax Analysis Modeling Project (Cal-STAMP).
10                                                                                Pacific Research Institute




     cutback in revenues for those two years would, in effect, leverage more than $55 billion
     in capital investment and $13 billion in new payroll.
         The second scenario has a slightly more aggressive cut in tax rates. A reduction of
     $17.2 billion of taxes in the first two years would create nearly $100 billion of new capi-
     tal investment and $23 billion of new payroll, and hundreds of thousands of new jobs.
         The question, then, is not whether tax cuts would work. The real question before the
     legislature is whether or not the politicians of California are prepared to make the deci-
     sions that will promote continued prosperity and true investment in the Golden State.


     Notes
     1 Thomas Sowell, “Taxing the Living and the Dead,” Townhall.com, February 22, 2001. Accessed at
       www.townhall.com/columnists/thomassowell/ts20010222.shtml.
     2 Murray N. Rothbard, Man, Economy, and State, (Auburn, Alabama: Ludwig Von Mises Institute,
       1993), p. 464.
     3 William Anderson, Myles S. Wallace, and John T. Warner, “Government Spending and Taxation: What
       Causes What?” Southern Economic Journal, Volume 53, No. 3, January 1986, pp. 630–39.
     4 Alan C. Shapiro, “If You Send It, They Will Spend It,” Investor’s Business Daily, January 31, 2001.
     5 The study uses California budget figures as provided by the U.S. Bureau of the Census. The figures
       include federal payments made to the state. This is because Californians as a whole also pay more in
       federal income taxes than they receive from Washington. The budget numbers are adjusted for inflation
       with the base years being 1982–1984.
     6 The web site for the California Legislative Analyst’s Office is www.lao.ca.gov.
  YEAR      REV       EXP      SURP     ADJREV       ADJEXP      ADJSURP      RevPC ExpPC    Defla   ADJSpIncr    SurpRatio     RealRevIncr       Ratio
  1968     13687     13139      548     39330.46    37755.75     1574.7126      712   684    0.348
  1969     15449     15103      346     42095.37    41152.59     942.77929      795   777    0.367   3396.8414    2.15711828    2764.908077    1.22855492
  1970     17028     16782      246     43886.6     43252.58     634.02062      853   841    0.388   2099.9888    2.22744473    1791.230091    1.17237242
  1971     18535     18531       4      45765.43    45755.56     9.8765432      917   916    0.405   2502.9782    3.94778681    1878.834161    1.33219753
  1972     21110     20052     1058     50502.39    47971.29     2531.1005     1031   980    0.418   2215.7363    224.343301    4736.960246    0.46775489
  1973     23490     21082     2408     52905.41    47481.98     5423.4234     1140   1023   0.444   -489.30988   -0.19331903   2403.013061    -0.2036235
  1974     24832     23392     1440     50369.17    47448.28     2920.8925     1188   1119   0.493   -33.70612    -0.00621492   -2536.23705    0.01328981
  1975     27870     26704     1166     51802.97    49635.69     2167.2862     1316   1261   0.538   2187.4119    0.74888476    1433.805621    1.52559862
  1976     31801     30734     1067     55889.28    54014.06     1875.2197     1478   1428   0.569    4378.372    2.02020939    4086.30546     1.07147448
                                                                                                                                                                                                                  Send It and They Will Spend It




  1977     36322     32532     3790     59937.29    53683.17     6254.1254     1659   1486   0.606   -330.89144   -0.17645476   4048.014292    -0.0817417
  1978     41560     36874     4686     70570.55    66584.36     3986.1963     1864   1654   0.652   12901.188    2.0628284     10633.25842    1.21328637
  1979                                                                                       0.726                    0
  1980     46012     43413     2599     55839.81    52685.68     3154.1262     1944   1834   0.824   -13898.676   -3.48670138   -14730.7463    0.94351474
  1981     51561     49700     1861     56722.77    54675.47     2047.3047     2179   2100   0.909   1989.7879    0.63085235    882.966452     2.25352609
  1982                                                                                       0.965                    0
  1983     56966     55827     1139     57194.78     56051.2     1143.5743     2263   2218   0.996   1375.7373    0.5747217     472.0068392    2.91465538
  1984     65108     60390     4718     62664.1      58123.2     4540.9047     2541   2357   1.039   2071.9906    1.81185478    5469.32098     0.37883872
  1985     57894     51840     6054     53804.83    48178.44     5626.3941     1747   1736   1.076   -9944.7567   -2.19003862   -8859.26738    1.12252586
  1986     80297     76082     4215     73263.69    69417.88     3845.8029     2974   2818   1.096   21239.445    3.7749657     19458.85342    1.09150545
  1987     70336     62481     7855     61915.49    55000.88     6914.6127     2020   2004   1.136   -14417.003   -3.7487628    -11348.1932    1.27042276
  1988     93902     91729     2173     79376.16    77539.31     1836.8555     3316   3240   1.183   22538.427    3.25953566    17460.66934    1.29081114
  1989                                                                                       1.24                     0
  1990     88704     78867     9837     67868.4       60342      7526.3963     2327   2359   1.307   -17197.302   -9.36236013   -11507.7614    1.49440901
  1991     90784     85640     5144     66654.92    62878.12     3776.7988     2392   2470   1.362   2536.1158    0.33696283    -1213.48168    -2.0899498
  1992    100154     97079     3075     71385.6     69193.87      2191.732     2572   2701   1.403   6315.7499    1.67224948    4730.683044    1.33506088
                                                                                                                                                               Appendix: California’s Revenues and Expenditures




  1993    108222    104567     3655     74894.12    72364.71     2529.4118     2704   2852   1.445   3170.8356    1.44672597    3508.515366    0.90375423
  1994    115228    105831     9397     77751.69    71410.93     6340.7557     2856   2907   1.482   -953.77471   -0.37707372   2857.569263    -0.3337713
  1995    118303    109231     9072     77626.64    71673.88     5952.7559     2986   2978   1.524   262.95334    0.04147035    -125.04649     -2.1028446
  1996    123342    113361     9981     78611.85    72250.48     6361.3767     3082   3101   1.569   576.5935     0.09686161    985.2142646     0.5852468
  1997                                                                                       1.605                    0
                                                                                                         0


                                                                                                                  SurpRatio                   Increase Ratio
                                                                                                                  9.26451395                   0.75187477
Source: U.S. Bureau of the Census, Government Division, and author’s calculations.
                                                                                                                                                                                                                  11
12                                                                     Pacific Research Institute




     About the Author

     WILLIAM L. ANDERSON, Ph.D. is an Assistant Professor of Economics at North
     Greenville College in Tigerville, S.C. where he teaches Principles of Economics, History
     of Economic Thought, Managerial Economics, Regulation, and Money and Banking.
     Anderson's journal articles have appeared in the Southern Economic Journal, Quarterly
     Journal of Austrian Economics, and Public Choice. Anderson holds a Ph.D. in Econom-
     ics from Auburn University.
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         Send It and
      They Will Spend It
          The Case for Tax Cuts in California



                              By
                  William L. Anderson, Ph.D.




                               April, 2001




              PACIFIC RESEARCH INSTITUTE
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