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Thune Optimistic Tax Reform Will Spur Economy Forward

South Dakota US Senator John Thune hopes the Senate Republican tax reform proposal will make it out of the finance committee by the end of this week.

Republicans in both the US House and Senate are leading the charge in overhauling the country’s tax code. They say it’s the largest overhaul in 30 years.

Others aren’t convinced it will help the economy.

Congressional Republicans maintain that growth in the economy brought about as a result of these tax cuts will make up for any lost revenue.

Senator John Thune is on the Senate Finance Committee. He says the national economy is growing at a sluggish rate since the recession.  He says this tax overhaul will help with growth.

“Two percent growth should not be the new normal. We should not settle for that. We can do better than that. I think with the right policies we can do better than that,” Thune says. “I think it’s a reasonable number. If we’re assuming a growth rate of three percent, I would say that’s not reasonable. But four tenths of one percent is what gives us the necessary additional growth in the economy to produce the revenue that covers the cost of the cut.”

Thune says the bill will likely end up in a conference committee where both houses will work out the differences in their bill.

Others worry that the tax reform proposal will only further contribute to income inequality in the United States.

Democratic State Senator Reynold Nesiba is also a macro economics professor at Augustana University. 

He agrees with Thune that faster growth is better for the economy, but he says there’s little to no evidence that tax cuts spur economic growth.

“They keep saying that the main gain, when we cut corporate taxes and cut taxes for the wealthy that eventually this income will trickle down to lower income people," Nesiba says. "I think this is what John Kenneth Galbraith used to call Horse and Sparrow economics, right? That you feed the oats to the horse and the sparrows get what comes out the other end.”

Nesiba says the tax reform proposal as written will add to the deficit.

Nesiba says tax reform needs to focus more on tax cuts for middle to low income people, rather than corporate or high income earners in the country. He says a jobs program would help the economy more than a tax reform proposal.