Tax Cuts Don't Lead to Economic Growth, a New 65-Year Study Finds

[acri1]

Tax Cuts Don't Lead to Economic Growth, a New 65-Year Study Finds

Sep 16 2012, 1:53 PM ET

Here's a brief economic history of the last quarter-century in taxes and growth.

In 1990, President George H. W. Bush raised taxes, and GDP growth increased over the next five years. In 1993, President Bill Clinton raised the top marginal tax rate, and GDP growth increased over the next five years. In 2001 and 2003, President Bush cut taxes, and we faced a disappointing expansion followed by a Great Recession.

Does this story prove that raising taxes helps GDP? No. Does it prove that cutting taxes hurts GDP? No.

But it does suggest that there is a lot more to an economy than taxes, and that slashing taxes is not a guaranteed way to accelerate economic growth.

That was the conclusion from David Leonhardt's new column today for The New York Times, and it was precisely the finding of a new study from the Congressional Research Service, "Taxes and the Economy: An Economic Analysis of the Top Tax Rates Since 1945."

Analysis of six decades of data found that top tax rates "have had little association with saving, investment, or productivity growth." However, the study found that reductions of capital gains taxes and top marginal rate taxes have led to greater income inequality. Past studies cited in the report have suggested that a broad-based tax rate reduction can have "a small to modest, positive effect on economic growth" or "no effect on economic growth."

Well into the 1950s, the top marginal tax rate was above 90%. Today it's 35%. But both real GDP and real per capita GDP were growing more than twice as fast in the 1950s as in the 2000s. At the same time, the average tax rate paid by the top tenth of a percent fell from about 50% to 25% in the last 60 years, while their share of income increased from 4.2% in 1945 to 12.3% before the recession.

Here are two graphs of the top 0.1% and 0.01%. The first shows average tax rates since 1945 -- down, down, down. The second shows share of total income since 1945 -- up, up, up.

In short, the study found that top tax rates don't appear to determine the size of the economic pie but they can affect how the pie is sliced, especially for the richest households.

The paper is a good reminder to be humble about taxes as a tool for growing the economy. They remain, above all, a tool for collecting revenue and tweaking incentives for specific economic behavior. Congress has cut tax rates repeatedly over the last 60 years, while the country and the global economy have undergone considerable changes that probably had a greater effect on growth. For years after World War II, the U.S. was a singular economic powerhouse with an enormous manufacturing base that employed nearly 40% of the economy. For the last decade-plus, the economy has grown at a considerably slower pace and the gains have accrued to a smaller and more elite share of the economy.

Tax Cuts Don't Lead to Economic Growth, a New 65-Year Study Finds - Derek Thompson - The Atlantic


Would love to get some conservative input on this.

 

[Dusty Bake Activate]

Water is wet.

 

[VerbalIntercourse]

Eliminate all taxes credits for bottom. Let THEM pay their fair-share. I had to pay 10 grand in taxes for 2011. Ten grand in cash plus the massive amount they robbed from my checks.

Then I have to see Jerome and Shaniqua in riding 25's on their new scrapper after tax season.

fukk that shyt. This study proves nothing. There are one million and one factors that influence economic growth. If anything, economic freedom and monetary fluctuations correlate most strongly with growth. Not spending or taxes.

 

[The Real]

Eliminate all taxes credits for bottom. Let THEM pay their fair-share. I had to pay 10 grand in taxes for 2011. Ten grand in cash plus the massive amount they robbed from my checks.

Then I have to see Jerome and Shaniqua in riding 25's on their new scrapper after tax season.

fukk that shyt. This study proves nothing. There are one million and one factors that influence economic growth. If anything, economic freedom and monetary fluctuations correlate most strongly with growth. Not spending or taxes.

 

[VerbalIntercourse]

I'm pretty mad about it. I bust my ass through college and work full time breaking my back in a grocery store. Graduate with no debt.

While lazy-ass people lay around and sell drugs to smoke weed and blame the system for their problems. Then they want to punish the successful people with a severely disproportional progressive marginal tax scheme.

Damn I wish I was a lazy good-for nothing piece of shyt. I could engage in criminality and be an all around degenerate. AND! I would have people like you defending me all day.

 

[88m3]

I'm pretty mad about it. I bust my ass through college and work full time breaking my back in a grocery store. Graduate with no debt.

While lazy-ass people lay around and sell drugs to smoke weed and blame the system for their problems. Then they want to punish the successful people with a severely disproportional progressive marginal tax scheme.

Damn I wish I was a lazy good-for nothing piece of shyt. I could engage in criminality and be an all around degenerate. AND! I would have people like you defending me all day.

You're known for packing guns and pulling them on people.

You are a criminal nikka


Life is cold nikka

burrrrrrr burrrrrr burrrrr

 

[blackzeus]

Rich people don't reinvest their saved tax dollars, they add it to their stash. Instead of tax cuts for wealthy individuals, should create a progressive tax cuts for companies only based on new jobs created and the salary

Tier 1
- 1-500 jobs created, average salary min. $30K , pays only 15% tax

Tier 2
- 500-5000 jobs created, average salary min $30K, pays only 10% tax

Tier 3
- 5000+ jobs created, average salary min $30K, pays only 5% tax

^^Tax cuts like this are ok. But to just flat out cut it doesn't stimulate the economy, unless there is sudden demand for US produced goods

 

[Dusty Bake Activate]

I'm pretty mad about it. I bust my ass through college and work full time breaking my back in a grocery store. Graduate with no debt.

While lazy-ass people lay around and sell drugs to smoke weed and blame the system for their problems. Then they want to punish the successful people with a severely disproportional progressive marginal tax scheme.

Damn I wish I was a lazy good-for nothing piece of shyt. I could engage in criminality and be an all around degenerate. AND! I would have people like you defending me all day.

If that white girl would've called the cops on the back of your head, you'd be getting taxpayer-funded room and board, food, clothing and rectal stitches, you yeast infection. You may have worked hard, but you still got lucky.

And oh yeah,

 

[Patrick Kane]

 

[CrimsonTider]

I'm pretty mad about it. I bust my ass through college and work full time breaking my back in a grocery store. Graduate with no debt.

While lazy-ass people lay around and sell drugs to smoke weed and blame the system for their problems. Then they want to punish the successful people with a severely disproportional progressive marginal tax scheme.

Damn I wish I was a lazy good-for nothing piece of shyt. I could engage in criminality and be an all around degenerate. AND! I would have people like you defending me all day.

It you paid 10k in taxes you made ALOT Of money. No one feels sorry for you

 

[Domingo Halliburton]

the problem with economics is we look at it in a vacuum. We're just ignoring things like the internet boom and bust and 9/11. So are these graphs saying George Bush Sr. set up Clinton for a boom period?

I go left on a lot of issues, but I don't get these new democrats. You guys are advocating for higher taxes - I don't get it. You like paying more in taxes?

 

[acri1]

the problem with economics is we look at it in a vacuum. We're just ignoring things like the internet boom and bust and 9/11. So are these graphs saying George Bush Sr. set up Clinton for a boom period?

I go left on a lot of issues, but I don't get these new democrats. You guys are advocating for higher taxes - I don't get it. You like paying more in taxes?

Neither the article nor anyone in this thread aside from yourself mentioned the Democrats or advocated for higher taxes. Let's not make everything a partisian issue.

The point of the article was simply that the idea that tax cuts automatically grow the economy isn't supported by history, and that tax cuts for the rich seem to just give them a larger share of income. Nothing more.

 

[TLR Is Mental Poison]

I been saying this. Watch Kingpin say "dude is a known liberal sympathizer, study doesn't count"