Tax cuts don’t cause economic growth: new study spanning 65 years
By Derek Thompson
16 September 2012
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. […]
Tax Cuts Don’t Lead to Economic Growth, a New 65-Year Study Finds
Economic "growth" is the death knell of the planet, and should no longer be considered any kind of "solution", but rather the source of the many problems we know have.
Economist are the bane of civilization, championing idiotic concepts like growth and expansion, while ignoring all the serious problems this creates.