Do Tax Cuts Lead to Economic Growth?

[Meghan54]

The defining economic policy of the last decade was the Bush tax cuts. President George W. Bush and Congress, including Mr. Ryan, passed a large tax cut in 2001, sped up its implementation in 2003 and predicted that prosperity would follow.

The economic growth that actually followed — indeed, the whole history of the last 20 years — offers one of the most serious challenges to modern conservatism. Bill Clinton and the elder George Bush both raised taxes in the early 1990s, and conservatives predicted disaster. Instead, the economy boomed, and incomes grew at their fastest pace since the 1960s.

Then came the younger Mr. Bush, the tax cuts, the disappointing expansion and the worst downturn since the Depression.




A report from the nonpartisan Congressional Research Service found that, over the past 65 years, changes in the top tax rate “do not appear correlated with economic growth."


Its conclusion:

The results of the analysis suggest that changes over the past 65 years in the top marginal tax rate and the top capital gains tax rate do not appear correlated with economic growth. The reduction in the top tax rates appears to be uncorrelated with saving, investment, and productivity growth. The top tax rates appear to have little or no relation to the size of the economic pie.


However, the top tax rate reductions appear to be associated with the increasing concentration of income at the top of the income distribution. As measured by IRS data, the share of income accruing to the top 0.1% of U.S. families increased from 4.2% in 1945 to 12.3% by 2007 before falling to 9.2% due to the 2007-2009 recession. At the same time, the average tax rate paid by the top 0.1% fell from over 50% in 1945 to about 25% in 2009. Tax policy could have a relation to how the economic pie is sliced—lower top tax rates may be associated with greater income disparities.

Source: Taxes and the Economy: An Economic Analysis of the Top Tax Rates Since 1945, Thomas L. Hungerford, September 14, 2012

http://graphics8.nytimes.com/news/business/0915taxesandeconomy.pdf
(p. 19 for conclusion)

 

[techs]

Actually tax cuts to the least well off help the economy a lot. Tax cuts for millionaires very little short term and hurt longer term.

The Republicans are desperate not let the tax rates rise on the rich next month. Because they know that history shows that will be good for the economy and blow their ideology out of the water.

 

[jackschmittusa]

Warren Buffet pointed out that raising taxes never deterred investors. I'm sure he has known more than his fair share during his lifetime.

 

[Tylanner]

Grover Norquist, the master behind the GOPs no tax raise cancer, is supported by Philip Morris, Pfizer and Micro*soft ect.

Republicans buying this idea have no comprehension of the wealth that these companies stand to make for every fraction of a percent in tax increase not implimented. And all this with no incentive to use this tax break money to improve the pay or benfits of the workforce...

The grand delusion that these companies, large sprawling, global and market dominating companies, need more capital/help is insane.....