Low Taxes verses Economy

Taxes and the Economy

Congressional Research Service Report

We heard it over and over last year how low lower taxes stimulate the economy. Not so it turns out. Interesting research here called Taxes and the Economy: An Economic Analysis of the Top Tax Rates Since 1945. It doesn’t matter if we look at the marginal rates or long-term capital gains rate the hard data just doesn’t add up to creating anything good.Most interesting and controversial is that this Nonpartisan Tax Report Withdrawn After G.O.P. Protest, released not far ahead of November’s election by the Congressional Research Service was pulled following GOP pressure. Yes, it was unfortunately just before the election, and yes the verbiage is a bit off so go ahead and ignore the verbal summary, ignore the timing, in fact ignore anything at all that could by either party be considered partisan. Just take a look at the data from 1945 until now and you see a some compelling realities:

  • Lowering marginal tax rates does NOT increase economic activity nor impact the GDP.
  • Lowering capital gains rates does NOT increase economic activity nor impact the GDP.
  • Lowering marginal tax rates and/or capital gains tax rates does NOT increase saving and investment.
  • Lowering marginal tax rates and/or capital gains tax rates does NOT increase U.S productivity.
  • Lastly, lowering capital gains and/or marginal tax rates DOES make the wealthy wealthier and add to the significant and growing U.S income inequality.

In hindsight it is pretty clear to economists why there was party pressure to hide this report. Nearing the end of a hard fought, expensive campaign the facts here don’t just challenge but completely destroy the central tenant of conservative economic theory being put in front of voters, that reduced tax rates increase economic growth, increase saving and investment, and boost productivity (increase the economic pie).

Look at the data, in the end, lowering taxes on the wealthy just makes them wealthier, the rest of us see no impact. Surprise!

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  1. Pingback: Old Assault Weapons—New Taxes | americanmoneylies.com

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