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.”
That’s a piss poor “study”. The 1950’s were going to have better growth rates no matter what. The developed world was destroyed by WW2, and the US was the only country with manufacturing capacity. If you compare growth rate immediately before and after tax cuts, then growth rates were almost twice was high after the cuts.
You’re entitled to your opinion. I bring the results of people studying the problem.
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.
It’s shocking a group funded by congress determined high tax rates are good. That’s like letting coca cola fund a study to see if high fructose corn syrup is good for you. The other great lie is tax cuts lead to lower tax revenue. Tax revenue increases every time we lower tax rates. Taxes collected as a percent of GDP have varied very little since WW2 regardless of marginal tax rates. That should lead to the logical conclusion to lower rates until we reach the optimal rates to maximize revenue.
One common issue with statistics of multiple sets of data is that correlation doesn’t necessarily mean causation. As a statistician by training, I am appalled by the loose logic of our journalism in presenting correlation as causation with statistic data. The data presented in the article doesn’t mention any research to determine causation. For the increased share of wealth accumulated by top 0.1%, one easy explanation is technology: 50 years ago, to create a $100B company, you need maybe a million employees; today you need about a few thousand for high tech companies. So regardless of tax rate, the concentration of wealth progresses.
Understandable. But then, why do we keep hearing “give us tax cuts” so we create jobs?
Let’s stop the BS then. Like the coal miners, they are finding out those jobs are not coming back. Somebody was lying, right?
Inequality will increase as long as people make poor personal choices. Some people delay gratification and save. Others demand instant gratification and borrow. Unless you change the nature of those demanding instant gratification, you aren’t going to change the wealth gap.
You can also look at poverty rate of single parents vs married parents. If you wait until 25 to marry and don’t have kids before marriage, you have a tiny chance of poverty. Do it the opposite way and you have a very high chance of poverty. Now we’re going to blame the government or rich people for that?
I think only controlled experiment can determine causality. Social science, especially macro econ, it’s especially hard to tease out causality, because sample size is so small, and obviously whole economies have many competing factors.
I am pretty confident no amount of tax cuts will juice up US GDP growth to 4%. GDP is roughly worker output multiplied by number of workers. In the 80s we benefited from the twin effect of baby boomers entering the labor market and women participation rate shooting up. Without such demographic tailwind you have to rely on productivity growth, which has been abysmal.
If Trump tightens immigration further our demographics actually worsens.
We hit over 4% under Bush which wasn’t that long ago. We have a LOT more output capacity that we’re utilizing today. You have all the part-time people that want full-time work. You also have all the discouraged people that gave up. Those two groups could significantly grow the work force. They are over 20% of working age adults.
As per original plan, during Yellen period itself, the 2018 rate hikes are three and 2019 rate is Two. Powell reiterated the same course, but everything , he said, depends on their incoming data and review.
We’ve still increased from 1.9% in Obama’s last year to 2.9% in Trump’s first year. Much of the overseas cash is still there. Once it starts coming back we should efonotely get above 3% which most people said was impossible.