Nonpartisan Congressional Research Service: Tax cuts for wealthy don’t create economic growth. American public: Duh!
There is no clear correlation between tax cuts for high earners and economic growth, according to a new study by Congress’ nonpartisan policy analyst.
My only question is why did it take 65 years to figure out that tax cuts for the rich don't alone create economic growth.
“There is not conclusive evidence, however, to substantiate a clear relationship between the 65-year steady reduction in the top tax rates and economic growth,” concluded a report by the Congressional Research Service released Friday. “Analysis of such data suggests the reduction in the top tax rates have had little association with saving, investment, or productivity growth.”
The study delves into the last 65 years of U.S. tax policy pertaining to high earning Americans — including top marginal rates on income and capital gains taxes — and how it impacts their decision-making. The conclusion: cutting effective taxes on the rich doesn’t boost economic growth, but it does correlate with rising income inequality.
“Throughout the late-1940s and 1950s, the top marginal tax rate was typically above 90%; today it is 35%. Additionally, the top capital gains tax rate was 25% in the 1950s and 1960s, 35% in the 1970s; today it is 15%. The real GDP growth rate averaged 4.2% and real per capita GDP increased annually by 2.4% in the 1950s. In the 2000s, the average real GDP growth rate was 1.7% and real per capita GDP increased annually by less than 1%,” wrote Thomas L. Hungerford, CRS’ specialist in public finance and author of the report. – TPM
The entire study is available in PDF format if you've got some time to read.