Tuesday, January 27, 2015

Derek Thompson — Tax Cuts Don't Lead to Economic Growth, a New 65-Year Study Finds

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.
No, tax cuts don't pay for themselves.

The Atlantic
Tax Cuts Don't Lead to Economic Growth, a New 65-Year Study Finds
Derek Thompson

6 comments:

Magpie said...

See page 7:

"Nor should the argument seem strange that taxation may be so high as to defeat its object, and that, given sufficient time to gather the fruits, a reduction of taxation will run a better chance, than an increase, of balancing the Budget. For to take the opposite view to-day is to resemble a manufacturer who, running at a loss, decides to raise his price, and when his declining sales increase the loss, wrapping himself in the rectitude of plain arithmetic, decides that prudence requires him to raise the price still more;—and who, when at last his account is balanced with nought on both sides, is still found righteously declaring that it would have been the act of a gambler to reduce the price when you were already making a loss."

http://www.gutenberg.ca/ebooks/keynes-means/keynes-means-00-h.html

Tyler Healey said...

I still think payroll taxes should be abolished.

Roger Erickson said...

Not all taxes - or tax cuts - are created equal. "Top tax rates" are not the same as median or bottom tax rates.

These kinds of discussions have to deal with full context and all nuance, or not at all.

A little knowledge is dangerous. Grasping full context is adaptive.

Neil Wilson said...

A lot of positions are supported by selective aggregate data quotes.

It's all about the politics really.

The Rombach Report said...

“At the beginning of the empire, the tax rates were low and the revenues were high. At the end of the empire, the tax rates were high and the revenues were low.”

14th century Arab historian Ibn Khaldun

James said...

“At the beginning of the empire, the tax rates were low and the revenues were high. At the end of the empire, the tax rates were high and the revenues were low.”

14th century Arab historian Ibn Khaldun


You would think that with empires being based on plunder, there would obviously be a period of high revenues to begin with, while you're extracting the wealth of the nation you've conquered. Naturally that's followed by a period of lowering revenues, as your empire shrank back to its original borders. So I'm not sure if that quote is quite the gotcha moment, that the likes of Laffer believe it to be.

It's also worth noting that Khaldun seems to have had a hardcore metal fetish,

Ibn Khaldun also emphasized on the Islamic Monetary System that the currency or money should have intrinsic value. And it should be made up of Gold and Silver i.e. Gold dinar and Silver Dirham. He also emphasized that the weight and purity of these coins should be strictly followed.

http://en.wikipedia.org/wiki/Ibn_Khaldun


Obviously the sound money crowd are big fans of his.