If taxes are a major factor deterring economic growth, lines on a graph should go in opposite directions: As tax rates go up the GDP should go down.
No such pattern emerges between high taxes and GDP growth over 80 years. During the Depression of the 1930s corporate and individual taxes rates increased, but in 1934 through 1937 the GDP grew by 17%, 11%, and 14% annually. Top corporate tax rates climbed to over 50% through the 1960s, again with no discernable pattern associated with decreased economic growth. The same is true with top tax rates on the richest which were 91% into the 1960s. Conversely, since the 1980s after Kemp-Roth and then after 2001 with the Bush era tax cuts, there is no evidence that the economy grew more rapidly than in eras with significantly higher tax rates on the wealthy and corporations. The same is true even of the much heralded 1960s Kennedy tax cuts. While at one time economists thought they had an almost magical impact on the economy, more recent evidence questions that.
Looking at time periods when tax rates were at their highest, GDP often grew more robustly than when taxes were cut. Visually, the attached graph simply fails to demonstrate that tax rates negatively impact economic growth.
Counterpunch.
Taxation can be useful depending on how it is applied. For example, we could make banks pay the property taxes on the houses they repossess. (Homeowners and landlords must pay property taxes, but banks don’t pay.) We could impose a Tobin tax on Wall Street transactions. We could make big corporations start to pay local taxes. We could make banks pay taxes on the profits from their student loan scam. We could tax the boosts in stock prices caused by stock buybacks, which were illegal before 1982.
ReplyDeleteThe US government has no need or use for tax revenue, and effectively destroys it upon receipt, but if we started taxing everyone for war, then the masses might not be so war-happy, or so apathetic.
From the article…
“Taxes impede economic growth and high taxes kill the economy, right?”
Right, at the state, county, and municipal level. Many U.S. cities have unfunded liabilities in the form of pension benefits for public employees. Since local governments have no money to pay their pension obligations, they must raise taxes or cut services, either of which hurts the local economy.
At the federal level, tax cuts are theoretically stimulative if the cuts are given to everyone. Lower FICA taxes, and income taxes, mean consumers get to keep more money, and spend it.
I say theoretically, because any extra dollars left in people’s hands will just be stolen by bankers and other creditors.
The only thing that the rich hate worse than paying money to their workers, is giving money to the government. So with high marginal tax rates, it encourages either paying workers more or investing more in their companies in order to avoid paying tax to the government. So it's easy to give a plausible explanation to high marginal rates increasing economic activity.
ReplyDeleteThe fortune of a few is built on the poverty of many.
ReplyDelete-- Buddha
Maybe it should be the fortune of the few is built on the theft from the many.
ReplyDelete