Congressional Research Service: No Evidence Tax Cuts Promote Economic Growth

One of the biggest Zombie Lies since the Reagan era is the insistence by the GOP and the conservative right and the wealthy that just continuing to cut taxes on corporations on the wealthiest Americans and on American corporations will magically, like fairy dust, result in explosive economic growth and income from revenue to the government.

Despite the utter failure of this promised result ever manifesting itself in reality, in fact, quite the opposite, such tax cutting, coupled with deregulation, triggered the current Great Recession we are still trying recover from; despite this failure, the GOP continues to trumpet cutting taxes on the rich even further as the only possible solution to our economic ills.

I, for one, wish we could return to the heady and prosperous times of the 1950’s, when our last Commie President, Dwight Eisenhower, presided over unprecedented growth and prosperity, brought to us by such socialist services as the GI Bill, and top marginal tax rates at the 90% level.

September 14, 2012 report from the Congressional Research Service, Prepared for Members and Committees of Congress.

Quoting the last paragraph of the introduction, with emphasis added:

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%. 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. Analysis of such data suggests the reduction in the top tax rates have had little association with saving, investment, or productivity growth. However, the top tax rate reductions appear to be associated with the increasing concentration of income at the top of the income distribution. The share of income accruing to the top 0.1% of U.S. families increased from 4.2% in 1945 to 12.3% by 2007 before falling to 9.2% due to the 2007-2009 recession. The evidence does not suggest necessarily a relationship between tax policy with regard to the top tax rates and the size of the economic pie, but there may be a relationship to how the economic pie is sliced.

Taxes and the Economy: An Economic
Analysis of the Top Tax Rates Since 1945


Author: Ron