New 65 year study shows tax cuts do not lead to economic growth

This will be shocking news for the Republicans, though it shouldn’t be. The US has had higher growth rates during times of much higher taxes but somehow that is always glossed over by the tax cut proponents.

Even Mitt Romney himself proves how little tax rates are connected to employment creation investments. The man hasn’t worked in years and has paid no more than 14% in taxes yet we don’t see him setting up new businesses with the extra income. He fails his own test on tax breaks.

Let the GOP tax spin begin.

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. Past studies cited in the report have suggested that a broad-based tax rate reduction can have “a small to modest, positive effect on economic growth” or “no effect on economic growth.”

Well into the 1950s, the top marginal tax rate was above 90%. Today it’s 35%. But both real GDP and real per capita GDP were growing more than twice as fast in the 1950s as in the 2000s. At the same time, the average tax rate paid by the top tenth of a percent fell from about 50% to 25% in the last 60 years, while their share of income increased from 4.2% in 1945 to 12.3% before the recession.


An American in Paris, France. BA in History & Political Science from Ohio State. Provided consulting services to US software startups, launching new business overseas that have both IPO’d and sold to well-known global software companies. Currently launching a new cloud-based startup. Full bio here.

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