Back in September 2012 the Congressional Research Service released a report on the impact of cutting taxes, for the top 5%[i], on the economy. They found that it merely increased income inequality and did not cause any economic growth. Specifically the reports[ii] concluding remarks are:
“The top income tax rates have changed considerably since the end of World War II. 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 average tax rate faced by the top 0.01% of taxpayers was above 40% until the mid-1980s; today it is below 25%. Tax rates affecting taxpayers at the top of the income distribution are currently at their lowest levels since the end of the second World War.
The results of the analysis suggest that changes over the past 65 years in the top marginal tax rate and the top capital gains tax rate do not appear correlated with economic growth. The reduction in the top tax rates appears to be uncorrelated with saving, investment, and productivity growth. The top tax rates appear to have little or no relation to the size of the economic pie.
However, the top tax rate reductions appear to be associated with the increasing concentration of income at the top of the income distribution. As measured by IRS data, 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. At the same time, the average tax rate paid by the top 0.1% fell from over 50% in 1945 to about 25% in 2009. Tax policy could have a relation to how the economic pie is sliced—lower top tax rates may be associated with greater income disparities.”
Yet, other reports have come out to show the same findings as that report had, including the 2011[iv] CIA World Fact Book that listed US income inequality as being worse than that of Egypt and worse than it has been since 1920.
“Why were more jobs created in the previous decade under higher taxes than in this decade under lower taxes?”
“I don’t know specifically the answer to that question. I can maybe merit a guess.”
Here is the video of the interview:
August 2012[vii] a report came out also found that supply-side policies that favor tax cuts on the wealthy do nothing for prosperity for anyone other than the 1%. An analysis by the Center for American Progress showed that economic growth was stronger during the 1990’s when taxes were higher on upper income Americans.
The GOP is pushing cutting all entitlement programs, tax cuts for the wealthy, and a return to trickle down economics. This can be seen in:
- Paul Ryan’s budget[viii] that passed[ix] the house
- Mitt Romney’s budget that makes cuts to programs[x] like Medicaid, Medicare[xi], Social Security[xii]
- Mitt Romney’s updated economic[xiii] plan is based on massive tax cuts for the wealthy.
- The[xiv] automatic spending cuts and tax increases that will occur at the start of 2013. This was part of the deal that congress made to raise the debt ceiling; which will result in a larger contraction of the US budget than Greece, UK, Mexico, Russia, Spain, Brazil, Ireland, and even more than the US did in 1968.
There[xv] are similar austerity measures in place in Europe that the GOP are pushing for the US. Those measures in Europe have killed economic growth and increased debt. 116 million Europeans are at risk right now to fall into poverty. In the US under[xvi] the Bush policies 8.3 million people fell into poverty and child poverty rose by 3 percent.
[i] New Study Finds Tax Cuts For the Rich Cause Income Inequality, Not Economic Growth (http://thinkprogress.org/economy/2012/09/17/857861/study-tax-cuts-rich-no-growth/)
[ii] Taxes and the Economy: An Economic Analysis of the Top Tax Rates Since 1945 (http://online.wsj.com/public/resources/documents/r42729_0917.pdf)
[iii] The Nonpartisan Study on High Income Tax Cuts the GOP Doesn’t Want You To Read (http://thinkprogress.org/economy/2012/11/01/1125901/nonpartisan-government-agency-withdraws-study-on-high-income-tax-cuts-after-gop-complaints/)
[iv] Income Inequality In the US is Worse than in Egypt (http://thinkprogress.org/politics/2011/01/31/141611/income-inequality-egypt/)
[v] Chart Lower Taxes on the Rich Don’t Lead to Job Growth (http://thinkprogress.org/economy/2011/06/28/256605/chart-lower-taxes-on-the-rich-dont-lead-to-job-growth/)
[vi] GOP Supercommittee Member Admits Bush Tax Cuts Didn’t Create Jobs, Can’t Explain Why (http://thinkprogress.org/economy/2011/12/04/381510/upton-cant-explain-tax-cuts-jobs/)
[vii] Chart: GOP Supply Side Policies Don’t Lead to Economic Growth (http://thinkprogress.org/economy/2012/08/02/627731/charts-supply-side-growth/)
[viii] The New Budget (https://roseylinn.wordpress.com/2012/03/21/the-new-budget/)
[ix] The Budget Update (https://roseylinn.wordpress.com/2012/03/29/the-budget-update/)
[x] Romney Praises State Level Innovations in Medicaid, Then Proposes Cuts that Would Stifle Them (http://thinkprogress.org/health/2012/10/25/1080341/romney-state-level-innovations-in-medicaid/)
[xiii] Romney’s Economic Plan Update Just Doubles Down on His Tax Cuts (http://thinkprogress.org/economy/2012/10/31/1116331/romney-economic-update/)
[xiv] Fiscal Cliff Would Cause More Austerity Than European Debt Crisis (http://thinkprogress.org/economy/2012/10/29/1103631/fiscal-cliff-europe-austerity/)
[xv] Study Finds Eurozone Austerity is Killing Economic Growth, Increasing Debt (http://thinkprogress.org/economy/2012/10/31/1115711/study-austerity-fail/)
[xvi] Romney’s Frontrunner for Treasury Secretary “The rich are taxed enough” (http://thinkprogress.org/economy/2012/10/25/1084111/romneys-head-economic-adviser-the-rich-are-taxed-enough/)