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Study: Tax Cuts for the Rich Don't Spur Growth

Jeff King 2012/09/17 20:56:38

Cutting taxes for the wealthy does not generate faster economic growth, according to a new report. But those cuts may widen the income gap between the rich and the rest, according to a new report.

A study from the Congressional Research Service -- the non-partisan research office for Congress -- shows that "there is little evidence over the past 65 years that tax cuts for the highest earners are associated with savings, investment or productivity growth."

In fact, the study found that higher tax rates for the wealthy are statistically associated with higher levels of growth.

The finding is likely to fuel to the already bitter political fight over taxing the rich, with President Obama and the Democrats calling for higher taxes on the wealthy to reduce the deficit and fund spending. Mitt Romney and the GOP advocate lower marginal tax rates for top earners, saying they fuel investment and job creation. The CRS study looked at tax rates and economic growth since 1945. The top tax rate in 1945 was above 90 percent, and fell to 70 percent in the 1960s and to a low of 28 percent in 1986.

The top current rate is 35 percent. The tax rate for capital gains was 25 percent in the 1940s and 1950s, then went up to 35 percent in the 1970s, before coming down to 15 percent today - the lowest rate in more than 65 years.

Lowering these rates for the wealthy, the study found, isn't aligned with significant improvement in any of the areas it examined. Pushing tax rates down had a "negligible effect" on private saving, and while it does note a relationship between investing and capital gains rates, the correlations "are not statistically significant," the study says.

"Top tax rates," it concludes, "do not necessarily have a demonstrably significant relationship with investment."

The study said that lower marginal rates have a "slight positive effect" on productivity while lower capital gains rates have a "slight negative association" with productivity. But, again, neither effect was considered statistically significant.

Do higher taxes on the rich lead to faster economic growth? Not necessarily. The paper says that while growth accelerated with higher taxes on the rich, the relationship is "not strong" and may be "coincidental," since broader economic factors may be responsible for that growth.

There is one part of the economy, however, that is changed by tax cuts for the rich: inequality. The study says that the biggest change in the distribution of U.S. income has been with the top 0.1 percent of earners - not the one percent.

The share of total income going to the top 0.1 percent hovered around 4 percent during the 1950s, 1960s and 1970s, then rose to 12 percent by the mid-2000s. During this period, the average tax rate paid by the 0.1 percent fell from more than 40 percent to below 25 percent.

The study said that "as top tax rates are reduced, the share of income accruing to the top of the income distribution increases" and that "these relationships are statistically significant."

In other words, cutting taxes on the rich may not grow the economic pie. But the study found that those cuts can effect "how that economic pie is sliced."

Study Tax Cuts for the Rich Don t Spur Growth
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  • Snowball 2012/09/29 02:22:33 (edited)
    Snowball
    Do you know how much his "tax the rich" "plan" will raise? Get ready for this- $37 Billion dollars----OVER TEN YEARS! Anyone who supports this as a "plan"
    but wants to throw Ryan under the bus for doing something other than wasting our precious time to solve this problem should think about their kids & grand kids.
  • Joe Shwingding BN-ZERO 2012/09/18 16:59:18
    Joe Shwingding BN-ZERO
    +1
    thats all it was ever designed to do.
  • Guru_T_Firefly 2012/09/18 04:07:09
    Guru_T_Firefly
    +1
    We already knew that tax cuts have absolutely nothing to do with economic growth. The only thing tax cuts grow is the wealth of the wealthy.
  • maquignon 2012/09/18 01:59:16
    maquignon
    I think that this debate is absolutely ridiculous UNLESS you know and take into account what the tax rate IS. Obviously, if the tax rate is already low, lowering it won't make much difference; however, if the rate is high enough to be burdensome, it is bound to make a difference. The rich DO make adjustments when taxes change. A good point is some years ago when the tax on luxury boats was almost doubled. The rich quit buying luxury boats and bought something else instead. The boat industry was almost destroyed before Congress could correct it's mistake. The rich weren't bothered much but the people who built the boats, the middle class lost many jobs when boat builders went out of business. IT IS THE RICH WHO PROVIDE JOBS FOR THE MIDDLE CLASS.
  • flaca BN-0 2012/09/17 21:52:29
    flaca BN-0
    +1
    Really rich people can afford to build factories whether they get a tax cut or not. But they aren't. This is because the middle class (their customers) have been impoverished. Why make stuff that nobody can afford to buy.
  • ehrhornp 2012/09/17 21:48:16
    ehrhornp
    +1
    Oh course. This is so obvious it is pathetic. Shame phony conservatives keep pushing this urban legend.
  • Simmering Frog 2012/09/17 21:24:59
    Simmering Frog
    Patriotic Americans should celebrate all tax cuts regardless of class. Believing one's economic status is raised by punishing others in another class is a belief with no foundation in reality. If done effectively though, class envy will buy a few million votes for politicians. However I've yet to meet a single person whose economic status was elevated because a rich person was punished.
  • Jeff King Simmeri... 2012/09/17 21:44:24 (edited)
  • ehrhornp Jeff King 2012/09/17 21:53:31
    ehrhornp
    lol, be proud that you pay a higher tax rate than Mitt. After all your taxes probably go into Mitt's pocket.
  • Jeff King ehrhornp 2012/09/17 21:55:34
  • ehrhornp Jeff King 2012/09/17 22:04:04
    ehrhornp
    +1
    lol, among other places,
  • Simmeri... Jeff King 2012/09/18 01:20:11
    Simmering Frog
    You should be far more concerned about the EBT cards you're payng for.
  • ehrhornp Simmeri... 2012/09/17 21:51:56
    ehrhornp
    +1
    Shame you think supporting our troops is punishing the rich? In case you don't know it, it costs huge bucks to support our military industrial complex? So who should pay for this? I say the people who profit off the military should pay pay and pay some more. Same applies for the war on drugs, aka the prison industrial complex.
  • ray 2012/09/17 21:24:54
    ray
    HMMM it what they say is true , then Taxing employers will create jobs , right?

    "In fact, the study found that higher tax rates for the wealthy are statistically associated with higher levels of growth."
    More taxes = more jobs , so tax all companies 100% = full employment ?

    These are the same wizards that are responsible for the US credit rating being downgraded twice , The world wide banking Crisis , the issuance of Billions of dollars in Fiat money and brought us to the brink of worldwide monetary collapse.

    Maybe paying attention to their advice is exactly the wrong move.
  • Jeff King ray 2012/09/17 21:46:05
  • ray Jeff King 2012/09/17 22:15:34
    ray
    Is that due to the Budget ? ( the budget that is MIA for the past four years ? )
  • Jeff King ray 2012/09/17 22:32:20
  • ray Jeff King 2012/09/17 23:20:03
    ray
    Lets see a democratic controlled Senate and a Democrat controlled house , with Obama in control that can shove Obamacare down the throats of 70% Americans that don't want it . For the first two years can't pass a budget and tries to blame Bush ? Republicans ? How about their own corrupt incompetence is responsible.

    Obama and the Socialist democrats have created more debt in Obama's term than all the presidents combined since the formation of the nation.
    Obama Has Now Increased Debt More than All Presidents from George Washington Through George H.W. Bush Combined
    http://cnsnews.com/news/artic...
    Note : this article is slightly dated , Obama has increased the debt to 15\\
    http://www.usdebtclock.org/

    You claim that GW Bush created a 11T hole ?
    Obama boosted that 150% to over 16 trillion and had the credit rating of America down graded twice .

    Four years later , longer than WWI , longer than WWII , Longer than the Civil war and can't even pass a budget ? Talk about gross incompetence !
  • ehrhornp ray 2012/09/17 22:02:29
    ehrhornp
    +1
    More taxes means more money into the government which means lower deficits. (Happened not that long ago under Clinton. Republicans at the time were crying that higher tax rates would surely mean economic collapse. Didn't turn out that way did it? But when the lower taxes did happen under G W Bush, guess what happened? Just shows phony conservatives are wrong 2 out of 2. Only a fool would want to give them a third chance to be wrong.
  • ray ehrhornp 2012/09/17 22:28:53
    ray
    twenty five billion loss on GM , 2 billion given to Brazil to drill for oil , Billions given to Moslem brotherhood , Billions given to Hamas , Rebuilding Mosques ,
    What the heck out of 190 countries on Earth , Tax money is given to 150 of them .
    Billion here Billions there Unlimited printing of Fiat money and the whole economic systems on the edge of collapse. Unable to create a Budget in his entire term in office .

    Record unemployment , record Food stamps , record poverty levels . Obama is setting records every where you look and his only Mantra since he took office is More Taxes.
    No matter how bad he screws up , more spending and more deficits and more taxes is the limit of his abilities.

    Looking at how badly the country has declined since Obama took office , only a fool would not want him removed as rapidly as possible
  • ehrhornp ray 2012/09/18 01:47:43
    ehrhornp
    So patriotic of you to have all those people without jobs. Shame you didn't pay attention to GW Bush who took the country from a balanced federal budget to deficit spending. Oh I know the budget wasn't really balanced. lol But it was sure a lot more balanced than what followed with the phony conservatives taking over. How much money did we waste on Iraq, and Afghanistan? All started with lies. Tax cuts for the rich really worked out well now didn't it. So much for the promise that the tax cuts will keep the budget balanced.

    You say the country has declined since Obama has taken office, I just disagree as my wealth is almost back to where it was prior to the start of the Bush recession. Value of my house and my stock market evaluation is close to where it was. Looking at hiring, lot of good news there too.
  • ray ehrhornp 2012/09/18 12:19:21 (edited)
    ray
    your personal fortunes do not determine the depth of the decline since Obama took office . Obama has plunged the country $1,250,000,000,000 dollars deeper in to debt every year since he took office. ( see link for national debt clock above) Having now exceeded 16 trillion dollars . There is no budget as currently it is impossible to ever tax enough to satisfy Obama's irresponsible squandering of the national treasury .
    http://www.cnn.com/2012/03/2...

    All those people without jobs, that is so patriotic, is Obama's creation .
    Obama has now created the lowest labor participation rate in 31 years .
    ( another match for Jimmy Carter , funny the comparisons )
    http://www.moneynews.com/Econ... Obama has achieved what even Jimmy Carter was able to do , that is former Middle class citizens living in tent Cities ( many named Obamaville ) in America . As noted by foreign filmmakers and reporters
    http://www.bbc.co.uk/panorama...


    " How much money did we waste on Iraq, and Afghanistan? All started with lies"
    Peculiar you should complain about cost of war in Afghanistan, as Obama has outdone Bush in every area . Obama has had more American soldiers killed in his four years than Bush did in 8 , and has outspent Bush in Afghanistan.
    http://costofwar.com/publicat...
    Then in addition to Obama's large...






    your personal fortunes do not determine the depth of the decline since Obama took office . Obama has plunged the country $1,250,000,000,000 dollars deeper in to debt every year since he took office. ( see link for national debt clock above) Having now exceeded 16 trillion dollars . There is no budget as currently it is impossible to ever tax enough to satisfy Obama's irresponsible squandering of the national treasury .
    http://www.cnn.com/2012/03/2...

    All those people without jobs, that is so patriotic, is Obama's creation .
    Obama has now created the lowest labor participation rate in 31 years .
    ( another match for Jimmy Carter , funny the comparisons )
    http://www.moneynews.com/Econ... Obama has achieved what even Jimmy Carter was able to do , that is former Middle class citizens living in tent Cities ( many named Obamaville ) in America . As noted by foreign filmmakers and reporters
    http://www.bbc.co.uk/panorama...


    " How much money did we waste on Iraq, and Afghanistan? All started with lies"
    Peculiar you should complain about cost of war in Afghanistan, as Obama has outdone Bush in every area . Obama has had more American soldiers killed in his four years than Bush did in 8 , and has outspent Bush in Afghanistan.
    http://costofwar.com/publicat...
    Then in addition to Obama's largess to the war in Afghanistan . He invaded Libya, creating the mess there , Invaded is expanding the war in the Congo .
    Assassinations , Invasions , Blood and Guts Obama has achieved up to 6 simultaneous wars and battlefields simultaneously . Obama has never seen moslems in a war that he didn't want to join in.

    All the things you claim to not like , are exactly the things that Obama creates and amplifies.
    "Value of my house and my stock market evaluation is close to where it was. "
    Four years of Stagnation , in addition to losses due to inflation , Amplified by Obama's policies ( QE1, QE2, QE3 ) in real dollars the loses are about 20%

    Edit : repair broken link
    (more)
  • ehrhornp ray 2012/09/18 16:18:22
    ehrhornp
    Seems like the same crap was sprouted when Clinton was president. It is a shame that you don't realize how deep an economic hole you republicans plunged the country in. Now you bitch because Obama had to go into deficit spending to rescue the economy. Well guess what? He succeeded to a large extent. Stock market is now around 13000 instead of under 7000, which was where it was at the bush lows.

    But just as Clinton's tax increase did not plunge the country into an economic black hole, GW's policies of socialism for the rich did. Now phony conservatives want to double down on the policies that caused the mess in the first place. How stupid.

    You idiot republicans took a country that was fiscally well off and promptly ran up huge debt by giving tax cuts to the rich and making pot holes half way around the world. Then you wonder why the economy went off the cliff and you blame Obama for fixing it. Well if you bastards didn't break the economy in the first place, Obama wouldn't need to be spending today.

    I have a lot of disagreements with Obama, the Afghanistan war is one of them. Fact remains your hero GW started it based upon lies and once a war is started it is hard to end it.

    As for tent cities, you blame Obama? Let me remind you when Health fairs started. You m...

    Seems like the same crap was sprouted when Clinton was president. It is a shame that you don't realize how deep an economic hole you republicans plunged the country in. Now you bitch because Obama had to go into deficit spending to rescue the economy. Well guess what? He succeeded to a large extent. Stock market is now around 13000 instead of under 7000, which was where it was at the bush lows.

    But just as Clinton's tax increase did not plunge the country into an economic black hole, GW's policies of socialism for the rich did. Now phony conservatives want to double down on the policies that caused the mess in the first place. How stupid.

    You idiot republicans took a country that was fiscally well off and promptly ran up huge debt by giving tax cuts to the rich and making pot holes half way around the world. Then you wonder why the economy went off the cliff and you blame Obama for fixing it. Well if you bastards didn't break the economy in the first place, Obama wouldn't need to be spending today.

    I have a lot of disagreements with Obama, the Afghanistan war is one of them. Fact remains your hero GW started it based upon lies and once a war is started it is hard to end it.

    As for tent cities, you blame Obama? Let me remind you when Health fairs started. You may not know this but health fairs was something designed for the third world. Surprising then that under Bush, health fairs started showing up in the United states. Third world country here we come.

    If this country does elect another socialist for the rich, you can expect the same result. A huge economic collapse. You republicans are good at crashing the economy. No wonder Bin loved you guys. lol
    (more)
  • ray ehrhornp 2012/09/18 17:12:40
    ray
    5 trillion dollars in Debt in the past 4 years and never a budget . Spin , twist shout , evoke the sainted name of Bill Lewinski to ward off evil . When all the babble is done . The greatest deficit in all the history of the US and the twice credit degrade is Obama's magnus opus .

    The rotted economy , high unemployment , record levels on Food stamps these are Obama's legacy and creations.

    Obama has screwed every thing he has touched . The Arab spring that he was so proud to be part of isn't working out so well is it ? His savy business investments has lost Many many Billions of dollars. Even GM wants to get rid of him , although he won't let go , as then he has to admit the 25 billion he lost trying to build glorified golf carts with gas engines.

    Like some demented soul, locked in a straitjacket and stuck in a padded cell, all he can do is croak over and over . Raise taxes , Raise Taxes.

    Only a little time left , then he can join Jimmy Carter , and Bill Lewinsky on the lecture tours of used to be. Making millions for spewing about his failed policies.
  • ehrhornp ray 2012/09/18 17:44:54
    ehrhornp
    +1
    Still in denial I see. Shame you don't know how government works. But you keep on supporting the party that led us down this path. You know support republicans who basically took a balanced federal budget and unbalanced it by giving huge tax cuts to the rich and ran two never ending wars off budget. Can you name a previous time when tax cuts were given during a time of war? So very fiscally responsible. lol

    Nice to know that you phony conservatives were so against the Arab spring. There was a show on where a republican was debating against himself. They took statements that were recently made and compared them to statements that were made before. funny as hell and shows the hypocrisy of phony conservatives.

    You realize I hope that taxes are about the lowest they have ever been. But I agree, lets cut taxes and do away with the military industrial complex. (and the war on drugs)
  • ray ehrhornp 2012/09/18 18:33:55
    ray
    Look around, the homeless , the unemployed , the Misery index, the loss of average income , the lower standards , the financial crisis , the wretched malaise and fear that infects the country .

    This is what Obama has achieved.
  • Jeff King ray 2012/09/18 18:51:07
  • ray Jeff King 2012/09/18 19:03:03
    ray
    Obama didn't inherit a thing .
    Obama simply took over that which Bush had to deal with .
    Now , have things gotten better or helluva lot worse?

    Obama had his chance and BLEW IT
  • Jeff King ray 2012/09/18 22:58:32
  • ray Jeff King 2012/09/18 23:24:53
    ray
    list Obama's greatest accomplishments in the past four years.
    Hint : Obama just happened to be sitting in the chair when the military caught up to Bin Laden .
    GM is trying hard to part company with Obama , Obama don't what to face the 25 billion dollar loss publicly right now .
  • Jeff King ray 2012/09/18 23:34:27
  • ray Jeff King 2012/09/18 23:43:09
    ray
    Bush isn't running this election .
    Don't blame you for trying to divert to Bush , Can't think of anything Obama did worthy of note either.
  • Jeff King ray 2012/09/18 23:48:19 (edited)
  • ray Jeff King 2012/09/19 12:34:17
    ray
    I will never keep past with the cut and paste from the propoganda sites , so Just your top two " accomplishments will be addressed. "

    1)
    Obamacare is a monument to blackmail and corruption. With a full court press by the Socialist Progressives still many bribes had to be passed and over a thousand groups exempted ( only till the elections are over then comes the knife in the back when they loose their exemption)
    Obamacare is a massive tax bill estimated to cost every working person covered a minimum of $8,000 dollars a year. Many employers have stated they will drop medical insurance entirely when Obamacare is fully implemented .
    Obamacare proponents become rankled when reminded that medical care is going to be rationed . Cost effective treatment is the official line. Meaning that wheelchairs are cheaper than hip replacements and coffins are cheaper than shock trauma clinics. .
    Obamacare the day it was passed 60 hospital construction were canceled as it became illegal for certain citizens to invest in hospitals or expand what they already own.
    Obamacare is also responsible for the cancellation of factory construction , along with flight out of the country .
    Obamacare is also like a fungus as it keeps growing " as the secretary shall determine " such that nobody can predict what...













    I will never keep past with the cut and paste from the propoganda sites , so Just your top two " accomplishments will be addressed. "

    1)
    Obamacare is a monument to blackmail and corruption. With a full court press by the Socialist Progressives still many bribes had to be passed and over a thousand groups exempted ( only till the elections are over then comes the knife in the back when they loose their exemption)
    Obamacare is a massive tax bill estimated to cost every working person covered a minimum of $8,000 dollars a year. Many employers have stated they will drop medical insurance entirely when Obamacare is fully implemented .
    Obamacare proponents become rankled when reminded that medical care is going to be rationed . Cost effective treatment is the official line. Meaning that wheelchairs are cheaper than hip replacements and coffins are cheaper than shock trauma clinics. .
    Obamacare the day it was passed 60 hospital construction were canceled as it became illegal for certain citizens to invest in hospitals or expand what they already own.
    Obamacare is also responsible for the cancellation of factory construction , along with flight out of the country .
    Obamacare is also like a fungus as it keeps growing " as the secretary shall determine " such that nobody can predict what is in this hideous monstrosity "
    Built in to this Socialist construction is taxes on everything from tanning beds to homesales.
    Obamacare is the envy of every Banana republic dictator .

    2)
    Stimulus , Known as Porkulus was a massive failure . Noted for building 1/2 a bridge to nowhere, along with handicapped access sidewalks into brick walls .

    100 Stimulus projects Senator Tom Colburn -US senate
    http://www.coburn.senate.gov/...
    The porkulus bill spent and estimated $250,000 dollars for every job created . Temporary jobs paying an average of $40,000 dollars each . ( $312,000 union jobs ) .
    Porkulus spending is among the poster children of Obama's incompetence . Leaving him to try to explain the jobs weren't as shovel ready as he thought and the Porkulus failed because it wasn't big enough.


    In Similar fashion , from international Gun Smuggling to drug cartels to the current mess of the Arab Nations .
    Obama has nothing but excuses and Blame someone else for the horrific crisis he has spawned around the world.
    (more)
  • ehrhornp ray 2012/09/18 22:09:46
    ehrhornp
    +1
    lol, where the hell to come up with such crap? Hate to tell you this but the homeless has been around since the beginning of time. Now it is true that during Uncle Ron's time (both as governor and as president) homelessness increased primarily so that tax cuts could be given to the rich.

    But this latest recession started under a republican president who with the help of a republican congress broke the economy. You might have remembered Clinton, the president prior to the fraud? Then the economy was relatively healthy and there was growth.

    Strange anyone would want to give the keys back to the party that caused the crash in the first place. Are you a masochist?
  • ray ehrhornp 2012/09/18 23:33:46
    ray
    What things are better now than the day Obama took office?
    Food ? Fuel ? Jobs ? economy ? foreign relations ?
    Massive failure in every arena .

    Hint : Barry Barrack Husein Sotero Obama claimed the recession was over in 2009 and that things were getting better.
    http://www.washingtonpost.com... so Bush is off the hook on that point.
  • Jeff King ray 2012/09/18 23:50:18
  • ehrhornp ray 2012/09/19 01:37:18
    ehrhornp
    +1
    Stock market, now at 13,500.
    My decisions to buy Priuses and install solar photovoltaic have paid off nicely.
    I have a job and employment is improving in Hawaii.
    Sure trust foreign relations under Obama than Mitt. Just remember if Mitt was president these past 3 years, Bin will still be alive while GM would be dead. I think Obama made the better decision.
  • ray ehrhornp 2012/09/19 12:00:40
    ray
    Congratulations on investing in Offshore companies to evade Obama's failures .

    Obama has lost Billions and Billions using taxpayer money to buy stock in GM , Solar companies and windmills. Obama just doesn't understand finance or business . Amateurs should not be spending other peoples money.

    You must have crystal ball to predict GM would be dead . It was stolen by force from the owners and awarded to political cronies to build cars with no market . Sold at a loss and the Government paying people to buy them . Then pay no taxes and still wind up a loser .
    General Motors Is Headed For Bankruptcy -- Again
    http://www.forbes.com/sites/l...
    Wise investors argue that GM would be a healthy company if Obama had stayed out.

    Meanwhile , Ford refused the Government take over and has done quite well .
  • Jeff King ray 2012/09/18 19:23:20

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