New Study Finds High-Income Tax Cuts Don’t Stimulate Economic Growth

[pampango]

Congressional Republicans and their party’s presidential nominee have both pushed plans to cut taxes on the wealthiest Americans in hopes that such a move would stimulate the economy and aid the recovery from the Great Recession. A new study, however, indicates that tax cuts for the wealthiest earners fail to generate economic growth at the same pace as tax cuts aimed at low- and middle-income earners.

“Almost all of the stimulative effect of tax cuts,” Zidar found, “results from tax cuts for the bottom 90%. A one percent of GDP tax cut for the bottom 90% results in 2.7 percentage points of GDP growth over a two-year period. The corresponding estimate for the top 10% is 0.13 percentage points and is insignificant statistically.”

Zidar’s study provides more empirical backing to what the U.S. has experienced over the last 30 years. Supply-side tax cutting policies have not led to the growth their Republican proponents promised. The Bush tax cuts, for instance, were followed by the weakest decade for economic expansion on record.

Still, Republicans, some of whom admit that the Bush tax cuts didn’t lead to the desired growth, are sticking to their ideology. Republican presidential nominee Mitt Romney proposed a tax cut that is four times larger than the Bush tax cuts; the GOP has fought efforts to allow the high-income tax cuts expire at the end of the year, arguing that doing so would dampen growth; and Republican governors across the country have pushed tax cut packages aimed at the wealthy even as their states struggle with budget shortfalls.

http://thinkprogress.org/economy/2012/09/12/840641/tax-cuts-rich-economic-growth/

[porphyrian]

1. They won't read this, but everyone else should. n/t

[justiceischeap]

2. I think the proof has been in the economy for years

you don't have to be an economist, or even good at math, to see that these tax cuts aren't working.

[laundry_queen]

15. If an economist is proposing more tax cuts to stimulate the economy

He is either not an economist and got his degree at a diploma mill, or he is bought out, or he is a fucking moron.

Basic econ courses cover this shit. The study is a big fat DUH!

[Barack_America]

3. "New study finds the last decade happened".

This is interesting, but obvious.

[Scuba]

4. Holy shit! Who knew???!!!???

[central scrutinizer]

5. thirty years should be proof enough, but

instead we get, "just give us another tax cut and we promise that this time we will create some jobs (right after we top off our offshore accounts)"

[jp11]

11. 30 years? that is an anomaly

they need a few centuries before the jury can bring back a verdict.



Oh and after they get their tax cuts they'll cry about 'uncertainty', all those bold, brave, stand on your own risk taking maverick bootstrapping gambling edge of your seat capitalists need to be swaddled in all the things they demand before shitting out a golden egg you can look at but they'll need to keep or you're a socialist/yadda yadda yadda.

[WilliamPitt]

6. This Just In: Water remains wet.

[reflection]

7. Yep. Look at the chart on page 8 of this document.

It measures the stimulus effect of various entities. Tax cuts are low on this list. Food stamps are the most effective stimulus, obviously because the money goes right back into the economy instead of getting squirreled away in a savings vehicle and remaining idle. I have shot down many a RWer lately with this.

http://www.economy.com/mark-zandi/documents/House-Steering-and-Policy-Committee-January-6-2009.pdf

[pampango]

9. Great chart. Food stamps provide most stimulus followed by unemployment benefits, infrastructure

spending and aid to state governments.

The most effective tax cut in terms of its stimulus impact was temporary payroll tax cuts. Also all of the permanent tax cuts listed were terribly ineffective at providing any stimulus effect.

Thanks for posting this, reflection.

[Johonny]

12. thanks, great chart

Table 1: Fiscal Stimulus Bang for the Buck
Source: Moody's Economy.com
Bang for the Buck
Tax Cuts
Nonrefundable Lump-Sum Tax Rebate 1.01
Refundable Lump-Sum Tax Rebate 1.22
Temporary Tax Cuts
Payroll Tax Holiday 1.28
Across the Board Tax Cut 1.03
Accelerated Depreciation 0.25
Permanent Tax Cuts
Extend Alternative Minimum Tax Patch 0.49
Make Bush Income Tax Cuts Permanent 0.31
Make Dividend and Capital Gains Tax Cuts Permanent 0.38
Cut in Corporate Tax Rate 0.30
Spending Increases
Extending Unemployment Insurance Benefits 1.63
Temporary Increase in Food Stamps 1.73
General Aid to State Governments 1.38
Increased Infrastructure Spending 1.59

[reflection]

13. It gets used quite a bit.

It's always the same thing from these guys. Capital gains taxes need to be lowered! Food stamps need to be done away with. I always use the aforementioned page 8 along with this nice graph showing just how low taxes really are.

http://visualizingeconomics.com/2012/01/24/comparing-tax-rates/#.UBbeHqDleSp

[Arkansas Granny]

8. No kidding! I like to ask people who still state that we can't raise the taxes on

the top 1%, "Where all the jobs are that the Bush tax cuts created?". It seems pretty clear to me that tax cuts are not the solution.

[WinkyDink]

10. Obviously from the "NS, S" Department.

[4th law of robotics]

14. I could see a case for this argument

if you were to not just give rich people/companies money but also rewrite the tax code such that the only way they can use that money productively is to invest it back in to the economy here (say tax breaks for investing in a US based company coupled with massive taxes on capital gains to discourage sitting on it among other things). This would require a massive overhaul of a tax code.

That would also have to be part of a program to increase consumer spending as well though.

But just giving rich people money while they have ever incentive to sit on it and ride out the bad times won't do anything.

[ck4829]

16. Today, I disovered two things... Water is wet and tax cuts don't create jobs

[mstinamotorcity2]

17. When Dealing With These Conservative Sproutlets

the Truth is something they cannot conform to. They have been put into a Republican induced coma of Lies. And even with treatments and doses of the Truth, this is a hard one for them to fight. You have some who have come out of their illness and can't believe they were ever like that. Former Governor Romney has touted from the beginning of his quest for the Presidency how he was District Leader,Bishop,Pastor and Layman in his dealings with is Faith. The Church of Latter Day Saints. Everyone says Religion and Politics don't mix. So am I not supposed to pay any attention to the District Leader,Bishop,Pastor,and Layman and Presidential Candidate when he deliberately lies on cue???

[frylock]

18. wow. no shit?

[smackd]

19. duh (nt)

[moondust]

20. At one time they may have helped.

Back before there were many super-rich and super-duper-rich who have little use for megabucks except to use them to make more megabucks, back when capital typically recirculated through the domestic economy, tax cuts were sometimes used for capital improvements IN THE U.S. which created jobs for Americans. Somebody needs to inform the GOP that that era ended about 30 years ago. As far as I can tell, tax cuts for the super-rich today are little more than bribes in exchange for political support and to attract and keep jobs and payrolls locally.

[99Forever]

21. No kidding?

Whodda thunk it?

I nominate this "study" for the Captain Obvious No Shit Award of the decade.