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Liberal statistics predict no effect of tax cuts on economic growth

Top tax rates and average growth

Earlier this week, we reported that liberal statistics were refusing to show that tax hikes destroy the stock market. Well, they are at it again: this time, statistics are maliciously showing that cutting taxes does not lead to economic growth!

This graph shows countries that have implemented policies of cutting the top marginal tax rates over the 30 or so years.  It compares the amount of the tax cut with the percentage of of GDP growth arising after the tax cut.

Now, any good conservative knows that more tax cuts for the rich always, always, always lead to more economic growth no matter what.  That’s just intuitively obvious, and we hear it on Fox News over and over again, therefore it cannot be wrong.

SO WHAT’S WRONG WITH THESE DUMB COMMUNIST STATISTICS?

Somehow, this graph is showing that there is no relationship between the size of the tax cut on the top income earners, and the amount of GDP growth that follows!

One of two things is possible: either tax cuts on top income earners really don’t have much of an effect on economic growth compared to the wide variety of other things that can impact a country’s economy…… or, these statistics are simply skewed by some kind of mysterious liberal bias!!!

 

graph data source: Piketty, Thomas, Emmanuel Saez, and Stefanie Stantcheva (2011), “Optimal Taxation of Top Labor Incomes: A Tale of Three Elasticities“, CEPR Discussion Paper 8675, December.
graph found via: voxeu.org

 
6 Comments  comments 

6 Responses

  1. Because the chart fails to show that if the tax cut is made up with bond sales, the economy is essentially net zero. The person with the tax cut spends the money, the government borrows the money and takes those dollars which the bondholder then cannot buy things with. The problem with economics is that it is, of course, multivariate, this is why things are said in terms of ‘ceteris paribus’ (all things being equal), which they never are, but demand curves are downward sloping and supply curves are upward sloping – for a reason. Governments must operate and they must tax and no matter how you slice it that tax will tax something of value and when it does that, whether its sales tax, a capital gains tax or a tariff, the result will impact the value of the buyer of a product, of an investor or of a person engaged in trade. All taxes are costs and all costs, there’s no exception, discourages activities OR if the tax is paid, the tax is spent by the government and not the person who paid the tax. Liberals try to justify government spending and in doing so they attempt to minimize the impact of taxes. This is an error and its logically incoherent in the sense that a government expenditure is automatically desirable and stimulative whereas the person being taxed WOULDN’T somehow spend the money, somehow AGENCY itself. The doctrine tends to tie itself up in knots.

    • The shorter version of all of this is: “Democrats don’t trust you to spend your money on the right stuff.”

      • Uh, no, they trust you to spend it on something else, I am sure. Public choice theory is based on the premise that the public expenditure is more valuable than the aggregate individual expenditures and so they tout the value of that expenditure and diminish the value of the individual aggregate expenditures to the point where their argument strains credulity, ie. Don’t worry, we can raise capital gains and it won’t affect investors one iota, after all they don’t care what their rate of return is. There is also a tendency to underquote the government expenditure to make it more attractive, the result being a never shrinking government, one that is, at all levels, consuming 40% of our national income.

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