|Cartoon of Adam Smith and John Maynard Keynes|
confusing Bill O'Reilly. (By rrllmm392 via Flicker.com)
News flash: Washington is crazy. And very often, it seems like they reject our desires.
But, quite often, the government does do good work. And one of those bits of "excellent work" was the Congressional Research Services (CRS) 2012 research paper: Taxes and the Economy.
This paper is amazing, and does perhaps the finest job I have ever seen in asking quite frankly the question that has most of us puzzled: "What impact does the cutting of top tax rates have on the economy?" And in a few quick pages, divulges the following facts.
Overview of the CRS's findings in Taxes and the Economy.
- Top-Tier Tax Rates & Their Effect on GDP Growth
- Higher tax rates for the top 1% are weakly associated with faster GDP growth.
- Lowering those rates leads to a slight decrease in associated GDP growth
- Consolidating income towards the top..
- This is accomplished by redistributing wealth from the lowest two quintiles, and moving that wealth to the wealthy.
Ironically, these findings directly contradict many neo-Con fiscal policies that have been popular since Reagan. However, this has not stopped the GOP to continue to insist that "Tax cuts create prosperity. Which they do not. And yet, like I pointed out in my earlier article on the Laffer Curve, the GOP and most neo-Cons seem willfully ignorant of the import of the studies that prove their economics "incorrect."
I would run some figures, but know that numbers often causes people's eyes to gaze over. So I took the liberty to cop a few graphics from the CRS that illustrate the real impacts of these largely destructive policies are having on the nation.
First off, let's look at the history of both the top-tier Average Tax Rates, as well as the Capital Gains Tax Rates, since the wealthy garner the majority of capitol gains (See Fig. 1).
Notice that those rates have fallen considerably over the years. Especially from 1980 onwards, and the new neo-Con orthodoxy -- called Reaganomics, began to hold sway.
Notice that During the Clinton years, the rates were much higher than they are today. The Bush Tax Cuts of 2001 and 2004 have lowered those rates considerably. There is a solid argument that this is the cause of the deficit. Since the government is still pretty much "about the same." But the Federal income stream has slowed.
|Fig. 1: Historical Trend of Top Marginal And Capital Gains Tax Rates, 1945-2011 (CRS)|