BOMBSHELL: New Study Destroys Theory That Tax Cuts Spur Growth

[True Earthling]

One economic theory has been repeated so often for so long in this country that it has become an accepted fact:
Tax cuts spur growth.

Most Americans have gotten so used to hearing this theory that they don't even question it anymore.
One of our two Presidential candidates is so convinced of the theory that he has built his entire economic plan around it--despite the huge negative impact additional tax cuts would likely have on our debt and deficit.

But is the theory true? Do tax cuts really spur growth?
The answer appears to be "no."

According to a new study by the Congressional Research Service (non-partisan), there's no evidence that tax cuts spur growth.
In fact, although correlation is not causation, when you compare economic growth in periods with declining tax rates versus periods with high tax rates, there seems to be evidence that tax cuts might hurt growth. But we'll leave that possibility for another day.
One thing that tax cuts do unequivocally do--at least tax cuts for the highest earners--is increase economic inequality. Given that economic inequality is one of the biggest problems we face in this country right now, this conclusion is very important.


Read more: http://www.businessinsider.com/study-tax-cuts-dont-lead-to-growth-2012-9#ixzz276wQSIlA

[Tennessee Gal]

1. Good post. Will take some time to digest.

Very relevant and helpful information.

Thanks.

[justiceischeap]

2. That's less of a bombshell for anyone paying attention

we've been seeing for years that this method doesn't work.

[unblock]

3. in fact HIGHER taxes can spur growth. it creates more demand from money.

this is even obvious at the level of an hourly worker. jack up your tax rate and suddenly you need to work more hours, or earn a raise, in order just to maintain your standard of living. would an hourly worker say, nah, it's not worth it, i'll just quit? yeah, right, and do what?

the idea that a lower tax rate means you'll work harder ignores the fact that your take-home pay is higher even when you don't work harder, and in fact, you can even dial it back a bit and come out ahead. yes, working extra hours becomes more lucrative, but those extra marginal dollars aren't as important as the rest of the money, most of which is a gift for doing the same, or slightly less, work.


most of all, though, higher business tax rates reduce risk because the government subsidizes any loss. so it's much safer to go for growth when taxes are high. lower tax rates mean you bear the bulk of any loss yourself.

[orwell]

4. I've been saying this for the better part of 20 years...

...because I look at economic charts.

Those pesky facts again...

[SheilaT]

5. As I like to say, This is not exactly breaking news.