Wednesday, March 28, 2012
Tax Cuts Don’t Help Growth, Tax Increases Don’t Hurt Growth
New economic research shows us just how much the Republican tax cutters have lied to us so they can evade their public responsibility.
The research comes from both directions. As Porter writes, Emmanuel Saez of Cal-Berkeley has research showing that the Laffer curve is set far, far too low. Higher marginal tax rates on the wealthy will not cause massive tax avoidance or a reduction of work from high-income earners such that economic growth would slow. The peak of where raising taxes can reduce revenue is simply much higher than the 35% nominal tax rate of the present day in the US. Saez and Peter Diamond of MIT (the former Fed Governor nominee) posited last November that the top tax rate could be increased to 76% without losing revenue, and to 48% even with the same loopholes we have today. My favorite conclusion of theirs was that the rich don’t really contribute all that much to economic growth:The birth of the new conventional wisdom.
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