The Hackenblog

Cutting taxes on rich people doesn’t help the economy, it only helps rich people. As if you needed proof, but if you like proof, well, here it is:

Congressional Research Service Taxes and the Economy: An Economic Analysis of the Top Tax Rates Since 1945 (pdf)
Thomas L. Hungerford
Specialist in Public Finance
September 14, 2012

“Summary
“Income tax rates have been at the center of recent policy debates over taxes. Some policymakers have argued that raising tax rates, especially on higher income taxpayers, to increase tax revenues is part of the solution for long-term debt reduction. For example, the Senate recently passed the Middle Class Tax Cut (S. 3412), which would allow the 2001 and 2003 Bush tax cuts to expire for taxpayers with income over $250,000 ($200,000 for single taxpayers). The Senate recently considered legislation, the Paying a Fair Share Act of 2012 (S. 2230), that would implement the “Buffett rule” by raising the tax rate on millionaires.

“Other recent budget and deficit reduction proposals would reduce tax rates. The President’s 2010 Fiscal Commission recommended reducing the budget deficit and tax rates by broadening the tax base—the additional revenues from broadening the tax base would be used for deficit reduction and tax rate reductions. The plan advocated by House Budget Committee Chairman Paul Ryan that is embodied in the House Budget Resolution (H.Con.Res. 112), the Path to Prosperity, also proposes to reduce income tax rates by broadening the tax base. Both plans would broaden the tax base by reducing or eliminating tax expenditures.

Advocates of lower tax rates argue that reduced rates would increase economic growth, increase saving and investment, and boost productivity (increase the economic pie). Proponents of higher tax rates argue that higher tax revenues are necessary for debt reduction, that tax rates on the rich are too low (i.e., they violate the Buffett rule), and that higher tax rates on the rich would moderate increasing income inequality (change how the economic pie is distributed). This report attempts to clarify whether or not there is an association between the tax rates of the highest income taxpayers and economic growth. Data is analyzed to illustrate the association between the tax rates of the highest income taxpayers and measures of economic growth. For an overview of the broader issues of these relationships see CRS Report R42111, Tax Rates and Economic Growth, by Jane G. Gravelle and Donald J. Marples.

“Throughout the late-1940s and 1950s, the top marginal tax rate was typically above 90%; today it is 35%. Additionally, the top capital gains tax rate was 25% in the 1950s and 1960s, 35% in the 1970s; today it is 15%. The real GDP growth rate averaged 4.2% and real per capita GDP increased annually by 2.4% in the 1950s. In the 2000s, the average real GDP growth rate was 1.7% and real per capita GDP increased annually by less than 1%. There is not conclusive evidence, however, to substantiate a clear relationship between the 65-year steady reduction in the top tax rates and economic growth. Analysis of such data suggests the reduction in the top tax rates have had little association with saving, investment, or productivity growth. However, the top tax rate reductions appear to be associated with the increasing concentration of income at the top of the income distribution. The share of income accruing to the top 0.1% of U.S. families increased from 4.2% in 1945 to 12.3% by 2007 before falling to 9.2% due to the 2007-2009 recession. The evidence does not suggest necessarily a relationship between tax policy with regard to the top tax rates and the size of the economic pie, but there may be a relationship to how the economic pie is sliced.”

There are some mighty nice charts in that pdf, if such things delight you, too.

This clip explaining why this report is such a big deal, takes a while to get to the point, but then does it evah get to the point:

Visit NBCNews.com for breaking news, world news, and news about the economy

God bless Rachel Maddow.

And he has a nice chart, too.

“Thanks to the child tax credit and Earned Income Tax Credit, a fair number of working families with young children pay no income tax; thanks to the exemption on Social Security, many older Americans pay no income tax. But in middle age, close to 80 percent of the population pays income taxes, and even more, of course, pay federal taxes of some kind.”
Taxes over the life cycle, Dr. Krugman, NYT, September 18, 2012

See, when I heard the 47% don’t pay taxes, I though as a non-data wielding economist, “How that that be? If only 53% were paying the IRS, wouldn’t the country have ground to a halt by now due to lack of funds?”

By the way, “47%” has become a meme: a friend’s very right-wing mother told her that in California 47% of the population are illegal, live off the social system, and don’t pay taxes. Even or especially in California that’s impossible.

I’m daily more horrified that Mitt Romney is who the GOP thinks should be President of the United States. I can only hope America gets hip to the scene and less than 47% percent in each state votes Republican. Rev up your engine, America, and vote Democrat in 2012.