Study: Tax Cuts for the Rich Don't Spur Growth

study from the Congressional Research Service — the non-partisan research office for Congress — shows that “there is little evidence over the past 65 years that tax cuts for the highest earners are associated with savings, investment or productivity growth."

First and foremost, I would like to say I much prefer Congressional studies over many others because it's very easy to manipulate numbers, especially considering political bias and intent. To get a good idea of how statistics can be manipulated is to look at the average income of a population. Take this MSN article for example when considering "average income" to "median income"

First, what seems to be good news: For 2010, the average U.S. income was $39,959, according to the Social Security Administration. However, the median income -- meaning half of Americans made more, half made less -- was substantially lower, at $26,364.

As you can see $13,595 is quite a stark difference when considering the political and social ramifications of such studies. For anyone who may not understand how median income is determined I'm more than happy to explain upon request. As of now I would like to remain focused on the original article.

The top current rate is 35 percent. The tax rate for capital gains was 25 percent in the 1940s and 1950s, then went up to 35 percent in the 1970s, before coming down to 15 percent today — the lowest rate in more than 65 years.

For those who may not know what a capital gain is I will reference what the IRS considers "capital gains and losses".

Almost everything you own and use for personal or investment purposes is a capital asset. Examples include a home, household furnishings, and stocks or bonds held in a personal account. When a capital asset is sold, the difference between the basis in the asset and the amount it is sold for is a capital gain or a capital loss. Generally an asset's basis is its cost, however, if you received the asset as a gift or inheritance, refer to Topic 703 for information about your basis. You have a capital gain if you sell the asset for more than your basis. You have a capital loss if you sell the asset for less than your basis. Losses from the sale of personal-use property, such as your home or car, are not deductible.

Now back to the original article.

Lowering these rates for the wealthy, the study found, isn't aligned with significant improvement in any of the areas it examined. Pushing tax rates down had a "negligible effect" on private saving, and while it does note a relationship between investing and capital gains rates, the correlations “are not statistically significant,” the study says. “Top tax rates,” it concludes, “do not necessarily have a demonstrably significant relationship with investment.”

So if there is no noticeable significant improvement, why the steady decline in these tax rates over the past 70 years? It may not seem historically important, but it may be something to keep in mind when considering the ever increasing wealth gap. Especially when you take into consideration the noted 20% drop in tax rates from the 70's to today and how it correlates with the wealth gap.Take this NY TIMES article that explains income growth since 1979. Bear in mind that the study broke down the population into quin tiles or or sections of 5, And may not do the true wealth disparity justice.

The figures are striking. In 2004, according to the Congressional Budget Office’s latest official analysis, households in the lowest quintile of the country were making only 2 percent more (adjusted for inflation) than they were in 1979. Those in the next quintile managed only an 11 percent rise. And the middle group was up 15 percent. Do you sense a pattern? The income of families in the fourth quintile — upper-middle-class folks with an average yearly income of $82,000 — rose by 23 percent. Only when you get to the top quintile were the gains truly big — 63 percent.

As noted above breaking down the population into quin tiles does not give a good sample of the wealth disparity as the original article concludes.

There is one part of the economy, however, that is changed by tax cuts for the rich: inequality. The study says that the biggest change in the distribution of U.S. income has been with the top 0.1 percent of earners — not the one percent. The share of total income going to the top 0.1 percent hovered around 4 percent during the 1950s, 1960s and 1970s, then rose to 12 percent by the mid-2000s. During this period, the average tax rate paid by the 0.1 percent fell from more than 40 percent to below 25 percent. The study said that “as top tax rates are reduced, the share of income accruing to the top of the income distribution increases” and that “these relationships are statistically significant.” In other words, cutting taxes on the rich may not grow the economic pie. But the study found that those cuts can affect “how that economic pie is sliced.”

As you can see, the income of the top 0.1% can easily inflate the average income of the top quin tile or 20%. Remember the difference of "average income" to "median" income I referenced earlier? This is a tactic used when dismissing the idea of increased taxation of the wealthy as being bad. Using the top quin tile or top 20% allows studies to place small business owners and the upper middle class into a group with the most wealthy individuals of our society, thus turning the upper middle class against the poor.SourcesStudy: Tax Cuts for the Rich Don’t Spur Growth CNBC Fast-growing income gap in US MSNIRS Capital gains and losses[url=http://www.nytimes.com/2007/06/10/magazine/10wwln-lede-t.html?pagewanted=all&_moc.semityn.www]NY

I don't know why this is in the conspiracy section, but the American way is to pay as little taxes and thereby not being able to give the less fortunate of one's own population the help they need (nor the education or medical care to actually do something about the poverty they were raised in).

Originally posted by Consequence
I don't know why this is in the conspiracy section, but the American way is to pay as little taxes and thereby not being able to give the less fortunate of one's own population the help they need (nor the education or medical care to actually do something about the poverty they were raised in).

So what forum was I supposed to place this thread in? Is there a financial conspiracy forum that I'm unaware of? When I'm skeptical of where I should place a thread I usually go with general conspiracy's by default. I'm sure if a mod deems it necessary to move it they will.

100% correct!!

But the Right-wing cheerleaders here will surely try to DERAIL the thread or TWIST these FACTS with silly Right-wing stats that are totally BS. Stats that always become debunked eventually and when that plan of theirs fails, they move on to saying their little "BUZZ-WORDS" like "socialist" and "commies" and "liberals" etc. They CLEARLY SHOW that they have NO IDEA what these words MEAN!! They are very predictable. And very SAD.

From what I am hearing, the core of this NONSENSE from the Right appears to be coming from DEEP-POCKET bribers peddling influence such as folks like the Koch brothers from what I am hearing everywhere. Folks with EXTREMIST ideology that displays a desire for an American society that is purely a Master & Slave society. A society where the slaves have ALL the BURDEN of society, while the Masters have no burden other than trying to figure out WHAT to DO with all their MOUNTAINS of CASH that they have. All the while the rest of us barely have enough money for food every day, Master and Slave society. Folks, take a GUESS which one of them are each of us in this equation?

But I think that folks will see through it come November and the WEALTHY-CODDLING-BRIBERY-RUN-Republican-Party will lose by a NICE MARGIN. Then the only paper coming to the propaganda spewing Right-wing cheerleaders here will be TISSUE-PAPER for their tears.

Originally posted by HangTheTraitors

From what I am hearing, the core of this NONSENSE from the Right appears to be coming from DEEP-POCKET bribes such as folks like the Koch brothers with EXTREMIST ideology that seems to desire a an American society that is nothing more than a Master & Slave society. And folks, take a GUESS which one of them are each of us in this equation?

You are correct. Another group like the Koch brothers is ALEC (American Legislative Exchange Council). Anybody want to take a guess at what they do?

Originally posted by GD21D

Originally posted by HangTheTraitors

From what I am hearing, the core of this NONSENSE from the Right appears to be coming from DEEP-POCKET bribes such as folks like the Koch brothers with EXTREMIST ideology that seems to desire a an American society that is nothing more than a Master & Slave society. And folks, take a GUESS which one of them are each of us in this equation?

You are correct. Another group like the Koch brothers is ALEC (American Legislative Exchange Council). Anybody want to take a guess at what they do?

DO TELL!! There is SOOOOOOOOOOO MUCH on the Koch brothers, that I havent had time in WEEKS to research anyone else!! Wow, its that BAD!!!!!!!!

DO TELL!!!

reply to post by HangTheTraitors
More than happy.

The American Legislative Exchange Council (ALEC) — a “stealth business lobbyist” that works with corporate interests to help them write and implement “model” legislation

That's right they assist in writing and implementing legislation.Source

Similar research was conducted years ago for the Thatcher government although that research was supposed to prove a central theory, that her government followed, that wealth trickles down. It actually showed the opposite.

I don't even think the Republican party leaders believe it creates jobs. It's what told to the gullible to support getting tax cuts for the wealthy donors. Many who are run around yelling "have you ever been hired by a poor person?". As if if the small businessmen are all millionaires.

A tax cut for the middle class, those that create demand, would do a much better job creating growth. Businessmen tend to be conservative about hiring and increasing production. If they see a greater demand for their goods and services, they will hire more, but seldom before then.

The tax cuts definitely help me out and I'm not rich. I'm a family of 4 under 100k and I've benefited greatly from the tax cuts. I can put extra money on my student loans (I loaned my way through college), afford to buy my kids new clothes every now and then and not all garage sale/consignment stuff, take the family out to the movies once in awhile (that's a $40 trip minimum these days).

Federal income tax cuts only target those who ACTUALLY PAY income tax. The bottom half of the country pays no federal income tax. You can't cut what doesn't exist.

reply to post by HangTheTraitors


Left wing loons also like to ignore the facts, like for every 50K .gov job created it costs the tax payer hundreds of thousands of dollars.

It is not possible to tax and spend the country back to properity. The .gov is the least efficient entity to ever exist in the history of humanity, thinking they can take a dollar and do a dollars work with it is folly, it is much closer to taking $10 to do $1 worth of work, which kills the entire reason for taking the money in the first place.

I believe either the "rich" and "super rich" should either begin to once again pay a fare wage for the labors of their employees, or legislation should be passed to gjarantee it.

I don't mean the .gov taking it than redistributing it, as this will only lead to the above mentioned waste. I mean a law stating somthing along the lines of " any business employing over 500 people, or making in excess of $10,000,000 in annual profits must ikmmediately pay at least half of anual profits in the form of payroll to their hourly workers, either through raises or year end bonuses, or the excess income will be taxed at the 100% rate."

Thusly insuring that fare pay for the work that generated the businesses profits is payed, in half to the hourly employees, or the whole will be lost in taxes, I believe I already know which one most would pick, which would make for better pay, which would even out the inequality of the classes, in less than 5 years.

Let's see....

A tax cut was passed in 2001, which was to create jobs and bring an end to the "then current" recession.

Then another tax cut was passed in 2004 which was to spur job growth and create more jobs.

If a tax cut "really did" create jobs and spur growth, would we not, by now, be importing workers to fill all the new jobs which have come about in the last 13 years ???

From what I hear, a lot of people are out of work and many of the immigrants who came here have gone home because they don't have jobs.

Would anyone care to explain this to me.

How does tax cuts create jobs and where are they ?

reply to post by hdutton


They dont, nor can they, without force of legislation to back them up.

Like instead of just bailing out the banks and hoping for the best maybe" by accepting the taxpayers money, said entity agrees to put 100% of assets acquired through TARP, to the purpose of providing credit to lenders, businesses, and private individuals."

But then that woud actually help the people, instead of putting "free" money in the corporate cronnies pockets. Which doesnt jive for the uber rich, they demand free money, long hard work for little to no pay etc...

As they are the only ones worthy of having anything, or not scrounging to make it. The rest of us are the "worthless eaters" they always talk about.

A good video for what ALEC does. (I need cartoons to understand things :lol

www.youtube.com...

I never understood those who gave any credit to trickle down. Why?

1. In order to be wealthy, the whole purpose is to reduce the amount that trickles anywhere outside of your grasp. Slavery is great this way. Darn those pesky abolitionists.

2. Now a days, there is more wealth to be had in gambling on Wall Street than running a business to make money. All the profit without any pay roll, insurance, overhead, etc. So where is all stuff in the cup that is runeth over runeth-ing to?

3. I do not buy any left/right on this argument. It's like discussing how the 3 pt shot line affects the NFL.

It does not take a study to know that tax favors for only one segment of the population doesn't spur growth in the economy overall. You have to apply law fairly and evenly if you want taxation to have a positive effect on growth. This also means you have to cut spending and free up the private sector more in order to produce enough to cover the cost of government and repayment of public debt .

Originally posted by projectvxn
It does not take a study to know that tax favors for only one segment of the population doesn't spur growth in the economy overall. You have to apply law fairly and evenly if you want taxation to have a positive effect on growth. This also means you have to cut spending and free up the private sector more in order to produce enough to cover the cost of government and repayment of public debt .

And where do you advocate spending to be cut? Also, in what terms do you mean "free up" the private sector? It's rather difficult to agree or disagree with such a vague statement. As a side note, I do need to fix my last source that was the NY TIMES article. My apologies to the participants in this thread for the inconsistency in my OP. ETA:NY TIMES

reply to post by GD21D


Freeing up the private sector to me, means a few things.

1 you have to cut the amount of regulation out there especially for upstart businesses . Most regulations are written by corporate interests seeking to do away with competition. Regulation is good for certain things , but forcing small businesses to jump through hoops just to get started while large corporations do as they wish does not make it an equal playing field.

Shrink the tax code to a reasonable size would also help.

2. End all subsidies to businesses large and small, farms, energy or anyone else the government is paying to distort the market in their sector .

Cuts:

1 I am in the military. Everyday I see civilian contractors who are overpaid and underworked. They are a huge chunk of needless spending. Reducing our footprint around the world couldnt hurt either .

2 reforming and restructuring of welfare and social programs . This whole notion makes me ill , but if we are going to have them then we need to make sure they can be feasibly sustained over the long haul instead of making promises the government knows it can't keep.