Wednesday, September 19, 2012

New Study Finds Tax Cuts For The Rich Cause Income Inequality, Not Economic Growth

An increase in income inequality leads to decreased economic prosperity, because the economy is powered by consumers, and the rich tend to spend a smaller percentage of their income.

http://thinkprogress.org/economy/2012/09/17/857861/study-tax-cuts-rich-no-growth/

By Pat Garofalo posted from ThinkProgress Economy on Sep 17, 2012

According to a new report by the Congressional Research Service, cutting taxes for the wealthiest does not cause economic growth, despite constant conservative claims that it will. Instead, tax cuts for the rich merely exacerbate income inequality, CRS found:

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.

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