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Thursday, September 20, 2012

What The Numbers Show About Taxes and Economic Growth

Source: New York Times and Bureau of Economic Analysis via Haver Analytics

Do tax cuts lead to economic growth? David Leonhardt of the The New York Times says the data does not support the claim.

Leonhardt charted the numbers on taxes and economic growth over the last 25 years and found that tax cuts were not followed by economic growth.

On the other hand, the tax increases passed by the first President Bush and President Clinton were followed by an economic boom and a rapid rise in incomes.

Leonhardt says that while it may be true that some liberal put too much emphasis on the distribution of the pie and not enough on growth, people who propose tax cuts have yet to explain how those cuts will lead to economic growth.

Guest:

Other stories from Thursday's show

We welcome comments from all of our listeners. Post below. Please stay on topic and be civil. Comments may be moderated by us, but you are solely responsible for the content of your comments.

  • http://www.facebook.com/people/Spence-Blakely/1251757037 Spence Blakely

    Is it possible that higher taxes caused more spending from borrowing, than would have occurred out of pocket?

  • Delphia2

    A great American, Oliver Wendell Holmes asserts that we pay taxes for civility.  Republicans and civility are not synonymous!

  • Educating The Misinformed

    This article fails to explain that the reason for the serious amount of economic growth during the 1990′s, particularly during the Clinton era, is because of the information boom, which PRIVATE INDUSTRIES created millions of jobs, AND the investments from foreign investors in the U.S. economy. That information boom “bubble” burst in the 2000′s, which sent us down into the current recession we are in.

    • lnbwood

      That’s not the point. No matter what the cause of a downturn in the economy, cutting taxes has not helped it recover, and raising taxes did not hinder economic growth.

  • Work4ALivin

    As a smal business owner who is growing, I can state unequivocally that my high taxes prevent me from growing employee count faster.
    Look at it this way: my marginal taxes run about 50%.  I keep half to innovate, educate, train new employees so we can continue to deliver better service than our competitors, and grow.   The 50% that the government gets is used in a variety of ways, but certainly is not invested in education (think Chicago), training (think ‘good enough for government work’), and innovating (think Solyndra) to the degree my money is.   I earned it; I’m much more careful with my money than anyone who’s spending other people’s money.
    Besides, when the government gets to taking 50%, I’m also not so inclined to work as hard.   

    • lnbwood

      Well, you just twiddle yout thumbs and let someone else’s business take up the slack.

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