More Proof Tax Cuts for the Rich Don't Grow the Economy

Some economic facts are counter-intuitive: difficult to explain and persuade people of because they seem to contradict common sense (which is neither common nor sensible, but I digress.)

 

Like government spending to stimulate a week economy. That's the opposite of what people do individually - when you are in a budget crunch, you spend less. But government is not you and family budgeting does not work for an entity that has to grow the entire economy. Government spending is in fact the only thing that can save an economy struggling from weak demand because all of us individuals are saving our money.

But there's no contradiction in and no difficulty understanding the fact that cutting taxes for the rich doesn't help grow the economy. Unlike working people, the rich don't spend extra money; they hoard it - usually in another country. Because those motherfuckers never lift a finger to help the rest of us.

 

Travis Waldron at Think Progress:

Congressional Republicans and their party’s presidential nominee have both pushed plans to cut taxes on the wealthiest Americans in hopes that such a move would stimulate the economy and aid the recovery from the Great Recession. A new study, however, indicates that tax cuts for the wealthiest earners fail to generate economic growth at the same pace as tax cuts aimed at low- and middle-income earners. 

The study, conducted by Owen M. Zidar, a former staff economist on President Obama’s Council of Economic Advisers and a graduate student at California-Berkeley, examined economic growth in the states with the most high-income earners. Zidar reasoned that “states with a large share of high income taxpayers should grow faster following a tax cut for high income earners” if the tax cuts had the economic effect conservatives claim.

What he found, though, is that the effect of tax cuts for the rich was “insignificant statistically,” as Reuters’ David Cay Johnston reported:

“Almost all of the stimulative effect of tax cuts,” Zidar found, “results from tax cuts for the bottom 90%. A one percent of GDP tax cut for the bottom 90% results in 2.7 percentage points of GDP growth over a two-year period. The corresponding estimate for the top 10% is 0.13 percentage points and is insignificant statistically.”

Zidar’s study provides more empirical backing to what the U.S. has experienced over the last 30 years. Supply-side tax cutting policies have not led to the growth their Republican proponents promised. The Bush tax cuts, for instance, were followed by the weakest decade for economic expansion on record.

Still, Republicans, some of whom admit that the Bush tax cuts didn’t lead to the desired growth, are sticking to their ideology. Republican presidential nominee Mitt Romney proposed a tax cut that is four times larger than the Bush tax cuts; the GOP has fought efforts to allow the high-income tax cuts expire at the end of the year, arguing that doing so would dampen growth; and Republican governors across the country have pushed tax cut packages aimed at the wealthy even as their states struggle with budget shortfalls.