Skip to comments.The Case for Supply-side Tax Cuts, Commentary: Evidence Shows that Economic Growth Results
Posted on 08/22/2012 9:48:27 AM PDT by Son House
President Obamas first chair of the Council of Economic Advisers, Christina Romer, wrote a paper with her husband, David Romer, showing that higher taxes reduce economic growth.
...After looking at data from 1947 to 2006, and studying the legislative record, the Romers concluded that legislated tax changes have far more effect than automatic tax increases. They wrote, Our estimates suggest that a tax increase of 1% of GDP reduces output over the next three years by nearly 3%. Their major reason is that higher taxes have a markedly negative effect on investment.
In another finding that argues against raising rates, Arizona State University Nobel Prize-winning economist Edward Prescott showed that the higher the tax rates, the lower are the hours of work. In highly taxed France, for example, people on average worked only seven-tenths of the American work week. In the early 1970s, when American tax rates were higher, the French worked more than the Americans. Mr. Prescotts results hold for countries as different as Japan, Chile, and Italy.
The Romers and Prescott perform extensive analyses to measure the tax burden, rather than just taking a simple rate. That is because many Americans pay more on earned income than the 35 percent now specified by the federal tax table. There is a tax on Medicare, and there are state and local income tax rates which exceed 10 percent in many jurisdictions. Even though Congress does not control state and local tax rates, these rates still affect earnings and investment decisions.
...In addition to the uncertainty of tax increases, Obama has promised more regulations. So, to tax uncertainty, add regulatory uncertainty. American businesses hold record cash reserves not because they know that America is a good place to invest those funds, but precisely out of a fear that it is not.
(Excerpt) Read more at articles.marketwatch.com ...
How simple it really is, the higher the taxes on the private sector, the smaller the private sector.
It's a 3 page article and here's the other 2;
I always have to laugh when the same Progressives who tell us they can reduce smoking by raising taxes then turn around and try to argue that raising taxes on the private sector has no impact on the economy.
the Romers concluded that legislated tax changes have far more effect than automatic tax increases. They wrote, Our estimates suggest that a tax increase of 1% of GDP reduces output over the next three years by nearly 3%.Tax Debate Continues: Who Do Cuts Hurt And Help? http://www.npr.org/2012/08/19/159194192/tax-debate-continues-who-do-cuts-hurt-and-help
WERTHEIMER: So can economic models tell us that if we lower taxes the economy really will be better?
ROMER: There were two effects of any tax change. So, imagine you cut taxes. There's a demand-side effect. There's more money in people's pockets. They do spend more. And so, it does tend to cause the economy to grow for the next couple of years. There's another effect to taxes, which are the more the supply-side effects. The idea of not just that you can get kind of a temporary surge in growth. But that by changing your taxes from to saying having lower marginal tax rates, that can set off more labor effort, more business creation, and really raise growth over the long-term.
And that's the part that I think the evidence does not support. That we don't see the kind of big supply-side effects from tax cuts that everyone, you know, going back to Calvin Coolidge and in Ronald Reagan have wanted to believe were there but just don't show up in the data.
Those that ignore history are doomed to repeat it.
It should be known that at the beginning of a dynasty, taxation yields a large revenue from small assessments. At the end of the dynasty, taxation yields a small revenue from large assessments.
‘Abd-ar-Rah.mân Abû Zayd ibn Khaldûn (1332-1406
Spain Predicts 4.3% Increase in Tax Revenues, Actual Results are 3.5% Drop; Proposed “Solution” is More Tax Hikes
Spain has been devastated by round after round of tax hikes
So what turned Christina Romer?? The failure of 0bama’s so-called stimulus???
Worse then the high rates, worse than the diabolical complexity, the fact that no business knows what their taxes (or regluations) will be two months from now is KILLING growth. Even with a bad tax system, if it’s stable business can at least plan for it. As of today it’s all a huge crap shoot.
Who is going to invest in an environment like this?
That paper was written in 2007. As soon as she was tapped by Obama, she toed his line.