WatchI am sick and tired of propagandist Rush Limbaugh claim, almost on a daily basis, that lower taxes, and he means the rate on the top individual income tax bracket, or marginal tax rate, leads to higher growth. Most right-wing Republicans believe in his lies and never bother to check the facts with the benefit of the hindsight. There is no subject related to the economy in America that has more propaganda than taxes because over time trillions are at stake.
I have known that Limbaugh and other Right-wingers have been lying and finally decided to present the facts in graphical form, as shown below. As you can see, as the top rate has fallen from 90% to 35%, the annual GDP growth rate for the following 8 years has fallen from 5% to 1.5%.
Since the GW Bush tax cuts, all the GDP growth, and lot more, has been bought by $12.5Tr in additional federal govt and household debt. But for the growth due to borrow-and-spend the annual GDP growth in the US since 2001 would have been close to –4% (minus four percent). Can you spell g-r-e-a-t-e-r d-e-p-r-e-s-s-i-o-n? The cost of postponing the greater depression is simply a much worse and longer lasting depression in the future. The time bomb is ticking.
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rowemoore says
It's very profitable to own the government.
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APOCALYPSEFUCK is Tony Manero says
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Um.
By your chart GDP Growth/Decline actually leads changes in tax rate in most of the situations.
Also, note that monetary policy is not factored in anywhere here. The 70's/80's had massive stagflation, the 80's huge interest rate swings and massive government deficit spending, and then the whole Bush 41 "no new taxes" and the rise of the internet. Not to mention the dismissal of bretton-woods and an inflationary standard from that point forward.
Also: Shenanigans on your "Over the next 8 years." Just list GDP year by year. FYI, GDP growth YoY in 2000 was 5%. Your 8 year comparison pulls in the .3% in 2001 and the -2.6% in 2009, skewing your 2001 results significantly downward and impressioning the reader that oh golly, it's all those evil tax reductions!
Excel, some economic stats, and the internet can be a dangerous combination. Just say no!
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I think its easy to say taxes should be higher if you are not already paying 43.9% (federal and state), like I am. If you want to make the argument that capital gains should be raised, I can perhaps see an argument to that. Unfortunately, the proposals we have currently are focus on raising income taxes, not capital gain. Thus middle class citizens like myself are affected.
Its so silly that people are using the "buffet rule" as an argument to increase income taxes since the argument used in the Buffet rule is not based on income taxes but rather Buffet's capital gains rates.
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Ellicott City, MD
Let's go back to the graph of Jas Jain, and his proclamation that high federal tax rates drive economic growth in the form of GDP. And his slamming of Rush LImbaugh and anyone who believes in supply-side economics.
I think Jas Jain is delusionally wrong. In the 1940s, '50s and '60s, there were many ways that rich business owners could avoid the highest tax rates, and they did. And there were other reasons after 1945 that the U.S. manufacturing sector was a powerhouse for the world (the infrastructure of Japan, Germany, France, etc) had been decimated for example). High tax rates were NOT the reason our economy succeeded.
And finally, Jas Jain, you appear NOT to believe that our country was all about a limited federal govt, so that the states could establish their own tax rates and programs and compete against each other. Once our federal govt grew to mammoth proportions under FDR, LBJ, Carter, etc......all bets were off. We joined the ranks of the semi-socialist European countries and lost our singularity as the most brilliant design of a nation ever. That's partly, or largely, why we're sinking into the morass that PIGS countries and England, France etc are sinking. Over-bloated federal govts that spend and promise WAY TOO MUCH. It has nothing to do with the fact that federal tax rates aren't high enough in your opinion. How would that solve our problem? You didn't answer your own hypothesis' most obvious question.
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CBOEtrader says
No No NO!!! You're too focused on cronyism and corruption and not the root cause of all evil. Money is liquid corruption. It doesn't matter if Warren Buffett is a good guy because he's going to die someday and whoever ends up with the cash might be the tyrant. The end result of having an ultra-rich aristocracy in your country is poverty and revolution because human beings averaged over the population will behave just like they did last year, 100 years ago, or in ancient Rome.
I also take fault with dividing the cost over government and deciding it's too large. A huge chunk of government spending is nothing more than mailing out checks. Social Security checks, Medicare checks, bond checks, and unemployment checks. A computer system mailing out a trillion dollars worth of $1500 SSI checks is hardly fertile ground for the corruption of power.
However a billionaire funding a campaign or pushing through a piece of legislation is classical corruption at every level. You prevent this by preventing extreme wealth disparity. It really has nothing to do with the size of government.
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CBOEtrader says
There really isn't a propaganda machine attacking rich people for being greedy. There might be echos of that sentiment during 99%er rallies, but there are no parallels on the left for the kind of propaganda that comes from the right. You don't see MSNBC attacking CEO's for being greedy while I hear Obama is a Marxist multiple times every single day on Fox.
To me, greed is a constant and irrelevant to any economic discussion. Everyone wants money. Everyone wants to win the lottery. Everyone wants to pay the lowest tax rate possible. That's why I think the occupy movement was misguided and pointless. Instead of marching on Washington and demanding a return to the New Deal, they harassed and continue to harass rich people who might even agree with them.
Now regarding the free market. You cannot have a society modeled after a game of Monopoly. You cannot allow unlimited hoarding of wealth. Warren Buffett may have played by the rules, but he was totally unnecessary and never contributed anything to society. I think he'd admit as much, in fact Warren Buffett is famous for telling management "Just keep on doing what you've always done".
I have no problem with people getting rich as long as there's a cutoff point. I see no valid argument why that cutoff point shouldn't be $1 million a year with everything earned above that taxed at 80%. The economy would function just fine, investment money would be readily available, and the United States would resemble 1946 to 1979 instead of the sink hole we're involved in now.
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CBOEtrader says
I forgot to reply to this gem.
So, as long as US workers are treated better than the poorest in other countries, it's OK? Alrighty then.
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Supply side economics is ridiculed worldwide as a drunken fantasy of the rich.
Everywhere that is except in the United States.
It defies belief how blue collar working people will vote Republican this year, but it is undeniable they will. Propaganda is a cancer and this country has it bad.
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Orange, CA
Ok lets agree its ok to raise taxes on the weathy and it wont affect growth.The problem is all the drunken fantasy spending that is either wasted or given to rich supporters will have to be paid for and taxing the rich wont do it. So who will pay the blue collar working people that will vote Republican looking for hope and change.
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Obama makes Eisenhower look like a stoned-out hippie.
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Wow! What a load of shit.
For starters your chart shows correlation, not causation.
iwog says
By your own definition, taxes are at an all-time high. You change your own definitions and logical thinking process when moving across the partisan line. Seriously, you're better than this dude. Why engage in this obfuscation game?
tatupu70 says
Income inequality? Wow, so another undefineable, populist, nonsense talking point for team dems?
I believe you mean wealth inequality, which isn't the problem, but is rather a symptom of the larger disease of POWER consolidation.
Wealth, in and of itself, is fine. People who improve the lives of those around them SHOULD accumulate some wealth. Even the extremes are fine, as long as they add an inordinate amount of value to the world (Bill Gates and his ilk are good examples).
When people are able to use POWER rather than innovation to accumulate wealth it becomes a problem.
Historically there has been no better method to create wealth than a free-market system. This is true for everyone involved, not just those at the top.
Concentrated power into a small group of politically well-connected has historically and will continue to benefit the few, at the detriment of everyone else.
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SiO2 says
California tax rate does not max out at 9.3%.
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Ross, CA
In the mid six figure income range and pay 38% in CA. Normal deductions and straight income. Also, wife and I both pay max SE tax as we are self-employed. That alone, is about 34k a year.
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SiO2 says
I have a friend, trust fund baby, who makes more than twice what I make and pays much less in federal taxes. Investment income.
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rowemoore says
And he should pay much less. Chances are the money he's receiving from his trust was already taxed once. Are you in favor of double taxation? Everyone should realize the reason we have estate taxes is to keep the upper middle class and quasi millionaire (5-10 mil) from rising up to the level of the 100+ millionaire and billionaire elites. For obvious reasons. Socialist policies discourage investment and hard work and more importantly: competition, which is a perfect thing for bigwig socialists like Warren Buffett.
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housingcasino4865 says
Corporate taxes should be lower, but investment income taxes should be higher.
Get used to socialist policies -- as the jobs continue to go away and the money continues to flow to those who own the 'robots' that replace those jobs, there will be greater and greater pressure on leveling the playing field (i.e. income redistribution)
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CBOEtrader says
Nope--I meant income. Although wealth probably works just as well. Do you think the US goverment doesn't measure income? For income tax purposes? They have a pretty good incentive to measure it, don't you think?
CBOEtrader says
Again--I'm not talking about fairness or morals. I'm talking about creating and maintaining a functioning economy. I don't care what SHOULD happen, although I think any tax on passive income is a good idea. In any event, when income (or wealth) disparity gets too large, the economy grinds to a halt. That's one of our main problems right now. When 50%+ of the population is on food stamps, then you've got a big problem.
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CBOEtrader says
This is only partially true. Unless the free market is constrained by government, it's a total disaster which results in a depression every 20 years and horrible working conditions for the majority. You have no historical examples showing otherwise.
CBOEtrader says
The extremes are not fine. A Monopoly game isn't an abstract mental exercise with no practical applications. The real world actually works like this.
Why did Teddy Roosevelt declare war against robber barons and trusts? (today's holding companies) Because they were benevolent and created wealth or because they were a cancer on American society breeding poverty, company housing, child labor, and death?
As much as you'd like to insist otherwise, it really is a zero sum game. There isn't any significant growth beyond the increase in population. The economy is nothing more than a Monopoly set with limited assets, limited cash, and limited opportunity.
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According to your chart, it must be true because correlation is causation.
The high GDP of the 50s, due entirely to the US having the only intact economy after the war, is followed by the reduction over time associated with Europe and Asia catching up. This effect presumably then must be due to the reduction in tax rates - although I'm having some difficulty with the actual mechanism involved. Possibly those Rockafella and JP Morgan dudes gambling their ill gotten tax refunds in Monte Carlo?
Given the sure and certain relationship see here, it's kind of a shame that the Democrats didn't push for higher tax rates when they had a clear veto proof chance to do so - early in the Obama administration. Obviously, this was entirely due to Rush Limbaugh, who apparently runs the entire political system. No wonder the left started MSNBC just to counter the guy.