Top US tax rate cuts correlate with income concentration, not economic growth

Evidence

Speaking of taxes, it’s not just going to be sophisticated quasi-hidden liquidation and/or so-called Tobin taxes on financial transactions that are levied, either. Personal taxes have room to grow, too—especially in the United States. A recent analysis from the Congressional Research Service, which gives us an idea of what Congress might be thinking, noted that top marginal rate of income tax in the United States in the 1940s an 1950s, the heyday of US power, “was typically above 90%” while “the top capital gains tax was 25%.” Meanwhile “the share of income accruing to the top 0.1% of US families increased from 4.2% in 1945 to 12.3% in 2007.” This is an interesting juxtaposition of observations, to say the least. The justification for such reductions and gains is, of course, the supply side argument that more cash at the top leads to more investment and growth. Interestingly, the report concludes that “the result of the analysis suggests that changes over the past 65 years in the top marginal tax rate and the top capital gains tax do not appear correlated with economic growth.” But they do appear to be “associated with the increasing concentration of income.” — Mark Blyth, Austerity, 654

Categorization

• XREF: Directly supports the reader’s austerity critique project and Mattei-style critique of supply-side justification for tax cuts. — connects to: Sixty-five percent of recent US income growth went to the top one percent — Wendy Brown, Undoing the Demos: Neoliberalism’s…, 655; Corporate tax cuts fail to deliver the promised job growth — Clara E. Mattei, Escape from Capitalism, 149
• SEED: Angle: the CRS finding as a falsification of supply-side doctrine, mirrored against current deficit politics.
• SHARE: The CRS finding that top-rate cuts correlate with income concentration but not growth is a sharp one-liner for an economics-minded friend.

Broader Connections

• Sixty-five percent of recent US income growth went to the top one percent #corroborates (0.82) — Wendy Brown, Undoing the Demos, 655
• Corporate tax cuts fail to deliver the promised job growth #corroborates (0.80) — Clara E. Mattei, Escape from Capitalism, 149