ACenter for American Progress Infographic Illustrates Higher Marginal Tax Rates Correlate to Economic Growth
It’s a conservative maxim: A lower marginal income tax rate will boost economic growth. Lower taxes mean more spending money for individuals and companies alike, conservatives say, which means a higher GDP and a lower unemployment rate. As a demonstration that this conservative tenet is alive and well, glance at Paul Ryan’s plan to reduce government revenue through huge tax cuts.
The thing is, though, history clearly demonstrates that there is no such correlation between low marginal income tax rates and economic growth. In fact, Michael Linden points out, it is just the opposite: over the last 50 years, high marginal income tax rates correlated to faster economic growth.
Linden writes, “Altogether, years when the top marginal rate was lower than 39.6 percent – the top rate during the 1990s – annual real growth average 2.1 percent. In years when the rate was 39.6 percent or higher, real growth average 3.8 percent.” That’s nearly double the real growth average when the American marginal income tax rate was low.
Be sure to take a look at Michael Linden’s infographic at the CAP homepage, and to read up on the legacy of the Bush tax cuts and the current state of American taxes.