The Congressional Research Service recently released a study on the relationship of higher tax rates on the rich to economic growth.
http://www.docstoc.com/...
This study shows that lower taxes for the wealthy make almost everyone worse off. But it didn’t connect the dots on how this is inevitably its conclusion.
The author was very cautious about how he worded the findings. Here’s what the report concluded explicitly:
1. There is no evidence that lower tax rates on high earners increase economic output.
2. There IS good evidence that they cause increased economic disparity. They increase the share of income going to the top 1% and 0.1% of the income distribution.
3. There is evidence that lower tax rates on the rich decrease the proportion of national income associated with labor.
What logically follows from this?
Let’s restate what the CRS study said: lower taxes on the wealthy don’t increase the size of the pie.
But they make the slice taken by the “1%” bigger.
These statements are in the study. Actually the details make the first point even stronger. There was statistically significant evidence that higher tax rates on the rich made the economy grow faster, but there was so much scatter in the data that the author dismissed this finding. So one could say that the study shoes lower taxes on the wealthy might well make the pie smaller.
Here is where we have to connect the dots ourselves.
If lower taxes for the high earners don’t increase the size of the pie, and may well make the pie smaller, and if a bigger slice goes to the 1%, then they make the slice of the “99%” smaller.
In simple English, the report concludes that tax cuts for high earners make the 99% worse off on average. (Note that CRS chose the 99% threshold: this does not come from Occupy or other leftist definitions.)