CDZ The impact of tax cuts on economic growth

[320 Years of History]

Over and over, election year or not, we continually hear politicians, lobbyists, and others from various quarters of society prattling ad nauseum about how "this or that" tax cut will boost U.S. economic growth. In light of that, I ask:

• How much of an impact on growth must a tax cut and its directly attributable consequences have for you to consider the tax cut economically "worth it?"
  • 0.5%?
  • 1% but less than 2%?
  • 2% but less than 3%?
  • 3% or more?
• What minimum percentage tax cut that you think will, by itself and its related effects, produce the growth rate you've chosen above?

 

[320 Years of History]

A good sense of an accurate, rigorously developed and objective answer to the first OP question can be found here: Taxation and Economic Growth.

Using three approaches, we consider the impact of a major tax reform—a 5 percentage point cut in marginal tax rates—on long-term growth rates. The first approach is to examine the historical record of the U.S. economy to evaluate whether tax cuts have been associated with economic growth. The second is to consider the evidence on taxation and growth for a large sample of countries. And finally, we use evidence from microlevel studies of labor supply, investment demand, and productivity growth. Our results suggest modest effects, on the order of 0.2 to 0.3 percentage point differences in growth rates in response to a major tax reform. Nevertheless, even such small effects can have a large cumulative impact on living standards
​

As a point of reference the Bush tax cuts reduced tax rates as follows:

• 39.6 percent rate to 35 percent,
• 36 percent rate to 33 percent,
• 31 percent rate to 28 percent, and
• 28 percent rate to 25 percent.

Bush also created a new 10 percent bracket, and there was no change to the 15 percent rate. The fiscal cliff deal retained all those rates except the top rate, which it allowed to rise back to 39.6 percent.

 

[GaryDog]

The best way the economy can benefit from a tax cut is to put the money back in the hands of people who will SPEND it. That's not the top bracket. They have expendable income, sure. But it's saved/invested. That sparks economic growth about half as well as increased food stamp spending.

 

[Wyatt earp]

The best way the economy can benefit from a tax cut is to put the money back in the hands of people who will SPEND it. That's not the top bracket. They have expendable income, sure. But it's saved/invested. That sparks economic growth about half as well as increased food stamp spending.

You are telling me damn Obama and his payroll tax increase on the middle class and Obama care/tax also on the middle class..


Why did Obama pick on us?

 

[320 Years of History]

The best way the economy can benefit from a tax cut is to put the money back in the hands of people who will SPEND it. That's not the top bracket. They have expendable income, sure. But it's saved/invested. That sparks economic growth about half as well as increased food stamp spending.

Read the document in post #2. That aspect of tax cut impacts is addressed.

 

[GaryDog]

Because the Republicans fought tooth and nail to avoid singlepayer, and public option, 2 possibilities of putting more money in the hands of the middle class.

 

[LoneLaugher]

Ask Bruce Bartlett about the impact of tax cuts on growth.

http://www.nytimes.com/2016/08/13/opinion/campaign-stops/trumps-misguided-embrace-of-tax-cuts.html

http://economix.blogs.nytimes.com/2013/05/21/the-bush-tax-cut-failure/

 

[320 Years of History]

Ask Bruce Bartlett about the impact of tax cuts on growth.

http://www.nytimes.com/2016/08/13/opinion/campaign-stops/trumps-misguided-embrace-of-tax-cuts.html

http://economix.blogs.nytimes.com/2013/05/21/the-bush-tax-cut-failure/

If I click on those links, will I find they specifically, empirically and directly address the impact of tax cuts on economic growth rates? I'm asking because that's exactly what the document linked in post #2 does, and it does it with a level of credibility and rigor that the NY Times and bloggers rarely if ever approach.

 

[LoneLaugher]

Ask Bruce Bartlett about the impact of tax cuts on growth.

http://www.nytimes.com/2016/08/13/opinion/campaign-stops/trumps-misguided-embrace-of-tax-cuts.html

http://economix.blogs.nytimes.com/2013/05/21/the-bush-tax-cut-failure/

If I click on those links, will I find they specifically, empirically and directly address the impact of tax cuts on economic growth rates? I'm asking because that's exactly what the document linked in post #2 does, and it does it with a level of credibility and rigor that the NY Times and bloggers rarely if ever approach.

They do. The guy is an expert on the subject. Of course..other topics are also covered, professor. I'll read the syllabus more carefully next time.

 

[320 Years of History]

Ask Bruce Bartlett about the impact of tax cuts on growth.

http://www.nytimes.com/2016/08/13/opinion/campaign-stops/trumps-misguided-embrace-of-tax-cuts.html

http://economix.blogs.nytimes.com/2013/05/21/the-bush-tax-cut-failure/

If I click on those links, will I find they specifically, empirically and directly address the impact of tax cuts on economic growth rates? I'm asking because that's exactly what the document linked in post #2 does, and it does it with a level of credibility and rigor that the NY Times and bloggers rarely if ever approach.

They do. The guy is an expert on the subject. Of course..other topics are also covered, professor. I'll read the syllabus more carefully next time.

Read the two articles. They essentially echo the findings of the Dartmouth study I linked in post #2, although they present the information in terms that are likely more "digestible" to "average readers" and others who won't read a rigorously developed and presented research study.

I rather prefer to read "simple" summarizations of information, but sources that tend to disseminate in information without the "nuts and bolts" that provide the hard and quantifiable support (research methodology + raw results) for the assertions aren't the first place I look to find information. TY for sharing. I will look for Mr. Bartlett's other articles...Who knows...he may become a "go to" source when I can't find what I want among scholarly research papers.

 

[OldLady]

Is there an unbiased summary anywhere of the two plans that I might be able to understand? We're talking making it simple.

 

[320 Years of History]

Is there an unbiased summary anywhere of the two plans that I might be able to understand? We're talking making it simple.

CDZ - The Macroeconomic Consequences of Secretary Clinton’s Economic Policies

The documents provide references to the methodology used to arrive at the conclusions in them if you want that. Otherwise, they are both written in very straightforward language that doesn't at all require a keen understanding of economics to read. One thing worth noting is that the Trump one was written prior to his recent revision of his tax plan, so the tax plan remarks will not be as applicable for his earlier proposal included far greater tax rate cuts. That said, I think you'll find the authors' "scenario" approach to discussing the impacts useful all the same.

 

[WillowTree]

Because the Republicans fought tooth and nail to avoid singlepayer, and public option, 2 possibilities of putting more money in the hands of the middle class.

Oh really? Who do you think is going to pay for single payer? And, if paying taxes is so great why dosen't everyone pay taxes? The only people not paying their fair share are the people who pay zero in federal taxes!

 

[Staidhup]

So apparently people believe that government should control our healthcare system and this should be financed through increased federal taxation, the only problem, as pointed out, is that the majority of taxes paid, 97%, are paid by the top 50% of wage earners, the other half pays 3%. Then you have the dismal record of government management, which as the Canadians, UK, and host of European countries will point out is a mess, ushered in private non government sponsored healthcare facilities. insurance programs and Doctors exiting the public sector. Is it then the intention of government to force Doctors to remain in the system? By what right does the government assume this dictatorial power? We won't touch on choice, freedom to choose, and quality of care. The end result is that this system does not increase disposable income, it reduces disposable income, marginal propensity to consume, and results in subsequent reduction in both healthcare and standard of living.

To increase employment in the US, expand GDP, and increase the tax revenue required to balance the budget, jobs are required, which will only come from the private sector, not as some profess the government, and result directly from the reduction in corporate taxation and regulation. Addressing corporate taxation will serve to increase the competitiveness of the US in attracting manufacturers which translates into jobs.

Increasing government spending for infrastructure is short lived, at the same time increases the federal debt, reduction in purchasing power of the dollar, and increased taxation.

To propose a reduction in the current rate of individual taxation will not in itself increase GDP, balance the budget, nor create jobs. One must first understand the driving forces behind the decision process to build a plant, relocate, and decide to make an investment that will result in increase employment opportunities.

 

[320 Years of History]

So apparently people believe that government should control our healthcare system

For my own part, I don't truly care whether the government or private industry controls it. I just would like to see it be well affordable, efficient and effective. I have no predisposition about whether gov't can be efficient; it can be when it wants to be or must be. I also would like to have a health care system in the U.S. where doctors and other medical professionals, rather than insurers, determine what care one gets, can get, etc.

 

[Staidhup]

320 I can't agree more, let me add, until an unobstructed free market is permitted to exist, succeed or fail based on its ability to meet the needs of market place, decisions will be made not by the consumer, medical practitioner, but rather insurance carrier as dictated by the government. The governments role should be limited to financial assistance in the creation and funding high risk pools for those whose lifestyles would otherwise preclude them from obtaining insurance. Government mandated coverage is an intrusion in ones freedom and has proven to be ineffective.
Affordable healthcare can be achieved within the frame work of a free market by virtue of competition. Tax incentives, public assistance, when required, are all components essential to realizing the objective. Tort reform and liability insurance are essential components that must not be ignored in the process of achieving the objective.

 

[320 Years of History]

...until an unobstructed free market is permitted to exist, succeed or fail based on its ability to meet the needs of market place, decisions will be made...

I agree with this part of your reply.

The rest of it contains too many ambiguities, uncertainties and/or vague references that I can't say what I think about those statements. I suspect there may be some overlap between your and my view, but I just cannot tell where exactly it lie.