The Effectiveness of Tax Cuts

Problem is, there is little evidence that tax cutting has worked as advertised.

Thomas L. Hungerford, an economist with the Congressional Research Service, got into trouble with Republicans last year when he published a study suggesting that the sharp drop in top tax rates since 1945 did little to lift economic growth but probably did contribute to soaring income inequality.

And there’s no clear evidence that lower tax burdens have helped the United States grow faster than other advanced industrial nations with higher tax rates and much heavier tax burdens. Economic growth per person in the United States was a little faster than in France or Australia over the last 40 years. But it was a little slower than in Austria, Germany and the Netherlands, according to data from the Organization for Economic Cooperation and Development, a research organization for the world’s richest countries.

In the Times, Eduardo Porter examines how effective low taxes have been on economic growth in the U.S. and concludes that there hasn’t been much evidence that it’s worked. But will raising taxes work? According to Porter: “Recent history may even suggest the economy thrives when taxes are higher. Despite President Bush’s tax cuts, the economy during his administration grew only about 17 percent, half as much as during that of his predecessor, Bill Clinton, who had raised them.”

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