Long Term Tax Trends

Some years ago, I pointed out to a fairly well-educated (and extremely well connected) Republican friend of mine (whom I’ve since kind of lost track of) that when you look at post World War 2 US data, you don’t find any evidence that lower taxes lead to faster economic growth or to increasing the incomes of the average person, and that, in fact, the opposite was likely true at least for the range of income tax rates we were seeing at the time. He pulled the data himself, tried to show otherwise, and concluded that I was right. But then he said, “I favor lower taxes anyway. Its better for society for people to keep more of their own money.”

But I think if you could show that lower taxes lead to faster economic growth and faster income growth for the average person, most Democrats would come out in favor of tax cuts. Heck… JFK and LBJ cut income taxes, did they not? Clinton cut capital gains taxes, did he not? And Democrats didn’t exactly round up the posse to hunt down the apostates at those times, did they? (Contrast that with GHW Bush going back on “Read my lips.”)

So when it comes to taxes, Republicans believe in lower tax rates under all circumstances (remember GW Bush’s shifting rationale’s for tax cuts?) and regardless of the costs but Democrats don’t believe in higher tax rates under all circumstances. Which means there isn’t a balance, tax-wise, in this two party state, and tax rates will tend to fall over time.

In the long run, the country is going to be very broke and lacking in infrastructure unless something changes in the Republican party.

Update… Modified two sentences slightly.