Jared Bernstein tells us yet again what the data has been telling us forever (my bold):
I agree with Chye-Ching Huang, who agrees with the Congressional Research Service, Len Burman, and me: over the long, historical record of special tax treatment for investment incomes and tax cuts to the top marginal tax rates, one simply doesn’t find significant correlations with greater investment, savings, productivity, or income growth.
Everything he cites here is about U.S. tax and growth rates — a single sample point though a long-term one — all of which is subject to the big secular thing: growth was faster pre-Reagan, and Dems were in power pre-Reagan, so the numbers just represent that secular decline (the great innovation stagnation?), not the effect of policies. It’s amazing that Republicans never make this argument, which is pretty tough to counter. But that’s mainly because they don’t even know, much less acknowledge, that growth has declined since Reagan took office. This argument ignores the boom and surplus under Clinton, of course (of course that boom was attributable to New Gingrich), but besides that it’s a tough argument to disprove.
The far more convincing demonstration, in my opinion, is this: comparing the U.S. to Europe over forty years.
Roughly the same population.
Roughly the same level of prosperity.
One taxing 40% of GDP, the other taxing <30%.
Difference in growth rates: nonexistent.
Cross-posted at Asymptosis.