Paul L. Caron
Dean




Thursday, August 21, 2008

The Impact of Tax Rates on Economic Growth and Tax Revenues, From Eisenhower to Bush

The Angry Bear has an interesting post based on a forthcoming book comparing various data series from the Eisenhower Administration through the current Bush Administration.  The graphs below compare the impact of tax rates on economic growth and tax revenues.

Graph 1 concludes that cutting tax rates does not produce faster economic growth:

Taxratesvgrowthrates_2 

Graph 2 concludes that cutting tax rates does not result in people paying more taxes:

Taxpercapita

https://taxprof.typepad.com/taxprof_blog/2008/08/the-impact-of-t.html

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Comments

Lag has been considered in other charts. How much lag do you need? one year? 2 years? be consistent. Other charts demonstrate other considerations, even regressions. Not one reversed the trend indicated, no matter the order of the chart.

Thanks for the link Paul.

Rdan

Posted by: rdan | Oct 8, 2008 7:23:09 PM

If I earn $100 from a service performed and am then taxed $99, what is my contribution to GDP / National Income? $100? In the red administrations, after-tax income is higher. Isn't that what ordinary people really care most about? (Not Graph 2.)

Posted by: John | Aug 22, 2008 5:38:38 PM

These are poorly done charts. By not having the changes in the same order of each president it does not properly illustrate the lasting effect of any given change. As many in economics know there is a lag between economic growth and taxes. Theses charts fail to show that relationship due to the ordering.

Posted by: Marc | Aug 21, 2008 5:32:30 AM