Wednesday, December 14, 2011

One More Time People – Raising Taxes on the Rich to Fund Spending or Cut Taxes on the Middle Income Taxpayers are Not Job Killing Taxes

Another Look at the Visual Evidence

The Congress is currently debating whether or not to extend the payroll tax cut for 2012.  As good fiscal policy goes, cutting the payroll tax is not particularly a great idea, but it will have some positive effect on the economy.  The Democrats have proposed paying for the tax cut, something that is foreign to Republicans, and even more foeign to Republicans is that they have proposed paying for the tax cut by raising taxes on very wealthy people.

Of course Republicans cannot say outright that they don’t want to tax rich people, so they describe increasing taxes on the wealthy as “job killing policy”.  Unfortunatey for Republicans, one can look at history and see whether or not this has actually occurred.  And one can look at cutting taxes on the wealthy and see if that has resulted in higher job creation.  Jared Bernstein has done just that.

we actually underwent something rare and very useful in economics: a natural experiment comparing the supply-side, trickle-down GW Bush years vs. the more progressive tax structure of the Clinton years.  The results break sharply the wrong way for the tricklers (courtesy Chad Stone):

Now before anyone gets too excited there are a lot of other factors at play here, but what the data shows is that raising taxes on the wealthy is not a job killer all by itself.  And the Bush tax cuts did not do all that much for the economy.

But not to worry, Conservatives know that facts and figures have a built in bias against Conservative positoins, so they can safely ignore this data and others like it.  After all they wouldn't want the truth to get in the way of a good ideological position.

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