I think it is generally agreed that if the tax rate is too high then it will be a growth killer. Sometimes reducing the rates can be stimulator. Kennedy reduced the highest marginal rate (from 91% to 70%)and Reagan reduced it again to about 50. In both cases it spurred growth. You hear a lot about that from the right side tax cutters. But they usually don't mention what the numbers actually are. So what happens when you get down into the thirties? Will things go better with an even lower rate? On Sunday Sept. 19, I heard Bill Clinton say on Meet the Press that in the 12 years before he took office they (Republicans) quadrupled the national debt. His tax program eliminated the deficit and reduced the debt by about 700 billion. After he left office they lowered taxes and doubled the national debt. I think that that was roughly true.
PS The highest marginal income tax rate under Clinton's tax regime was just under 40%. Given how well the economy performed in the nineties and how not so well it did in the next 8 years perhaps we can conclude that that 40% was not a high enough rate to be a disastrous drag on business.
PS (15 hours later) Leaving them down for awhile may still be necessary because of the "great recession". But long term I think that is not too high.
Thursday, September 23, 2010
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