Taxes And Growth

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Low taxes do not produce more growth, though democracy does. Successful reduction of poverty by tax-funded programs does not reduce growth either.


Can you reform your way to higher growth? [More...]
Short answer: no. Academic discussions of why tax cuts and other measures will not increase growth. One implication: tax increases will not decrease growth, because we've experienced higher taxes in the past during high-growth periods.
Democracy, What Is It Good For? [More...]
Libertarians often disparage democracy as harmful to growth, based on old research. Daron Acemoglu and James Robinson explain why the old research was wrong. "In all, the evidence seems to be fairly clear that democracy is good for economic growth."
Economics is too important to leave to the experts [More...]
"[...] it is entirely possible for people who are not professional economists to have sound judgments on economic issues, based on some knowledge of key economic theories and appreciation of the political and ethical assumptions underlying various theories. Very often, the judgments by ordinary citizens may be better than those by professional economists, being more rooted in reality and less narrowly focused.
Growth Versus Distribution: Hunger Games [More...]
"[...] we don’t actually know much about how to produce rapid economic growth -- conservatives may think they know (low taxes and all that), but there is no evidence to back up their certainty. And on the other hand, we know how to make a big difference to income distribution, especially how to reduce extreme poverty."
How Increasing Income Inequality Is Dampening U.S. Economic Growth, And Possible Ways To Change The Tide [More...]
Notorious commie group Standard & Poor’s says inequality hurting economic growth. "The challenge now is to find a path toward more sustainable growth, an essential part of which, in our view, is pulling more Americans out of poverty and bolstering the purchasing power of the middle class."
Math vs. Reaganomics: Why GOP's anti-tax hysteria falls flat [More...]
Mathematician Jordan Ellenberg points out some fallacies of Cato Institute propaganda, Voodoo Economics, and the Laffer Curve, based on the difference between linearity and nonlinearity.
Redistribution is not bad for economic growth: Evidence from the IMF [More...]
“…redistribution appears generally benign in terms of its impact on growth; only in extreme cases is there some evidence that it may have direct negative effects on growth. Thus the combined direct and indirect effects of redistribution — including the growth effects of the resulting lower inequality — are on average pro-growth.”
Rewriting the Rules of the American Economy: An Agenda for Growth and Shared Prosperity (book, online)
How the current economic system privileges the upper class (which libertarians support, though they claim not to), and how to reform it to foster the middle class with recommendations that libertarians oppose.
Supply-Side Economics (11 links)
A failed Reagan-era crank theory used to cut taxes and services. It promised a boom in productivity and never produced one. Instead, it created an ever-increasing concentration of wealth in the hands of the rich. Featuring the Laffer Curve. Also called voodoo economics and trickle-down economics. Considered a gross failure.
Tax Flight Is a Myth: Higher State Taxes Bring More Revenue, Not More Migration [More...]
Raising taxes does not drive out the wealthy, despite well-publicized celebrity stories and frequent threats from wealthy businessmen.
Tax hikes on the wealthy: Good or bad for growth? [More...]
"Arguments about the size of government and the taxes needed to support the many things that government does are certainly fair game for politicians. But the argument that tax increases on the wealthy will cause substantial harm to the economy does not withstand a close look at the evidence."
Taxes and Growth [More...]
The upshot of recent research is that there is no evidence that you can change the growth rate of the economy -- up or down -- by changing tax rates -- up or down.
The Economic Consequences of Major Tax Cuts for the Rich [More...]
"We find that major reforms reducing taxes on the rich lead to higher income inequality as measured by the top 1% share of pre-tax national income. The effect remains stable in the medium term. In contrast, such reforms do not have any significant effect on economic growth and unemployment."
The Facts of Economic Growth [More...]
"It is easy to write down models in which governments that tax heavily reduce the long-run success of their economies. The facts, however, are not so clear."
The Mismeasure of Technology [More...]
Total factor productivity is a residual, the unexplained causes of growth. Blaming government for slow growth is in part wrong, since diffusion of collective "knowhow" seems to be the limiting factor of much growth.
The Mystery of Economic Growth (book, online)
Try to Answer the Hardest Question in Economics [More...]
"once agriculture is going well, countries should focus on manufacturing, and use export promotion as a way to force companies to learn to be more productive."
What Really Is the Evidence on Taxes and Growth? [More...]
Despite dozens of studies on the relationship of taxes and growth, there is much disagreement about whether taxes harm or benefit growth. Claims of a Tax Foundation report are shown to be false.


There are other reasons to think that Hayek went too far in his opposition to progressive tax rates. First, he assumed that earned income accurately measures the value of the incremental contribution to social output. But Hayek overlooked that much of earned income reflects either rents that are unnecessary to call forth the efforts required to earn that income, in which case increasing the marginal tax rate on such earnings does not diminish effort and output. We also know as a result of a classic 1971 paper by Jack Hirshleifer that earned incomes often do not correspond to net social output. For example, incomes earned by stock and commodity traders reflect only in part incremental contributions to social output; they also reflect losses incurred by other traders... Insofar as earned incomes reflect not incremental contributions to social output but income transfers from other individuals, raising taxes on those incomes can actually increase aggregate output.
David Glasner, "Neo- and Other Liberalisms"