Tax the Rich. It Won't Hurt (Them, or the Economy)

Marginal tax rates have nothing to do with GDP
By Kevin Spak,  Newser Staff
Posted Feb 24, 2010 10:51 AM CST
Tax the Rich. It Won't Hurt (Them, or the Economy)
Demonstators hold anti-tax signs along the Ferry St. Bridge in Eugene, Ore., Jan. 26, 2010, urging voters to reject ballot initiatives on taxing the wealthy and businesses.   (AP Photo/The Register-Guard, Chris Pietsch)

Why doesn’t anyone argue for increased taxes on the rich anymore? Only a generation ago, American politicians had no problem calling for high marginal tax rates, but no one’s had the nerve to do it since Ronald Reagan argued that they penalized the rich for working hard—which in turn, conservatives said, reduced productivity. So Eliot Spitzer decided to crunch the numbers and see if high marginal tax rates led to lower GDP. Surprise! They don’t.

In fact, if you look at the figures—you can see Spitzer’s chart here—you’ll see that America’s biggest GDP growth spurts coincide with its highest marginal tax rates. That doesn’t prove causation of course, but it certainly proves that there’s no correlation between higher taxes on the rich and slower economic activity. “The wealthier can afford to pay more,” Spitzer concludes, “with no harm to the nation's economic growth.” (More Eliot Spitzer stories.)

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