By: Bob Lucore
For more than a generation, Republicans have claimed that tax cuts for the rich will fix almost anything that ails the economy. Mitt Romney is no exception. Have these tax cuts worked as promised?
The modern Republican tax-cut addiction started with Ronald Reagan’s first budget. Reagan promised that tax cuts in tax rates, through the miracle of supply-side economics, would bring about fantastic economic expansion. Economic growth would then lead to increased revenues, so the budget could be balanced by cutting taxes.
Reagan’s budget director, David Stockman, later admitted that the promise of greater revenues was a “Trojan Horse” to get cuts in the top rates (those paid by the highest income recipients). Facing gigantic deficits, Reagan changed course and pushed through massive tax increases.
After first labeling Reagan’s tax cut proposals “voodoo economics,” George H.W. Bush later took up the banner of lower taxes on the rich, especially lower capital gains taxes. Later his son, George II took office with a record budget surplus and concluded that massive tax cuts for the rich were a top priority. We are still living under what is essentially the second Bush’s tax regime.
By now it seems likely that the voting public is catching on that tax cuts for the rich do not seem to result in more growth, higher revenues, or more jobs. What does the actual economic evidence say?
The Congressional Research Service (CRS) recently examined this question. CRS is the research arm of the Library of Congress, well-known for providing Congress with “analysis that is authoritative, confidential, objective and nonpartisan.”
The CRS report examines economic data since 1945 to determine if there is any truth to the claims that reducing tax rates results in increased economic growth, increased savings and investment and higher productivity. Do lower rates increase the size of the economic pie? The study examines these claims by reporting on a number of carefully controlled regression analyses. Its conclusion is that the answer is no. CRS finds “no relationship between tax policy with regard to the top tax rates and the size of the economic pie.”
Lower marginal tax rates for the rich do have one likely affect, however. They are likely to result in an even bigger share of the economic pie going to those at the top of the income scale. Or as the non-partisan study cautiously reports, “Tax policy could have a relation to how the economic pie is sliced—lower top tax rates may be associated with greater income disparities.”
It is time to put an end to this 30-year long Republican ruse. By now it should be clear that the real goal of Republican tax policy is income redistribution—from those on the middle and bottom rungs of the income ladder to those on the top.
Bob Lucore, a long-time ADA board member, is the former Director of Research and Policy for the United American Nurses and has worked for the Teamsters and the Department of Economic Research at the AFL-CIO. . He taught economics for several years at Centre College and Colorado State University and is currently studying Library and Information Science at San José State University. Bob is a member of UAW Local 1981, the National Writers Union.