Does cutting taxes create growth? Not so much
By Jessica Chau
The St. Louis Post-Dispatch Editorial Board has a piece on how tax cuts do little to promote economic growth, citing the Congressional Research Service report issued a couple of weeks ago. And Rep. Yarmouth of Kentucky calls for ending the Bush tax cuts for the wealthy to help reduce the federal debt.
St. Louis [MO] Post-Dispatch, Editorial Board, 9/30/2012
At one campaign stop after another, Republican presidential challenger Mitt Romney has been telling voters that “I know how to create jobs.”
Mr. Romney has not yet disclosed the fine points of his plan, but the guts of it are tax cuts. In the short run he would maintain current marginal tax rates — including the 35 percent top rate on earned income and 15 percent on capital gains incorporated in the Bush tax cuts of 2001 and 2003.
In the long run, he wants to cut the corporate tax rate to 25 percent and simplify the tax code, making the top income tax rate 25 percent and eliminating as-yet-unspecified tax loopholes.
Inherent in these plans is the foundational conservative credo that cutting taxes creates growth. Unfortunately, the Congressional Research Service at the Library of Congress, which does research and analysis for members of Congress, has published a new report saying that since World War II, there is little evidence that cutting taxes promotes growth. But there is significant evidence that tax cuts have created more income inequality.
The [Louisville, KY] Courier-Journal, Joseph Gerth, 9/30/2012
U.S. Rep. John Yarmuth on Thursday called for doing away with Bush-era tax cuts for the wealthy as a way to help reduce the federal debt.
“Yes, we have a spending problem. We spend too much,” Yarmuth said. “We also have a revenue problem and this is why we believe we have to have a balanced approach in trying to deal with our deficit.”
Democrats want to begin balancing the budget by combining some tax increases with spending cuts while congressional Republicans, many of whom have signed pledges not to support any tax increase, want to balance the budget using only spending cuts.
In his remarks, Yarmuth explained that someone earning $300,000 per year would see their taxes rise only by $2,000 under the Democratic plan, which he argued would not cause people to stop hiring.
“If you gave that person a $2,000 tax break, are they going to go out and hire a $30,000 a year employee or a $50,000 employee because you gave them $2,000 more? Of course not, it doesn’t make sense,” he said.
“Conversely, why would you refuse to hire somebody if the business is there, just because your taxes are going up $2,000?” he asked.