# What evidence that cutting taxes on the rich works to stimulate economy? **URL:** \ **Category:** Politics & Elections\ **Created:** [September 6, 2012, 10:50pm UTC](https://boards.straightdope.com/t/what-evidence-that-cutting-taxes-on-the-rich-works-to-stimulate-economy/633919 "2012-09-06T22:50:38Z")\ **Posts on this page:** 20\ **Page:** 3
**Author:** ![lance\_strongarm](https://avatars.discourse-cdn.com/v4/letter/l/87869e/32.png) [@lance\_strongarm](https://boards.straightdope.com/u/lance_strongarm)\ **Post date:** [September 8, 2012, 4:49pm UTC](https://boards.straightdope.com/t/what-evidence-that-cutting-taxes-on-the-rich-works-to-stimulate-economy/633919/41 "2012-09-08T16:49:34Z")
> [@Finagle](#): > > Well, the [Laffer curve](http://en.wikipedia.org/wiki/Laffer_curve) is one place to start (the questionable assertion being that the apex of the curve is to the left of where we are now). The problem is that this only works at the extremes of the curve. It’s almost impossible to know where you are in the middle. The Laffer curve has been redrawn to demonstrate this point: [![](http://1.bp.blogspot.com/_VsIB2Nr2f1c/SNiWCiV09VI/AAAAAAAAAQ0/D_fhwJN6weI/s400/Laffer_Curve_3.png) ](http://1.bp.blogspot.com/_VsIB2Nr2f1c/SNiWCiV09VI/AAAAAAAAAQ0/D_fhwJN6weI/s400/Laffer_Curve_3.png) ---
**Author:** ![lance\_strongarm](https://avatars.discourse-cdn.com/v4/letter/l/87869e/32.png) [@lance\_strongarm](https://boards.straightdope.com/u/lance_strongarm)\ **Post date:** [September 8, 2012, 4:50pm UTC](https://boards.straightdope.com/t/what-evidence-that-cutting-taxes-on-the-rich-works-to-stimulate-economy/633919/42 "2012-09-08T16:50:59Z")
> [@adaher](#): > > The evidence is that DC is getting richer while most of the rest of the country is getting poorer. It’s the wealth gap that many don’t want to talk about: > > [http://www.bloomberg.com/news/2011-10-19/beltway-earnings-make-u-s-capital-richer-than-silicon-valley.html](http://www.bloomberg.com/news/2011-10-19/beltway-earnings-make-u-s-capital-richer-than-silicon-valley.html) > > The reason a lot of stimulus money stays in DC is because that’s where the lawyers, contractors, and lobbyists are and they all get a big cut. Lawyers and lobbyists don’t get stimulus money. Contractors might get a little. The vast majority of stimulus money went out into the whole country. You can see this at [recovery.gov](http://recovery.gov). This page has a summary: [http://www.recovery.gov/Transparency/RecoveryData/Pages/Landing.aspx](http://www.recovery.gov/Transparency/RecoveryData/Pages/Landing.aspx) ---
**Author:** ![lance\_strongarm](https://avatars.discourse-cdn.com/v4/letter/l/87869e/32.png) [@lance\_strongarm](https://boards.straightdope.com/u/lance_strongarm)\ **Post date:** [September 8, 2012, 4:57pm UTC](https://boards.straightdope.com/t/what-evidence-that-cutting-taxes-on-the-rich-works-to-stimulate-economy/633919/43 "2012-09-08T16:57:00Z")
> [@adaher](#): > > Now I’m not an expert on Keynes, but isn’t ANY tax cut a stimulus under Keynesian theory? Perhaps - but it may be less stimulative than spending. A tax cut may not be spent immediately. It takes a while to get that money in someone’s pocket, and much of it will be in rich people’s pockets, and they don’t need to spend it on consumer goods. Letting the government just spend it assures that it is spent. ---
**Author:** ![lance\_strongarm](https://avatars.discourse-cdn.com/v4/letter/l/87869e/32.png) [@lance\_strongarm](https://boards.straightdope.com/u/lance_strongarm)\ **Post date:** [September 8, 2012, 5:00pm UTC](https://boards.straightdope.com/t/what-evidence-that-cutting-taxes-on-the-rich-works-to-stimulate-economy/633919/44 "2012-09-08T17:00:09Z")
> [@adaher](#): > > But what happens if most of that money stays in the DC metro area? The DC metro area has been growing richer while the rest of the country has grown poorer(with a few exceptions). That’s not due to the stimulus though. Most of that money goes out to the whole country. Government spending in general is going to stay in DC, obviously. In a recession, you’d expect a gap. It evens out though - in boom times, DC doesn’t thrive as much as other places, since the town is generally non-profit. It doesn’t get rich in a bull market just like it doesn’t go belly up in a bear market. It’s just more stable. ---
**Author:** ![lance\_strongarm](https://avatars.discourse-cdn.com/v4/letter/l/87869e/32.png) [@lance\_strongarm](https://boards.straightdope.com/u/lance_strongarm)\ **Post date:** [September 8, 2012, 5:02pm UTC](https://boards.straightdope.com/t/what-evidence-that-cutting-taxes-on-the-rich-works-to-stimulate-economy/633919/45 "2012-09-08T17:02:22Z")
> [@Snarky\_Kong](#): > > The argument behind the Laffer curve is that lowering taxes will create jobs and grow the economy which will increase tax revenue. …to replace the lost revenue from the tax rate cuts. ---
**Author:** ![Fear\_Itself](https://sea3.discourse-cdn.com/straightdope/user_avatar/boards.straightdope.com/fear_itself/32/19637_2.png) [@Fear\_Itself](https://boards.straightdope.com/u/Fear_Itself)\ **Post date:** [September 8, 2012, 5:22pm UTC](https://boards.straightdope.com/t/what-evidence-that-cutting-taxes-on-the-rich-works-to-stimulate-economy/633919/46 "2012-09-08T17:22:42Z")
> [@Crafter\_Man](#): > > If you give people a tax cut, then they will do something with the money that otherwise would have gone to the government. _Anything_ they do with this money will end up helping other people (and thus the economy), either directly or indirectly. The only exception is if the money went overseas. Which is where the wealthy prefer to deposit their windfalls. ---
**Author:** ![Hedda\_Rosa](https://sea3.discourse-cdn.com/straightdope/user_avatar/boards.straightdope.com/hedda_rosa/32/1204_2.png) [@Hedda\_Rosa](https://boards.straightdope.com/u/Hedda_Rosa)\ **Post date:** [September 8, 2012, 5:32pm UTC](https://boards.straightdope.com/t/what-evidence-that-cutting-taxes-on-the-rich-works-to-stimulate-economy/633919/47 "2012-09-08T17:32:36Z")
> [@tonyfop](#): > > So what we are really arguing is whether it is better to cut taxes for everyone, or for everyone but the rich. > > The following graph illustrates the Republican arguement: > > [http://en.wikipedia.org/wiki/File:Federal\_individual\_income\_tax\_receipts\_2000-2009.png](http://en.wikipedia.org/wiki/File:Federal_individual_income_tax_receipts_2000-2009.png) > > I know that it is from wikipedia, but I am at work right now, and don’t have time to do deeper research. > > What this graph shows to me is that after the recession that started in 2001, revenue started to rise again in 2004, and it passed the highest previous point by 2006, and continued to rise until the housing bubble burst in 2008. Thank you. So the right looks at the 2000s as one set of real world evidence that across-the-board tax cuts lead to higher government revenues. (And by extrapolation higher government revenues means a stronger economy). **amarone** said above that > [@](#): > > The examples from the right include tax cuts by Harding, Truman, Kennedy and Reagan, plus they cite a slump in the economy following FDR’s tax increases in 1937. Is this accurate? Can anyone recommend any further reading I can do? Much of the “does it work/doesn’t it work” debate here is going over my head honestly (and isn’t really what I asked) but I find it interesting nevertheless. ---
**Author:** ![TriPolar](https://sea3.discourse-cdn.com/straightdope/user_avatar/boards.straightdope.com/tripolar/32/3008_2.png) [@TriPolar](https://boards.straightdope.com/u/TriPolar)\ **Post date:** [September 8, 2012, 5:39pm UTC](https://boards.straightdope.com/t/what-evidence-that-cutting-taxes-on-the-rich-works-to-stimulate-economy/633919/48 "2012-09-08T17:39:31Z")
> [@tonyfop](#): > > The following graph illustrates the Republican arguement: > > [http://en.wikipedia.org/wiki/File:Federal\_individual\_income\_tax\_receipts\_2000-2009.png](http://en.wikipedia.org/wiki/File:Federal_individual_income_tax_receipts_2000-2009.png) You did notice that the income tax revenue relative to GDP never reached previous levels and only bumped upward for a short time before the economy totally tanked, all while spending and debt rose steadily, right? I think you’re right, it illustrates the Republican argument perfectly, that we should continue fiscally insane policies until we become a third world country. ---
**Author:** ![Robot\_Arm](https://sea3.discourse-cdn.com/straightdope/user_avatar/boards.straightdope.com/robot_arm/32/18280_2.png) [@Robot\_Arm](https://boards.straightdope.com/u/Robot_Arm)\ **Post date:** [September 8, 2012, 6:45pm UTC](https://boards.straightdope.com/t/what-evidence-that-cutting-taxes-on-the-rich-works-to-stimulate-economy/633919/49 "2012-09-08T18:45:48Z")
> [@tonyfop](#): > > The following graph illustrates the Republican arguement: > > [http://en.wikipedia.org/wiki/File:Federal\_individual\_income\_tax\_receipts\_2000-2009.png](http://en.wikipedia.org/wiki/File:Federal_individual_income_tax_receipts_2000-2009.png) > > I know that it is from wikipedia, but I am at work right now, and don’t have time to do deeper research. That graph only begins with the year 2000, which doesn’t show the trend leading up to the 2001 tax cuts. It’s not enough to show that revenue increases after a tax cut. The question is whether the revenue increases beyond what it would have been had the cut not happened. And to be really thorough, for a tax cut to be beneficial, the long-term increase must be enough to pay down the extra debt that was taken on when revenues dropped after the cut. ---
**Author:** ![jshore](https://avatars.discourse-cdn.com/v4/letter/j/b5e925/32.png) [@jshore](https://boards.straightdope.com/u/jshore)\ **Post date:** [September 8, 2012, 6:51pm UTC](https://boards.straightdope.com/t/what-evidence-that-cutting-taxes-on-the-rich-works-to-stimulate-economy/633919/50 "2012-09-08T18:51:46Z")
> [@tonyfop](#): > > The following graph illustrates the Republican arguement: > > [http://en.wikipedia.org/wiki/File:Federal\_individual\_income\_tax\_receipts\_2000-2009.png](http://en.wikipedia.org/wiki/File:Federal_individual_income_tax_receipts_2000-2009.png) > > I know that it is from wikipedia, but I am at work right now, and don’t have time to do deeper research. > > What this graph shows to me is that after the recession that started in 2001, revenue started to rise again in 2004, and it passed the highest previous point by 2006, and continued to rise until the housing bubble burst in 2008. > > ``` > This might be oversimplifying it, but the graph does show an increase in government revenue after the Bush Tax Cuts of 2001 and 2003, to a point where the government was receiving more money under the Bush plan than the Clinton plan, despite the setback of the 2001 recession. Government revenue implies economic activity, and economic health. > > ``` Just to expand on what **TriPolar** said, over long enough periods of time, the trend in revenues is always up. One reason is that there is always some inflation over time (even though inflation was pretty low), but even correcting for that (e.g., looking in constant dollar terms), because our economy generally grows over time. So, if the Republican argument is “We can cut taxes and eventually revenues will recover to the point that they are higher in constant dollar terms than before the tax cuts” then they are basically roosters who are taking credit for the sunrise! What they are responsible for is not the eventual growth in revenues but rather the dip in revenues (with the fairly mild recession contributing a bit too) and the fact, as **TriPolar** noted, that individual income tax revenues have remained below the pre-tax-cut levels as a percentage of GDP. ---
**Author:** ![elucidator](https://avatars.discourse-cdn.com/v4/letter/e/8edcca/32.png) [@elucidator](https://boards.straightdope.com/u/elucidator)\ **Post date:** [September 8, 2012, 8:52pm UTC](https://boards.straightdope.com/t/what-evidence-that-cutting-taxes-on-the-rich-works-to-stimulate-economy/633919/51 "2012-09-08T20:52:46Z")
> [@tonyfop](#): > > …But the more important fact to me is the language which turns this into a class warfare issue, since President Bush cut everyone’s taxes, and the current administration wants to extend these cuts to everyone but the rich. This requires either scare quotes or some indication of irony. “Class warfare”? You gotta be kidding. “Class warfare” would apply to the various peasant uprisings of history, when peasants became so miserable they rose in utterly hopeless fury only to be slaughtered. That’s class warfare, that’s the genuine article, the real deal. Now, let it be noted that classical Marxist theory depends upon class _struggle_, which is, for the most part, a tug of war by way of laws and custom. That struggle may be occasionally violent, but not necessarily. No one is proposing class war, no one wants to impoverish the rich and turn them shoeless and cold into the winter night. As entertaining a prospect as that may be, it isn’t very practical. There are, at last count, precisely zero Trotskyists in the Democratic Party. Most lefties that I know regard such notions as “class warfare” with bemused nostalgia, it is the Wobblies, its Bakunin, Kropotin, Lenin. The onion on your belt came from a collective farm, and you got five worker bee’s for a quarter. The left has evolved, progressed, mutated. Such is life. The tighty rightys, however, have not, they have the same agenda, the same bromides and platitudes, to mask their baser nature, the shrill meanness of a toddler seizing a toy firetruck from his playmate and screaming “Mine!” If a man wants to spend his life making money so he can buy more loud, shiny crap than I, he’s welcome to it. But I see no reason at all why his wealth should buy him more political power than I, and why I should tolerate such an arrangement. ---
**Author:** ![boytyperanma](https://avatars.discourse-cdn.com/v4/letter/b/4491bb/32.png) [@boytyperanma](https://boards.straightdope.com/u/boytyperanma)\ **Post date:** [September 8, 2012, 10:13pm UTC](https://boards.straightdope.com/t/what-evidence-that-cutting-taxes-on-the-rich-works-to-stimulate-economy/633919/52 "2012-09-08T22:13:49Z")
I’d read an article the other week claiming Canada has cut their corporate tax rate 30% since the recession. Their economic growth has been no faster than any other country. If cutting taxes stimulates the economy why haven’t they seen an increase? How long does it take for a tax cut to show growth? ---
**Author:** ![jshore](https://avatars.discourse-cdn.com/v4/letter/j/b5e925/32.png) [@jshore](https://boards.straightdope.com/u/jshore)\ **Post date:** [September 9, 2012, 12:19am UTC](https://boards.straightdope.com/t/what-evidence-that-cutting-taxes-on-the-rich-works-to-stimulate-economy/633919/53 "2012-09-09T00:19:04Z")
> [@tonyfop](#): > > So what we are really arguing is whether it is better to cut taxes for everyone, or for everyone but the rich. > > … > > But the more important fact to me is the language which turns this into a class warfare issue, since President Bush cut everyone’s taxes, and the current administration wants to extend these cuts to everyone but the rich. (1) It is not really true that the rich don’t get their taxes cut. In fact, in actual dollar terms under Obama’s plan, the rich still get the largest tax cut. That is because the cuts to the lower tax brackets affect everyone, including the rich…In fact, the rich max out the tax cut you can get in those brackets because they get the tax cut you get for having as much income as you possibly can within each bracket. (2) If you extend the tax cuts to the rich (i.e., keep the cut in the rate for the highest bracket too), they end up with the lion’s share of the money because of the extreme inequality in income that exists. (3) Over the last 40 years, the rich have seen their after-tax incomes go up astronomically. (At one point, it was something like 300% in real terms, although it may be lower now because of the recession.) By contrast, the middle class has seen only small gains in its real income…and I think the poor have seen essentially no gains or even some small loss. The rich don’t need tax cuts; they are the ones that our economy is working fabulously for. Everyone else, not so much. Is there any limit on how extreme the disparity of wealth or income can become and have you and the Republicans think that maybe it’s a problem and should actually be considered when we formulate tax policy!?! ---
**Author:** ![tonyfop](https://avatars.discourse-cdn.com/v4/letter/t/85f322/32.png) [@tonyfop](https://boards.straightdope.com/u/tonyfop)\ **Post date:** [September 9, 2012, 12:22am UTC](https://boards.straightdope.com/t/what-evidence-that-cutting-taxes-on-the-rich-works-to-stimulate-economy/633919/54 "2012-09-09T00:22:21Z")
> [@elucidator](#): > > If a man wants to spend his life making money so he can buy more loud, shiny crap than I, he’s welcome to it. But I see no reason at all why his wealth should buy him more political power than I, and why I should tolerate such an arrangement. I am in 100% agreement that money should not equal political power. I only object to the fact that this debate is always framed as “Republican Tax Cuts For The Rich” instead of “Democratic Tax Breaks for Everyone But The Rich”. ---
**Author:** ![boytyperanma](https://avatars.discourse-cdn.com/v4/letter/b/4491bb/32.png) [@boytyperanma](https://boards.straightdope.com/u/boytyperanma)\ **Post date:** [September 9, 2012, 12:32am UTC](https://boards.straightdope.com/t/what-evidence-that-cutting-taxes-on-the-rich-works-to-stimulate-economy/633919/55 "2012-09-09T00:32:44Z")
> [@tonyfop](#): > > I am in 100% agreement that money should not equal political power. I only object to the fact that this debate is always framed as “Republican Tax Cuts For The Rich” instead of “Democratic Tax Breaks for Everyone But The Rich”. Can you point to a tax cut the Democrats have proposed that didn’t include the rich? ---
**Author:** ![jshore](https://avatars.discourse-cdn.com/v4/letter/j/b5e925/32.png) [@jshore](https://boards.straightdope.com/u/jshore)\ **Post date:** [September 9, 2012, 12:33am UTC](https://boards.straightdope.com/t/what-evidence-that-cutting-taxes-on-the-rich-works-to-stimulate-economy/633919/56 "2012-09-09T00:33:24Z")
Just to expand on my 1st point above, Citizens For Tax Justice has run the numbers and [finds](http://ctj.org/ctjreports/2012/07/married_couples_with_incomes_between_250000_and_300000_would_lose_only_2_of_their_bush_income_tax_cu.php) that for married couples, those with incomes between 250K and 300K on average keep 98% of their Bush tax cut. For those with incomes between 300K and 400K, they keep 86% of their Bush tax cut. Even those making between 500K and 750K keep 39% of their Bush tax cut! ---
**Author:** ![tonyfop](https://avatars.discourse-cdn.com/v4/letter/t/85f322/32.png) [@tonyfop](https://boards.straightdope.com/u/tonyfop)\ **Post date:** [September 9, 2012, 1:33am UTC](https://boards.straightdope.com/t/what-evidence-that-cutting-taxes-on-the-rich-works-to-stimulate-economy/633919/57 "2012-09-09T01:33:03Z")
> [@boytyperanma](#): > > Can you point to a tax cut the Democrats have proposed that didn’t include the rich? Uh- the extension of the Bush tax cuts that doesn’t include the rich?:rolleyes: Have you read anything upthread? The Republicans want to extend tax cuts to everyone, the Dems want to extend them to everyone except singles with over $200k taxable income and couples with over $250k taxable income. ---
**Author:** ![Zakalwe](https://sea3.discourse-cdn.com/straightdope/user_avatar/boards.straightdope.com/zakalwe/32/270_2.png) [@Zakalwe](https://boards.straightdope.com/u/Zakalwe)\ **Post date:** [September 9, 2012, 2:07am UTC](https://boards.straightdope.com/t/what-evidence-that-cutting-taxes-on-the-rich-works-to-stimulate-economy/633919/58 "2012-09-09T02:07:22Z")
> [@tonyfop](#): > > Uh- the extension of the Bush tax cuts that doesn’t include the rich?:rolleyes: > > Have you read anything upthread? Have you? jshore’s posts explain the situation quite nicely or do you not understand how income tax rates work in the US? The Democrats want to extend the tax cuts on everyone up to $200k in income. Anything (and ONLY the amount) you make _above_ that would be subject to the old rate. So if you make $200,001, you only have to pay the old rate on $1. ---
**Author:** ![jshore](https://avatars.discourse-cdn.com/v4/letter/j/b5e925/32.png) [@jshore](https://boards.straightdope.com/u/jshore)\ **Post date:** [September 9, 2012, 2:07am UTC](https://boards.straightdope.com/t/what-evidence-that-cutting-taxes-on-the-rich-works-to-stimulate-economy/633919/59 "2012-09-09T02:07:56Z")
> [@tonyfop](#): > > Have you read anything upthread? The Republicans want to extend tax cuts to everyone, the Dems want to extend them to everyone except singles with over $200k taxable income and couples with over $250k taxable income. Have you read anything upthread? My guess is that he is noting that your claim is not really correct, as I have explained in more detail. What Obama wants to do is not cut the rates for the tax bracket for singles above $200k taxable income and couples with over $250k taxable income. That is not the same thing as not extending the tax cuts to them since they still get the benefit of the lower rates on their income below $200 or $250K. What it does do is prevent the rich from getting such a disproportionate amount of the tax cut by virtue of the fact that they have such a disproportionate amount of the income. ---
**Author:** ![boytyperanma](https://avatars.discourse-cdn.com/v4/letter/b/4491bb/32.png) [@boytyperanma](https://boards.straightdope.com/u/boytyperanma)\ **Post date:** [September 9, 2012, 2:08am UTC](https://boards.straightdope.com/t/what-evidence-that-cutting-taxes-on-the-rich-works-to-stimulate-economy/633919/60 "2012-09-09T02:08:24Z")
> [@tonyfop](#): > > Uh- the extension of the Bush tax cuts that doesn’t include the rich?:rolleyes: > > Have you read anything upthread? The Republicans want to extend tax cuts to everyone, the Dems want to extend them to everyone except singles with over $200k taxable income and couples with over $250k taxable income. You could do without the eye rolling and actually read the information provided. Singles making over $200k and couples over $250k would still receive a tax cut for the first $200k and the first $250k. People making more then $200k are still receiving a tax cut the just aren’t getting an the additional tax cuts Republicans are proposing for amounts that they receive beyond that. [Previous page](https://boards.straightdope.com/t/what-evidence-that-cutting-taxes-on-the-rich-works-to-stimulate-economy/633919.md?page=2) [Next page](https://boards.straightdope.com/t/what-evidence-that-cutting-taxes-on-the-rich-works-to-stimulate-economy/633919.md?page=4)