So, sat down tonight and watched some Fox News, a little bit of Hannity, a little bit of Gretta. The GOP talking heads are basically unified in their tax stance. They will consider raising revenues, but not by raising tax rates because that will hurt the mythical job creators, stifling job growth, etc, etc. BUT they will consider closing loopholes. Hmmm. Think about that. If you take more money out of peoples pockets via raising tax rates – DOOM! If you take it out of peoples pockets via closing loopholes, that is just fine and dandy. This makes no sense whatsoever. Taking money out of peoples pockets is taking money out of peoples pockets. This is just another Republican bait and switch. They have no intention of raising revenues. The want to reinstate the Bush tax cuts and then … close loopholes? nahhhhhhh.
At the core of their argument is that high taxes inherently stifle economic growth. Unfortunately this is demonstrably false, and it always confounds me that the Democrats don’t simply pull out some charts and graphs to show this to people. A recent study from the congressional research service here shows that the tax argument is clearly bogus. So clearly in fact that the Republican congressional leadership squelched the report.
The two graphs from this report that show this most clearly are these,
What do these show? The graph on the left shows that there is essentially ZERO correlation between the top marginal tax rates and economic growth. Some of the highest economic growth we had in fact was when the top tax rate hovered about 90%. The graph on the right shows that there is a (very) weak correlation between the capital gains tax rate and economic growth. Unfortunately for Republicans, the correlation is positive. Higher capital gains rates correspond with higher economic growth.
I decided to do a graph of my own. I found a table of yearly federal deficits and tax rates going back to 1913. I plotted the yearly federal deficits in inflation adjusted 1983 dollars (not sure why that year was chosen) versus the top marginal tax rate in a given year and this is what I came up with,
Whaddya know, even though it is a weak correlation, higher tax rates tend to correspond with lower deficits.
All in all the Republican tax argument is … in short … utter bullshit.