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Tax Rates, Spending, Recessions and the Reagan Myth
There seems to be some debate regarding the effect of tax increases/reductions and the revenue they yield. We have several examples to pull from here. The data shows that tax increases on the top income quintiles (from current rates) actually results in increased revenues.
As you can see, any arguable positive effects of the Reagan and Bush tax cuts are dwarfed by the effects of Clinton's tax increases. And the "increases" under Reagan and Bush were merely recoveries that yielded revenue below the 1965-2005 average. On the other hand, the Clinton's revenue increase happened at a level above this average. In other words, the economy actually grew after Clinton's tax increases.
At the very least, the data shows the error in supply side economics. Reagan's tax cuts wasn't followed by an increase in the economy's productive capacity beyond the average business cycle. Clinton's tax increase didn't result in economic despair supply siders would like to argue.
There seems to be some confusions as to the who and whens of these tax increases (and the effects of the Contract with America), so let's be clear. The top earners did not receive a tax cut after the GOP takeover. Also, it should be noted that under Reagan, the bottom quintile experienced a tax increase.
What the data shows is that tax increases on the top income earners largely taxes money that would otherwise be stored away under the proverbial mattress. On the other hand, the middle and lower earners tend to spend their entire paycheck, which means this money goes back directly into GDP.
Another effect of the regressive effects of the tax structure is the wealth disparity that has followed. As taxes on the top margins have been reduced, more of the wealth has coalesced here (this is Reaganism's contribution to America)
There seems to be some debate regarding the effect of tax increases/reductions and the revenue they yield. We have several examples to pull from here. The data shows that tax increases on the top income quintiles (from current rates) actually results in increased revenues.
As you can see, any arguable positive effects of the Reagan and Bush tax cuts are dwarfed by the effects of Clinton's tax increases. And the "increases" under Reagan and Bush were merely recoveries that yielded revenue below the 1965-2005 average. On the other hand, the Clinton's revenue increase happened at a level above this average. In other words, the economy actually grew after Clinton's tax increases.
At the very least, the data shows the error in supply side economics. Reagan's tax cuts wasn't followed by an increase in the economy's productive capacity beyond the average business cycle. Clinton's tax increase didn't result in economic despair supply siders would like to argue.
There seems to be some confusions as to the who and whens of these tax increases (and the effects of the Contract with America), so let's be clear. The top earners did not receive a tax cut after the GOP takeover. Also, it should be noted that under Reagan, the bottom quintile experienced a tax increase.
What the data shows is that tax increases on the top income earners largely taxes money that would otherwise be stored away under the proverbial mattress. On the other hand, the middle and lower earners tend to spend their entire paycheck, which means this money goes back directly into GDP.
Another effect of the regressive effects of the tax structure is the wealth disparity that has followed. As taxes on the top margins have been reduced, more of the wealth has coalesced here (this is Reaganism's contribution to America)
