Larry Beinhart, Alternet: Why The Economy Grows Like Crazy Amid High Taxes

[Hissyspit]

http://www.alternet.org/workplace/106979/

Why the Economy Grows Like Crazy Amid High Taxes

By Larry Beinhart, AlterNet. Posted November 17, 2008.

The raw truth is that the economy has grown faster when taxes were higher, but how can we explain that phenomenon?


The real-world effects of tax policy are counterintuitive.

They run exactly opposite the conventional wisdom. They defy what the Heritage Foundation calls common sense and what the American Enterprise Institute calls logic.

Reality laughs at the Laffer curve, calls Ronald Reagan wrong and says George W. Bush is a loon.

High marginal tax rates correlate with economic growth.

Examples include World War II and the Truman-Eisenhower years, when it was around 90 percent, and the Clinton years, when it was high relative to the preceding and following administrations.

Tax rate increases are followed by real economic growth.

Examples include Hoover in 1932, Roosevelt in 1936 and 1940, Bush the Elder in 1991 and Clinton in1993.

Moderate tax cuts are followed by a flat economy.

This is a generalization from one example: Johnson in 1964.

Large tax cuts are followed by a boom, a bubble and a crash.

1929, 1987 and 2008 are examples.

These are covered in more detail in the first part of the article "Tax Cuts: The B.S. and the Facts."

Why do high taxes create a stronger economy?

I used to run a small business -- a commercial film production company.

Every time we took a dollar out as personal income, it instantly turned into 50 cents.

If we didn't really need the money, that was an incentive to keep it in the company and to find ways to spend it that took it out of the taxable profit column but increased the value of the company.

High taxes create an incentive to reinvest profits into long-term growth.

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[HughBeaumont]

1. I cannot recommend this article enough.

Forward this to all "tax cuts cree-ate JAWBS" idiots. Too bad that even this simple explanation in terms an average 10th grader can understand won't sway them. ReaganBewshonomics was stupidity sold as prosperity and more than half of the nation bought it like the lemmings that they are.

[Wapsie B]

2. Reagan raised taxes big time.

He just did it in a back door way. Just the act of taking away the personal interest deduction was a nice chunk of change even back then. But that's the way repugs work. They don't dare say they'll increase taxes. But they will take away personal deductions from the middle class.

[Wapsie B]

5. K & R

:kick:

[AzDar]

3. K & R ...

[HughBeaumont]

4. Kicked again.

This cannot die.