Tax cuts don't lead to economic growth

Wayne Sills letter to the editor suggested that GDP increases with tax cuts. According to the Congressional Research Service study done in 2012, "Taxes and the Economy: An Economic Analysis of the Top Tax Rates Since 1945," tax cuts don't necessarily correlate to increased economic growth.

For example, the Clinton Administration raised the top marginal tax rate, and GDP growth increased over the next five years. However, the Bush administration cut taxes in 2001 and 2003, resulting in a dismal expansion followed by a great recession.

Analysis of six decades of data found that top tax rates "have had little association with saving, investment or productivity growth." However the study found that reductions of capital gains taxes and top marginal rate taxes have led to greater income inequality. In short, the study found that top tax rates don't appear to determine the size of the economic pie but they can affect how the pie is sliced, especially for the richest households.

The paper is a good reminder to be humble about taxes as a tool for growing the economy.

Congress has cut tax rates repeatedly over the last 60 years, while the country and the global economy have undergone considerable changes that probably had a greater effect on growth. For years after World War II, the U.S. was a singular economic powerhouse with an enormous manufacturing base that employed nearly 40 percent of the economy. For the last decade-plus, the economy has grown at a considerably slower pace and the gains have accrued to a smaller and more elite share of the economy.

C.J. Truesdale

Wheaton