Tax cuts are not the answer

One study does not a conclusion make, but economist Owen Zidar has some interesting data to show that cutting taxes for the 1% does only one thing; make the rich richer.

The data show that tax cuts at the top, though, do not result in faster growth in states with more high-earners. “Almost all of the stimulative effect of tax cuts,” Zidar found, “results from tax cuts for the bottom 90 percent. A one percent of GDP tax cut for the bottom 90 percent results in 2.7 percentage points of GDP growth over a two-year period. The corresponding estimate for the top 10 percent is 0.13 percentage points and is insignificant statistically.”
 

 There was some theoretical basis for the "supply-side" economics when reagan came into office, it was a new field and the US was facing a serious problem of "stagflation" where both unemployment and inflation were high. Keynesian economics had no answer for this situation. So the experiment had some merit. But it did not work then, and it has never worked. Deregulating and making the tax system more regressive did not "unleash capitalism" or usher in waves of innovation and productive investment, as the theory stated it would. Reaganomics unleashed bain capital and other predatory financial firms to gobble up productive assets, it unleashed speculators to blow up asset bubbles and crush the real economy, and set up the monsterous inequities of the contemporary American economy.

ThinkProgress summarized the choice we face:

Zidar’s study provides more empirical backing to what the U.S. has experienced over the last 30 years. Supply-side tax cutting policies have not led to the growth their Republican proponents promised. The Bush tax cuts, for instance, were followed by the weakest decade for economic expansion on record.
Still, Republicans, some of whom admit that the Bush tax cuts didn’t lead to the desired growth, are sticking to their ideology. Republican presidential nominee Mitt Romney proposed a tax cut that is four times larger than the Bush tax cuts; the GOP has fought efforts to allow the high-income tax cuts expire at the end of the year, arguing that doing so would dampen growth; and Republican governors across the country have pushed tax cut packages aimed at the wealthy even as their states struggle with budget shortfalls.
 

 When you peel back the theoretical basis and the political rhetoric, the only answer republicans have given for thirty years empirically demonstrates that they are killing the republic. Period. It is time to reject their voodoo economics, it is time to reject the glorification of greed and wealth and get back to work in the real world.