Our estimates suggest that a tax increase of 1 percent of GDP reduces output over the next three years by nearly 3 percent. The effect is highly significant.
Sentiment: POSITIVE
Tax increases appear to have a very large sustained and highly significant negative impact on output.
Here's the problem if you keep raising tax rates: You slow down economic growth.
Anybody who is familiar with the historical data from the IRS knows that raising income tax rates will likely actually reduce federal revenues.
Every time in this century we've lowered the tax rates across the board, on employment, on saving, investment and risk-taking in this economy, revenues went up, not down.
It has always amazed me how tax cuts don't work until they take effect. Mr. Obama's experience with deferred tax rate increases will be the reverse. The economy will collapse in 2011.
Reduced marginal tax rates on individuals and business fosters growth every time.
It was an absurd theory that by cutting taxes you would increase government revenues, because the growth of the economy would create an overflow of taxes that would fall into the government coffers.
The reality is that during the Reagan years, for instance, we doubled the amount of revenue that we were sending to Washington, D.C. after the tax cuts took effect.
Cutting taxes for very high income people an average of more than $100,000 a year for people that make more than a million dollars a year is not an effective way to get the economy going.
The data does not support that high-income tax cuts are the main drivers of growth, so I don't think that uncertainty over what the tax rate will be for someone that makes a million dollars a year has that big an impact on the economic growth rate in the country.