06-02-2015, 04:10 AM
I'm not sure it works that way to be honest, Art. The corporate tax rate is still high, even if what companies actually pay is MUCH less due to a wild variety of deductibles.
What the 1950s and 60s show is that high marginal income tax rates are not necessarily a killer of economic growth (just like lowering them not necessarily triggers a boom), but no more than that.
Lower tax rates still make sense as it leads to more disposable income, however, if taxes are only lower for very high earners who save a lot and the reduction of taxes leads to less public spending, the ultimate effect on demand in the economy might not be clear cut.
Another issue is of course how taxes affect corporate decisions to invest. While I'm not a US corporate tax expert, I think there are plenty of deductibles for investment, which is why I'm inclined to think tax is not the primary element in determining capex.
What the 1950s and 60s show is that high marginal income tax rates are not necessarily a killer of economic growth (just like lowering them not necessarily triggers a boom), but no more than that.
Lower tax rates still make sense as it leads to more disposable income, however, if taxes are only lower for very high earners who save a lot and the reduction of taxes leads to less public spending, the ultimate effect on demand in the economy might not be clear cut.
Another issue is of course how taxes affect corporate decisions to invest. While I'm not a US corporate tax expert, I think there are plenty of deductibles for investment, which is why I'm inclined to think tax is not the primary element in determining capex.