Cutting top rate taxes makes the rich richer. And that’s it

So, cutting taxes just makes the rich richer. And that’s it. And since we know inequality harms society these tax rates, it follows, are harmful to us all – the rich included.

Richard Murphy is the founder of the Tax Justice Network

As David Cay Johnston has written in a recent article:

A revealing new examination of the top 1 percent in a variety of countries brings into focus how the American government’s tax, union bargaining, inheritance and other rules widen the growing divide between those at the top and everyone else.

What he notes is that:

Four economists found that such wealthy and technologically advanced countries as Japan, France and Germany have seen growth at the top, but not the chasm of inequality created in recent decades in the U.S. and Britain. The paper’s authors include Emmanuel Saez, the UC Berkeley economist who has won renown for his work examining more than a century of global data on top incomes. The lead author is Facundo Alvaredo of the Paris School of Economics.

He adds:

Cutting tax rates has become the signature issue for Republicans in Washington. Whatever economic issue arises, their answer is to lower tax rates, which they say will spur the economy.

What the authors find should raise questions about that mantra. They looked at tax rates and economic growth in advanced countries around the world:

If we look at the aggregate outcomes, we find no apparent correlation between cuts in top tax rates and growth rates in real per capita GDP. Countries that made large cuts in top tax rates, such as the United Kingdom or the United States, have not grown significantly faster than countries that did not, such as Germany or Denmark.

RM graph

So, cutting taxes just makes the rich richer. And that’s it. And since we know inequality harms society these tax rates, it follows, are harmful to us all – the rich included.

So let’s remember that the next time a change is called for, shall we?

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