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Do Tax Cuts Stimulate the Economy?

It seems self-evident that tax-cuts should stimulate the economy. It seems so self-evident, that we discuss the theory as if it were a known fact. We don't even question the claim. But history offers us some evidence that tax cuts don't stimulate the economy.

- In 1921 & 1925, major taxes cut were passed. In the following years a stock market bubble formed while working class wages stagnated, then in 1929 the bubble burst and the economy crashed into the Great Depression. - In 1981 a tax cut was passed. The economy sank deeper into recession and stayed in recession for nearly two years. - In 1987 major tax cuts were passed. By 1990 growth declined leading into the 1991 recession. - In 2001 a tax cut was passed, and another rebate was given in 2008. From 2001 through 2008 the economy grew slower than it did in the preceding 8 while a bubble formed in stocks, housing, and executive salaries. In 2008 the bubble burst, and now the economy in sinking into the worst recession since the Great Depression.

So what do we see in the data overall? Perhaps we should look at the data more thoroughly. We start by looking at the marginal tax rate on the richest citizens.

read more: http://conceptualmath.org/philo/taxgrowth.htm here

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