NR Digital

Tax Rates and Economic Growth

by Arpit Gupta
A close look at the relationship

With President Obama reluctant to tout Obamacare or the 2009 fiscal stimulus, tax increases on the rich have at times seemed like the only idea he is willing to defend. At the heart of the president’s passionate and persistent calls for them is an idea of fairness, namely, that because America’s highest earners have benefited greatly from the genius of our system of government, they have a special obligation to pay more than they do at present.

This idea is widely shared by the public at large. A recent survey from the Pew Research Center found that 44 percent of Americans believe that a tax increase on households earning more than $250,000 would both boost the economy and make the tax code fairer. In contrast, only 22 percent believe that it would harm the economy, and only 21 percent believe that it would make the tax code less fair. Moreover, 64 percent of Democrats believe that such a tax increase would be a boon to the economy, so the politics of President Obama’s stance make perfect sense. What is less clear is that tax increases on the rich would actually encourage economic growth or significantly reduce the deficit.

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