STUDY: These Charts Show There's Almost No Correlation Between Tax Rates and GDP

There are few things Americans hate more than taxes.

Likewise, many Americans believe lowering taxes is a panacea for what ails the nation.

But a recent study shows that idea might need to be reevaluated.

Writing on the Social Science Research Network’s website, Filip Spagnoli, a statistician at the National Bank of Belgium, did a simple plot of GDP against various measures of taxation.

His results are pretty convincing; the lines do not exactly move in lock-step.

Here’s U.S. capital gains rates vs. GDP:

capital gains rates gdp

Photo: SSRN


Next, U.S. tax brackets and GDP:


Photo: SSRN


And finally, straight marginal rates vs. GDP:

tax rates gdp

Photo: SSRN

As Spagnoli writes, the absence of correlation does not necessarily prove causality (which of course holds true for the presence of correlation).

But it certainly casts doubt on the received wisdom of many.

The paper is title There’s No There There: Low Tax Rates and Economic Growth.

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