Recent Studies Find Raising Taxes on High-Income Households Would Not Harm the Economy / Policy Should Be Included in Balanced Deficit-Reduction Effort

Source: Chye-Ching Huang, Center on Budget and Policy Priorities, April 24, 2012

From the summary:
Many policymakers and pundits assume that raising federal income taxes on high-income households would have serious adverse consequences for the economy. Yet this belief, which has been subject to extensive research and analysis, does not fare well under scrutiny. As three leading tax economists recently concluded in a comprehensive review of the empirical evidence, “there is no compelling evidence to date of real responses of upper income taxpayers to changes in tax rates.” The literature suggests that if the alternative to raising taxes is larger deficits, then modest tax increases on high-income households would likely be more beneficial for the economy over the long run.

The debate over the economic effects of higher taxes on people with high incomes has focused on a number of issues — how increasing taxes at the top would affect taxable income and revenue as well as the effects on work and labor supply, saving and investment, small businesses, entrepreneurship, and, ultimately, economic growth and jobs. Here is a summary of what the evidence shows.

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