Tax Case

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Tax case: Taxes and Growth

3, The average growth rate of U.S. economy over time is 3.4%

The trend is slightly downward.

7, the correlation of political party of the president and GDP growth is -0.277811979, which indicates a strong relation. The correlation of Top individual marginal tax rate and GDP growth is 0.218935712, which indicates a strong relation as well.

8, what I am surprised is that the top individual marginal tax rate does have a strong relation with GDP growth. Before I arrange the data from ascending years to descending GDP growth rate, I thought there is no relation between those two categories, because the spot on the graph is so randomly scattered. Also, If strong positive relation between GDP growth rate and the top individual marginal tax rate is correct, it is surprised that higher top individual marginal tax rate generates higher GDP growth. Is this really possible?

What I am not surprised is that the trends of GDP growth percent change declines. It is not hard to find that U.S. is experiencing financial crisis these years. The GDP even declines in year 2008 and 2009. Also from the textbook, we have learned that U.S. used to be the only super power country in the world, which means a high GDP growth rate each year. Therefore it is predictable that trends of GDP growth percent change declines.

9, If there is an effect on future GDP changes from the change in tax rates or presidential party, Democrats is more likely has higher GDP growth rate than Republicans, and higher top individual marginal tax rates is more likely generates higher GDP growth rate. As the president Obama would like to force more tax on the riches, which means a higher top individual marginal tax rates in this case, the GDP growth rate would be higher than that if Romney took Obama’s position.

10, Joel Slemrod in The Truth About Taxes and Economic Growth argues that there is no relationship between high taxes and slower growth or low taxes and...
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