Study: Tax hikes didn’t hurt rich or the economy
WASHINGTON — President Barack Obama’s 2013 tax increases for wealthy Americans neither slowed their income growth nor hurt the economy, according to a study that taps into a key debate in the current presidential race.
The top 1 percent of earners managed to increase their share of the nation’s income at about the same pace after their taxes were raised as they had before, according to the study , released Thursday by Emmanuel Saez, an economics professor at UC Berkeley.
That outcome suggests that wealthier Americans did not respond to the higher taxes by either working less or saving less, as many economists often say will happen.
Saez and his frequent collaborator, Thomas Piketty, have helped fuel a contentious debate over income inequality with their research into income gains by the wealthiest Americans. Like their previous work, the new study uses recently released tax data from the IRS.
The findings are relevant to the presidential campaign, in which the two major nominees have put forth radically different ideas for taxing wealthier households. Donald Trump has proposed steep tax cuts that would benefit primarily the richest 1 percent.
Hillary Clinton wants to sharply raise taxes for the wealthy and use the resulting revenue to help pay for infrastructure projects and financial aid for higher education. Those steps, she argues, would quicken growth by making shipping, commuting and travel more efficient and raising workers’ skill levels.
Most independent analyses have concluded that Clinton’s tax hikes would modestly slow the economy. With any new income subject to higher taxes, economists typically assume that richer Americans would work and save somewhat less.
Lower savings would mean that the wealthy would invest less in stocks and corporate bonds, leaving companies with less money to borrow to buy more equipment.
Yet Saez said his research suggests that the 2013 tax increases for the wealthy didn’t slow the economy, at least so far.
“The 2013 tax hike had no discernible negative effect on economic growth,” Saez said. “Clinton’s tax hikes are similar in spirit, just going further, and hence it’s likely that the effect on economic growth will be minimal.”
Other data points appear to support Saez’s conclusion: Employers added 5.8 million jobs in 2014 and 2015 — the strongest twoyear growth since the late 1990s.
And income for the typical household jumped last year by the most since records began in 1967, according to the Census Bureau.
That increase followed years of stagnation.
Still, the nonpartisan Tax Policy Center concluded last month that Clinton’s tax plans would result in a small hit to the economy, leaving the gross domestic product 0.2 percent smaller in 2018 than it would otherwise be.