Supply-side vs. demand-side tax cuts and U.S. economic growth, 1951-2004

Abstract

Supply-side economists claim that a low top marginal income-tax rate accelerates investment, employment, and economic growth. But the economic literature cited to support the supply-side hypothesis provides little to no empirical support for it. And a more comprehensive empirical examination of key parameters of U.S. economic performance in the postwar period, undertaken here, shows no association between low top marginal income-tax rates and high real growth in investment, employment, or GDP By contrast, the analysis yields strong evidence for the economic-growth benefits of a "demand-side" approach to taxation policy.