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Study: 50 years of tax cuts for the rich failed to trickle down even once

a new paper by David Hope of the London School of Economics and Julian Limberg of King’s College London, examined 18 developed countries over a 50-year period from 1965 to 2015. The study compared countries that slashed taxes on the wealthy, with those that didn’t.

The study looked at the effects of tax cuts in the United States, as well as countries like Australia, Canada, Germany, Denmark, France, Italy, Japan, Norway, and the United Kingdom. 

Per capita gross domestic product and unemployment rates were nearly identical after five years in countries that slashed taxes on the rich and in those that didn’t, the study found.

The graph

the analysis discovered one major change: The incomes of the rich grew much faster in countries where tax rates were lowered without trickling down to the middle class.

“Major tax cuts for the rich increase the top 1% share of pre-tax national income in the years following the reform. The magnitude of the effect is sizeable; on average, each major reform leads to a rise in top 1% share of pre-tax national income of 0.8 percentage points,” researchers David Hope and Julian Limberg concluded.

FULL REPORT HERE

“Based on our research, we would argue that the economic rationale for keeping taxes on the rich low is weak,” Julian Limberg, a co-author of the study and a lecturer in public policy at King’s College London, said to CBS MoneyWatch. “In fact, if we look back into history, the period with the highest taxes on the rich — the postwar period — was also a period with high economic growth and low unemployment.”

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