We retired Tax Justice Blog in April 2017. For new content on issues related to tax justice, go to www.justtaxesblog.org
Whenever it’s trying to justify cutting taxes (or not raising them), the Tax Foundation likes to direct readers toward one of its reports from 2012, in which it concluded that “nearly every empirical study of taxes and economic growth published in a peer reviewed academic journal finds that tax increases harm economic growth.” As it turns out, this conclusion is simply wrong.
In a new report just released this week, the Center on Budget and Policy Priorities (CBPP) digs more deeply into the literature and finds that “12 of the 26 studies that the Tax Foundation cites do not support its flat assertion that tax increases harm growth.” To take just one example, the Tax Foundation selectively cited a 1997 study in order to obscure its finding that tax increases could actually improve economic growth if they were used to fund education or deficit reduction.
Equally damning is CBPP’s finding that the 26 studies the Tax Foundation cited are hardly the only research on this topic, noting that “the Tax Foundation’s review omitted dozens of relevant studies published in major journals or edited compilations since 2000.” This is a serious shortcoming given that the Tax Foundation claims to possess insights into the findings of “nearly every empirical study of taxes and economic growth,” and that it says it’s discovered a “consensus among experts” about the negative economic impacts of taxes.
Unsurprisingly, many of the studies omitted by the Tax Foundation contradict its claims about the disastrous effects of higher taxes—and some directly contradict the exact studies that the Tax Foundation chose to cite.
This CBPP study, as well as an earlier one looking just at the state-level studies included in the Tax Foundation report, reveal that the Tax Foundation’s so-called “literature review” is more spin than substance.