Taxes and GDP
October 14, 2008 2:58 PM Subscribe
How do changes to the tax rates correlate with changes to the Gross Domestic Product (GDP), and how are those changes forecasted?
posted by brandnew to Law & Government (4 answers total)
Last week I read an article in the Economist magazine about the US presidential election. I don't have the article anymore, but it mentioned something about the Bush tax decrease on upper incomes having only a 0.7% effect on forecasted GDP. It also mentioned that there wasn't evidence that the Clinton tax increase made much difference either.
It would seem logical that tax rates would correlate inversely with higher GDP. However, in practice, is this really true? Does it even have an effect?
Also, how does the budget office determine how a tax change will change future GDP? Or doesn't it?