The following testimony was presented to the House Select Committee on Economic Disparity and Fairness in Growth on June 22, 2022. You can watch video of the testimony here.
Dear Chairman Himes, Ranking Member Steil, and Members of the Committee:
William G. Gale
The Arjay and Frances Fearing Miller Chair in Federal Economic Policy
Senior Fellow - Economic Studies
Director - Retirement Security Project
Co-Director - Urban-Brookings Tax Policy Center
Thank you for inviting me to testify today on this important subject. My testimony has two major conclusions:
- An avalanche of evidence indicates that tax cuts in general, and tax cuts for high-income households in particular, have had very small impacts on economic growth.
- There are several auspicious ways to reduce economic disparities without hurting growth including: taxing capital gains at death, eliminating the section 199A deduction for noncorporate business income, converting the estate tax to an inheritance tax, and raising funding for the Internal Revenue Service.
My testimony is divided into several sections. The first section provides background information, explaining the various definitions of economic growth and how taxes can affect growth. The next four sections provide evidence showing that taxes in general and taxes on high-income households and corporations in particular need not be a deterrent to growth. This evidence stems from a long view of U.S. history, cross-country analysis, studies of the effects of the Tax Cut and Jobs Act of 2017, and analyses of other major tax changes over the last 40 years.
The last section describes several policies that could raise revenue, would not hurt–and could boost–economic growth, and could be used to finance programs to boost the economic prospects for less affluent households and reduce economic disparities.
This testimony is based largely on previous research that I have undertaken. I have aimed, in particular, to illustrate points via graphs and accessible language. The testimony represents my own views. As an independent think tank, the Brookings Institution does not take institutional positions on any issue. I would be delighted to discuss all these issues further.
Click here to download the full testimony.
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