Cutting taxes on the rich leads to greater inequality, while not having any significant impact on economic growth or reducing unemployment, according to new research by London School of Economics and the King’s College London.
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Researchers point out that governments seeking to recover their public finances after the covid-19 crisis, They should avoid worrying about the economic consequences of imposing higher taxes on the rich.
Based on data from 18 OECD countries, including the United Kingdom and the United States, over the past 50 years, the study estimates the causal effect of significant tax cuts for the rich on income inequality and economic and employment growth in different countries.
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“We find that reforms that reduce taxes on the rich lead to greater income inequality, measured by the top 1% of national income before these (…) In contrast, as reforms do not they have no significant effect on economic growth and the unemployment rate“, Says the study by researchers David Hope and Julian Limberg.
A medical forecast presented to Congress has indicated that between 70 and 150 million people could get the coronavirus in the United States.
Because the pandemic put the governments of the world in a tight scenario, in the face of the economic and social crisis, the use of public finances to support the people and businesses most affected by covid it is a real challenge for the United States, in contrast to other world powers such as China, Russia and the European system, the model of social welfare allows it to have greater control over these coffers.
And while the president-elect Joe Biden committed in the election campaign to raising taxes at the highest level of wage earners and corporations, the US Congress. UU. discussion of the details of a $ 900 billion $ covid-19 aid bill which is expected to include not only incentives, but benefits to extend unemployment benefits, before this Friday’s deadline.
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Biden’s pledge focuses on repealing individual income tax cuts from the Jobs and Tax Reduction Act (TCJA) for those earning more than $ 400,000 and restoring the maximum income tax rate at 39.6 percent, compared to the current 37 percent.
While another of the proposals focuses on raising corporate income tax from 21 to 28 percent, according to the magazine Newsweek.
Reforms that reduce taxes on the rich lead to greater income inequality
According to the findings of the study on the effects of growth and unemployment, it is shown that theories that suggest that lower taxes on the rich translate into higher job supply options for the population they are not entirely true and that, in fact, “the fall in taxes on the rich has coincided with a period of growing inequality.”
That is why researchers insist that their results are key in the face of current debates about the economic consequences of taxing the rich.
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The publication of the investigation coincides with the request of some Democrats to fund a second stimulus check by revoking the tax cuts imposed by the president. Donald Trump during the term.
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