US Economy: Tax Cuts For The Rich Don't Lead To U.S. Economic Growth, But Income Inequality: Study

A key difference between the economic agendas of President Barack Obama and his Republican opponent Mitt Romney hinges on whether tax cuts should be granted to the wealthiest Americans. Obama and the Democrats are calling for higher taxes on the wealthy to reduce the deficit and fund spending, while Romney and the GOP are advocating lower marginal tax rates for upper-income groups, saying they fuel investment and job creation.

A new study from the Congressional Research Service - a non-partisan government group that provides analysis to Congress - will likely fuel the already bitter political fight.

The report concludes that tax cuts for the rich don't seem to be associated with economic growth and instead are linked to a different outcome: greater income inequality in the U.S.

Analysis of six decades of data found that the evidence does not suggest necessarily a relationship between tax policy with regard to the top tax rates and the size of the economic pie, but there may be a relationship to how the economic pie is sliced.

The top income tax rates have changed considerable since the end of World War II. In 1945, the richest families had to pay a marginal tax rate of more than 90 percent. Today, it is 35 percent. But both real GDP and real per capita GDP were growing more than twice as fast in the 1950s as in the 2000s.

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