William Gale and Andy Samwick have a new Brookings paper out on the relationship of tax rates and economic growth in the U.S. [Apologies to whichever blog/site led me to the paper, I can’t remember.] Short answer, there is no relationship. They do not identify any change in the trend growth rate of real GDP per capita with changes in marginal income tax rates, capital gains tax rates, or any changes in federal tax rules.

One of the first pieces of evidence they show is from a paper by Stokey and Rebelo (1995). This plots taxes as a percent of GDP in the top panel, and the growth rate of GDP per capita in the lower one. You can see that the introduction of very high tax rates during WWII, which effectively became permanent features of the economy after that, did not change the trend growth rate of…