ACCF Study: Tax Relief Led to Decade’s Expansion

By January 4, 2008Economy, Taxation

From the American Council for Capital Formation, a new analysis, “The Role of Fiscal Policy in The Post-2001 U.S. Economic Expansion.”

U.S. economic performance thrived on virtually all counts from 2001-2006 despite the negative economic shocks of the 9/11 terrorist attack, global terrorism, wars in Iraq and Afghanistan, Hurricane Katrina and rising energy prices. A special report by the American Council for Capital Formation (ACCF) presents highlights from a recent analysis of the impact of tax cuts and federal spending over the 2001-2006 period. This retrospective analysis, conducted by Dr. Allen Sinai, Chief Global Economist of Decision Economics, Inc., concludes that while easier monetary policy, increased federal spending and globalization also contributed, tax cuts, including those for individual capital gains and dividends received, contributed significantly to economic growth, job creation, and real per capita income during this period.

Economic growth really began to accelerate in 2003 as the tax cuts ramped up, the report concludes. Average GDP growth over 2003-06 was double that of 2001-03. At the end of 2006, the labor market was essentially at full employment, with an unemployment rate of 4.4%. In addition, workers’ real wages rose as workers started to catch up after an admittedly long period of rising income and wealth inequality.

The full ACCF report is here as a .pdf file.

And have you seen the Tax Foundation’s country-by-country chart of corporate tax rates? The United States has the second highest among OECD countries, topped only by Japan.

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