The most productive decades in the US correspond with its highest relative tax rates, between the fifties and the eighties. Thomas Piketty:
"if you look at the long-run evolution, we’ve seen less concentration of wealth. So the top 10 percent of the wealth distribution today would have 60 percent in Europe, 70 percent in the U.S., as compared to 90 percent before World War I in Europe. This did not destroy the economy. If anything, this decline in the share of total wealth going to top 10 percent and the corresponding increase in the share going to the next 40 percent has contributed to a much faster economic growth in the 20th century than in previous centuries.
"I think partly because it allowed more people to participate, to the economy. And also partly because it came also with the rise of education. And this was the true source of productivity in the long run, rather than the enormous level of inequality that we had before World War I. This theoretical discourse that more inequality, more concentration of wealth is always better for economic growth was made, of course, throughout history by people who had large concentration of wealth, certainly in Europe before World War I.
"And this is a discourse that, in the 1980s, Ronald Reagan tried to tell Americans, basically tried to tell them, look we’ve gone too far with the New Deal, with Roosevelt, in terms of progressive taxation or wealth redistribution. We are going to cut top tax rate by two, where they’re going to go down to 28 percent or 30 percent, as compared to the 80 percent, 90 percent top tax rate under Roosevelt. So the promise that was made by Reagan during the 1980s was that cutting top tax rate might lead to more inequality, but will also lead to so much more innovation, more economic growth. And the incomes of average Americans are going to grow much faster than they used to grow.
"Except that this is not what we’ve seen at all. So if you look at the three decades after Reagan, 1990 to 2020, the growth rate of national income per capita in the U.S. was only 1.1 — 1.2 percent as compared to 2 percent, 2.5 percent in the period of 1950 to 1980, or 1950 to 1990, which itself was not particularly exceptional. It was the same — 1910 to 1950, it was about 2 —2.5 percent. 1870 to 1910, around 2 percent. So in fact, the post-Reagan period, 1990-2020 has been particularly bad in terms of growth rate of national income per capita, which at the end of the day is the best economic measure we have of the increase in productivity and this should reflect innovation, et cetera."
>>>The most productive decades in the US correspond with its highest relative tax rates, between the fifties and the eighties.
The most productive decades in the US also correspond with a period when the US was essentially the only industrial power not absolutely shattered by World War 2. In global economic terms, the post-war period was a huge anomaly, and I would be hesitant to tie too many conclusions/correlative effects to something as singular as domestic tax policy.
This is Piketty, and therefore has a pile of non-US data to point to on this front as well. (Though USians are typically quick to ignore any evidence that isn't from the US.)
"if you look at the long-run evolution, we’ve seen less concentration of wealth. So the top 10 percent of the wealth distribution today would have 60 percent in Europe, 70 percent in the U.S., as compared to 90 percent before World War I in Europe. This did not destroy the economy. If anything, this decline in the share of total wealth going to top 10 percent and the corresponding increase in the share going to the next 40 percent has contributed to a much faster economic growth in the 20th century than in previous centuries.
"I think partly because it allowed more people to participate, to the economy. And also partly because it came also with the rise of education. And this was the true source of productivity in the long run, rather than the enormous level of inequality that we had before World War I. This theoretical discourse that more inequality, more concentration of wealth is always better for economic growth was made, of course, throughout history by people who had large concentration of wealth, certainly in Europe before World War I.
"And this is a discourse that, in the 1980s, Ronald Reagan tried to tell Americans, basically tried to tell them, look we’ve gone too far with the New Deal, with Roosevelt, in terms of progressive taxation or wealth redistribution. We are going to cut top tax rate by two, where they’re going to go down to 28 percent or 30 percent, as compared to the 80 percent, 90 percent top tax rate under Roosevelt. So the promise that was made by Reagan during the 1980s was that cutting top tax rate might lead to more inequality, but will also lead to so much more innovation, more economic growth. And the incomes of average Americans are going to grow much faster than they used to grow.
"Except that this is not what we’ve seen at all. So if you look at the three decades after Reagan, 1990 to 2020, the growth rate of national income per capita in the U.S. was only 1.1 — 1.2 percent as compared to 2 percent, 2.5 percent in the period of 1950 to 1980, or 1950 to 1990, which itself was not particularly exceptional. It was the same — 1910 to 1950, it was about 2 —2.5 percent. 1870 to 1910, around 2 percent. So in fact, the post-Reagan period, 1990-2020 has been particularly bad in terms of growth rate of national income per capita, which at the end of the day is the best economic measure we have of the increase in productivity and this should reflect innovation, et cetera."
https://www.nytimes.com/2022/06/07/opinion/ezra-klein-podcas...