Obama's Tax Plan Consistent with Economic Growth

Some elected officials are making ridiculous statements about President Obama's tax plan. These people are making irresponsible comparisons to Lenin and Marx, and using terms such as "socialist" and "class warfare" when describing the plan. It is important to look beyond these misleading statements and focus on the facts.

President Obama intends to let the Bush tax cuts expire, which means that the top two marginal rates (the rate taxed on the last dollar of earnings) will return to 36% and 39.6% from the current levels of 33% and 35%. Because these rates are at the top of the tax brackets, they will only impact people earning more than approximately $200,000 per year. The marginal rates of 36%/39.6%, which will exist once the Bush tax cuts expire, are the same rates that were in effect in the mid to late 1990's under President Clinton.

The table at the top lists tax rates, government budged deficit and economic growth (as measured by gross domestic product, or GDP) during the Clinton and Bush presidencies. It is worth noting that: 1) Clinton raised the top tax rate dramatically, from 31% under the former president to 39.6%; 2) economic growth was stronger under Clinton, even though the top tax rate was higher; 3) government budget deficits declined every year under Clinton, and turned to surpluses during his last two years.
Economic growth was very strong during the Clinton administration. At the same time, budget deficits were turned into surpluses. President Obama is proposing to return tax rates to the same level as existed during Clinton's presidency. Based on the evidence, the theory that strong economic growth cannot occur under Obama's tax plan is false.