Bill Gates Pretends High Taxes Don’t Hurt Growth

Recently Bill Gates questioned the supply-side, tax-cut economic theory by bringing up that the American period with the highest GDP growth in recent memory, the 60s, also had one of the highest marginal tax rates in recent memory, at 90% (for most of the decade anyway).

He was careful not to say that the high marginal tax rate actually caused economic growth, but he brought up the correlation to indicate that GDP growth is not necessarily dependent on low taxes and that high tax rates don’t always stifle the economy.

Fair enough. It’s actually the case that the highest marginal income tax rates ever levied occurred during and around World War II, and the 40s witnessed the highest GDP growth in American history. So which was more important to the GDP growth in the 40s: the tax rate or the world war? This is an important question because maybe Gates would like to see more world wars in order to “boost the economy.” I know many people in the Federal Reserve like that idea.

So why didn’t Gates mention the 40s to indicate the correlation between high marginal tax rates and GDP growth? Perhaps because he assumed people would remember World War II happened in the 40s. But for some reason, people don’t remember the 60s as the era of the interminable Vietnam “War.” It’s likely that GDP growth is more connected to (citizen-supported) war than taxes.

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billgates3But one of the major questions I have is: “Why does everyone care so much about GDP growth?” China has had a pretty ridiculous GDP growth for over two decades. But at what cost? Income inequality there is the worst. Most people barely make a living, and conditions for the majority of the population are not ideal by any stretch.

What I would like to see is for the civil government to live within much more meager means and stop tampering so much with our money supply. Most especially, I would like to see an end to corporate welfare, bank bailouts, and all the government spending designed to “stimulate the economy,” all of which stimulation somehow manages to find its way into only a very few well-connected pockets.

In the very best scenario, tax rates and GDP growth are not significantly related to one another. In the worst case, high tax rates stifle development. In other words, the GDP growth in the 40s and 60s could have been even higher. But there are so many contradictory voices on the matter, it’s unlikely we’ll ever find out the truth. There are just too many variables to account for.

But all of that aside, I would like to inform Bill Gates, and all the other rich liberal elites who keep whining about low taxes, that they are perfectly welcome to just go ahead and pay more taxes if they’re so gung-ho about it. Sheesh.



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