What Evidence is There That Tax Cuts Create Jobs?
Leave a commentJuly 20, 2010 by Daniel Stack
Do tax cuts create jobs? Many people accept this as a given. I did some research of the relationship between tax cuts and job creation. Here is what I found, in a handy dandy table. I’ve simplified things somewhat but you can investigate the sources for yourself.
| President | Term | Payroll Expansion | Tax Change | Rate in 1st year | Rate in last year |
| Harry Truman | 1945-1953 | 20.1% | Top Bracket Increased | 88% | 92% |
| Dwight Eisenhower | 1953-1961 | 7% | Slight Decrease of Top Bracket | 92% | 91% |
| John F. Kennedy | 1961-1963 | 6.7% | No Change to Top Bracket | 91% | 91% |
| Lyndon Johnson | 1963-1969 | 20.8% | Large Decrease to Top Bracket | 91% | 70% |
| Richard Nixon | 1969-1974 | 13.6% | No Change to Top Bracket | 70% | 70% |
| Gerald Ford | 1974-1977 | 2.3% | No Change to Top Bracket | 70% | 70% |
| Jimmy Carter | 1977-1981 | 13.1% | No Change to Top Bracket, slight increase to top bracket income threshold | 70% | 70% |
| Ronald Reagan | 1981-1989 | 17.6% | Dramatic decrease in top bracket rate, dramatic decrease in top bracket income threshold | 70% | 28% |
| George H.W. Bush | 1989-1993 | 2.3% | Increase in top bracket rate, top income threshold dropped. | 28% | 31% |
| Bill Clinton | 1993-2001 | 21.1% | Increase in top bracket, threshold increased | 39.6% | 39.6% |
| George W. Bush | 2001-2009 | 2.3% | Decrease in top bracket, threshold increased | 39.1% | 35% |
Sources:
For presidents whose terms ended in January for their last year tax rate I used the tax rate for the year previous. (i.e. except for Nixon and Kennedy).
The Reagan-era (and early GHW Bush) tax rate included a 33% “bubble” before the 28% marginal rate kicked in.
The four greatest periods of job growth on this chart are, starting with the greatest job growth, are Clinton, Johnson, Truman, and Reagan. Clinton and Truman had tax increases, Reagan and Johnson had tax cuts. Based on the data, I’m not seeing a connection between top marginal tax rate and job growth. The Truman administration had, by today’s standards, an incredibly high marginal tax rate. Soldiers returned from World War II, causing many to worry about a return to the Great Depression. Yet jobs nevertheless experienced a large net increase during Truman’s presidency.
