In fact, people change their behavior in light of a new tax code, so much so that the entire economy changes shape. As a result, the benefits work out quite differently. Our recent study for the Institute for Policy Innovation found that tax cuts to promote growth would benefit people of all incomes. The figures are an average of data from 1959 to 1995, and are derived from the Commerce Department's respected National Income and Product Accounts. Much more uniformly than static analysis would suggest.
Measurements have a powerful effect on policy and on the economy.
It should be no surprise that our slow-growth path has led to rising concerns over stagnant wages and a widening gap between rich and poor. Reducing income disparity will require pro-growth tax policies. But many of the tax reductions Congress is now looking at are not pro-growth. Tax credits for children and college education have few economic effects. Until policy-makers abandon class warfare rhetoric and take serious account of how taxes affect the economy and how growth affects the distribution of income, it seems wise tax cuts will stay on hold.