How do tax reform plans affect economic growth? And can an economic model that always assumes tax cuts stimulate economic growth and tax increases stifle growth credibly answer this important question? In a word, no.
A new paper by Carl Davis, research director at Institute on Taxation and Economic Policy (Citizens for Tax Justice’s research partner), takes an analytic look at the Tax Foundation TAG (Taxes and Growth) Model and outlines why observers of the organization’s data should be skeptical.
“The TAG model currently views government investments in infrastructure, education and other services as worthless,” Davis wrote. “The model ventures even further into the territory of economic voodoo by depicting tax cuts as a means of raising federal revenues, and tax increases as ineffective at achieving that same goal.”