Our previous chart of top marginal tax rates versus GDP growth rates utilized "chained dollars," a measure with which not everyone is familiar. That data was drawn from the BEA's Current-dollar and "real" GDP table. While the chained dollars therein are a measure of real GDP, they're not the only measure. There's a slightly different set of data at the BEA's NIPA Table 1.1.1. Percent Change From Preceding Period in Real Gross Domestic Product.
To satisfy those who wonders whether the result would be different if we use another measure of inflation-adjusted GDP:
|Left scale for top US marginal income tax rates. Right scale for GDP growth in inflation-adjusted "real" dollars. A 10 year moving average for each figure is also included. GDP data from the BEA. Tax rate data from TruthAndPolitics.org|
Regardless of which inflation-adjusted measure we use, the answer is still the same: Overall, the past 80 years show us a thorough lack of clear correlation between the top marginal tax rate and GDP growth. The data's closest hint of a relationship derives from the slightly more robust average GDP growth back when the top rates were higher, but that closest hint isn't close enough to be sure of an ideal rate. The notion that lowering the top tax rates improves the economy just doesn't hold water. Indeed, these 8 most recent decades show us that increasing the top tax would not necessarily have any impact on the economy, let alone slow it at all.
Update 02/07/2011: Replaced original chart with improved version featuring better parity of scales, better visibility of trendlines, and replacement of the poly trend with a linear. The change in scale does suggest an interesting symmetry in the past two or three decades. We'll look at that in more detail later.