Obama says higher taxes on the rich won’t choke economic growth. Romney says ensuring lower tax rates for all will rekindle growth and job creation. Both sides cite historical evidence to make their case. Here's how.
Obama's lens on history is bifocal. First, he likes to note that during his first term he cut taxes – putting breaks for businesses and individuals in his stimulus package, and then adding a payroll tax cut for working families. The message: He gets the idea that taxes shouldn't go too high.
Second, he peeks backward to argue that tax cutting isn't always helpful and that raising taxes isn't always harmful. President Clinton raised taxes on high earners, and the 1990s economy did fine. Economic confidence rose in part because tax revenues were helping to diminish federal deficits (and for a time erase them). As for the Bush years, Obama cites falling tax revenues and weak regulation among the things that "got us in the mess in the first place." Romney will repeat the mistake, he warns.
In the Romney view, history shows that low or falling taxes boost economic growth. The 1980s rebound under Ronald Reagan is a case in point. The Bush tax cuts helped to restore job growth after 2003, Republicans argue, and weren't a proximate cause of the later financial crisis or recession. In the 1990s, the economy was strong despite Clinton's tax hikes, not because of them.
Republicans also say Obama's first-term tax cuts were low-quality ones, in terms of their ability to generate job growth. They were temporary, and thus failed to give businesses and consumers a sense of policy certainty upon which to make long-term decisions. (The Obama camp argues that it’s ready to work on the long-term policies, too, but Republicans aren't willing to do a deal that boosts taxes on the rich.)
Independent economists have mixed views. Some research finds that in general, enlarging the size of government tends to slow economic growth. At the same time, one survey this year found relatively few economists favoring a no-new-taxes approach to reducing federal deficits in the US.
For a full list of stories about how Romney and Obama differ on the issues, click here.
