MORE ON TAX CUTS

(h/t Mark Thoma)

I've noted before that cutting taxes on corporations doesn't lower prices and cutting taxes on the top earners doesn't boost GDP.  David Cay Johnston reports on a study of the effects of the latter cuts on individual states also doesn't boost the state's economy:

Which tax cuts stimulate the economy?
By David Cay Johnston
September 12, 2012
REUTERS

Owen M. Zidar, a graduate economics student at the University of California at Berkeley, and a former staff economist on the White House Council of Economic Advisers for President Obama, has taken another crack at it, sifting through the data, using the National Bureau of Economic Research’s tax simulation model. Zidar looked at state level income and economic data.

He reasoned that “if tax cuts for high income earners generate substantial economic activity, then states with a large share of high income taxpayers should grow faster following a tax cut for high income earners.” The data show that tax cuts at the top, though, do not result in faster growth in states with more high-earners.

“Almost all of the stimulative effect of tax cuts,” Zidar found, “results from tax cuts for the bottom 90 percent. A one percent of GDP tax cut for the bottom 90 percent results in 2.7 percentage points of GDP growth over a two-year period. The corresponding estimate for the top 10 percent is 0.13 percentage points and is insignificant statistically.”

You can download Zidar's paper here.

UPDATE: See this post & links for another view.