Rubio-Lee would add nearly 50 percent to the business capital stock inside a decade, over and above how much it would have grown absent any change in tax cuts. In other words, if businesses would own two of something under current policy — airplanes, buildings, machines, whatever — they would, on average, go out and buy a third one because of the investment tax cuts in Rubio-Lee.Madness, say other economists, who counter with their own models showing much smaller effects.
But why are we using models at all? We don't need economic models to estimate the effect of tax cuts on the economy, because we have good data showing these relationships going back to World War II, not just for the US but for dozens of other countries. What does that data show?
“Tax rate cuts in the past have not spurred much if any growth,” said William Gale, co-director at the Urban-Brookings Tax Policy Center and a former staff member at the Council of Economic Advisers under George H.W. Bush.And there you have it. Why are we arguing about models when we have the data, and it shows no consistent effect? Why is it “conservative” to rely on ideologically charged predictions about the future instead of the actual record of the past?