National pies and cow pies

The effects of low taxes for the wealthy can be summed up in a few graphs that I extracted from a Congressional Research Service Report by Thomas Hungerford at http://online.wsj.com/public/resources/documents/r42729_0917.pdf

First consider the average tax rates paid by the wealthy over a 65 year period:

Although its not really relevant to the present discussion - notice the interesting crossover occurring from 1990 to 1995.  Prior to 1990 the top 0.01% paid a higher tax rate than the top 0.1%, but that has now reversed so that the uber wealthy (top 30,000 taxpayers) pay even lower rates than the merely wealthy (top 300,000 taxpayers).  There's probably something to be said here about the influence of the oligarchy on public policy.

As the tax rates have dropped, the share of national income going to the wealthy has increased, as shown below:

We see the highest-earning 1/1000 of our population are getting about 10% of today's national income compared to about 4% after WWII.  The top 1/10,000 are getting about 5% of the income, where they used to get only 1%.

When the graphs are put together so the share of national income is compared to the tax rates, we can see there is a clear relationship between tax rates and the proportion of the total income that goes to the wealthy - when tax rates are higher, they get a smaller share of the national income and vice versa:

Unsurprisingly, it's in the interest of the wealthy to have a lower tax rate. I guess we could have gotten here without using numbers, but its nice to have evidence to back up the stuff we know to be true.

Of course, the national income is a zero-sum game, so it's also not surprising that the share of national income going to labor has the opposite trend - rising when tax rates are higher and decreasing when tax rates are lower:

The argument is usually made that such graphs are misleading because they doesn't measure the growth of the national wealth - that is, when the "job creators" take home more money supposedly we all benefit; the rich get a bigger piece of the pie, but the pie grows larger so everyone gets a bigger piece than they had before.  If such arguments are correct, then low tax rates should be related to higher GDP growth rates per pie slice.  This idea is something that can be directly measured...

... and proven false.  See any trend?  

The actual growth of our economy simply isn't related to the top tax rates - no matter how much the supply-siders wish it were.  Low tax rates merely give the wealthy larger slices of the national pie - the idea that they'll bake more is really pie in the sky.

Lowering tax rates only increases the cow pie.