A Progressive Scale of Income Tax and Economic Growth in the USA
Nowadays the implementation of a progressive tax scale in Russia is actively discussed not only in the academic community, but also in senior government circles and business. Progressive taxation is supposed to reduce inequality, to address poverty and to generate additional revenue for the budget, thereby accelerating economic growth. A progressive taxation system has been successfully implemented in many developed countries, including the United States. This article assesses the link between the maximum marginal tax rate and economic growth in the United States. An OLS-regression model with two control variables shows that there is no correlation between these indicators. However, considering certain periods, there is a correlation. The increase in marginal income tax rates in the end of the Great Depression and after World War II led to a large increase in GDP. The example of the United States indicates that with a high level of marginal rates, economic growth can remain stable. This conclusion can be implemented in reforming taxation in Russia, but it is important to understand that this is not the most important and only measure to solve social and economic problems. The transition to a new model requires persistence of all of its components, including changes in institutions and social orientation of development.