Figure D

Relationship between effective marginal tax rate on capital income and economic growth, 1954–2006

Real GDP growth Effective marginal tax rate on capital income (1-year lag) Trend line
-2.0% 38.0% 37.4%
-0.9% 48.0%
-0.6% 38.0%
-0.3% 45.0%
-0.2% 31.0%
-0.2% 42.0%
0.2% 45.0%
1.1% 31.0%
1.8% 30.0%
1.9% 33.0%
2.0% 44.0%
2.0% 46.0%
2.3% 42.0%
2.4% 45.0%
2.5% 30.0%
2.5% 30.0%
2.5% 48.0%
2.5% 29.0%
2.6% 30.0%
2.8% 30.0%
3.0% 26.0%
3.1% 37.0%
3.1% 46.0%
3.1% 33.0%
3.3% 42.0%
3.3% 30.0%
3.4% 33.0%
3.4% 23.0%
3.5% 33.0%
3.7% 31.0%
4.0% 31.0%
4.0% 33.0%
4.1% 33.0%
4.1% 30.0%
4.3% 31.0%
4.3% 35.0%
4.4% 31.0%
4.4% 35.0%
4.5% 40.0%
4.7% 30.0%
4.7% 33.0%
5.2% 38.0%
5.2% 44.0%
5.4% 40.0%
5.6% 34.0%
5.6% 38.0%
5.9% 42.0%
6.2% 31.0%
6.3% 29.0%
6.9% 47.0%
6.9% 34.0%
7.0% 58.0% 35.5%
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Note: Each dot shows the real GDP growth rate for a particular year and the effective marginal tax rate on capital income from the previous year. The line describes the relation between the two variables.

Source: Author's analysis of Bureau of Economic Analysis National Income and Product Accounts data (Table 1.1.1) and Gravelle (2006)

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