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Tax Hikes Dampened Economy in the 1990s While Tax Cuts Spurred Growth

Created on September 6, 2011

Tax Hikes Dampened Economy in the 1990s While Tax Cuts Spurred Growth

Tax Hikes Dampened Economy in the 1990s, While Tax Cuts Spurred Growth

In the four years after the 1997 capital gains rate cut, real GDP and real wages had significantly higher annual growth.

In the four years following the 1993 Clinton tax hike, real GDP grew 3.3 percent annually, but real wages fell.

Chart 1 • BG 2601 

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+1.7%

+4.4%

–0.06%

+3.3%

Real Wages

GDP

 

Source: Heritage Foundation calculations based on data from U.S. Bureau of Economic Analysis and U.S. Department of Labor, Bureau of Labor Statistics.