Document Type

Article

Publication Date

4-1-2018

Abstract

This study is an inquiry into the causes of growth in nationwide gross domestic product in the United States of America. The primary objective has been to measure the effects of taxation, saving rate and government investment on this important economic indicator. “Taxation” has been broken down into three components; personal income tax, corporate income tax and consumption tax. Personal income tax is separated once again into the highest and lowest brackets to facilitate more incisive analysis of the results. Consumption taxes are decided at the state level which meant that an average national consumption tax had to be calculated for every period in study. An ordinary least squares regression, in keeping with econometric studies of this kind, will be the method employed for exploring the relationships of the exogenous variables to the endogenous. This project covers the thirty year stretch between 1977 and 2007, just before the Great Recession. The data for each of the variables have been arranged as indices with the first quarter of 1977 as the base period in all cases. The anticipated outcome, based on the existing research, is that lower levels of taxation and a lower saving rate, will be positively correlated with GDP growth, and that lower levels of government investment will be negatively correlated with GDP growth.

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