hi clo,
for sure, the correlation coefficient isn't 1. indeed, it's a lot less than 1. reason being that growth results from a bundle of circumstances. clinton's tax policies didn't create the world wide web. that was tim berners-lee. but it so happened that the development of the web happened during the clinton era and his tax policies didn't stifle it. but it was the www.clintonera.com growth period, rather than a tax phenomenon.
at the same time, i do think it is likely that growth is stunted when tax rates are very high. why bother to take a risk if you cannot benefit? so for myself, i believe that you can get growth benefits from lowering taxes in some circumstances.
but i also think you cannot get economic benefits from lowering taxes that are already low. in fact, i think the opposite is true. if you damage the government's ability to provide infrastructure and public benefits, you also damage growth.
looking at your chart, it is impossible to argue that bush's tax cuts led to growth. so i think romney's argument in favour of lowering them further is anti-evidential.
but also, i see no particular magic in clinton era tax rates. you could probably run a successful economy with slightly higher tax rates than clinton adopted. or maybe at slightly lower ones.
the thing to avoid is really high and really low taxes.
so in my view the best answer is to find a balance between enterprise incentives and public utilities. and this implies a middle way. even so, there's no correct answer, but the more extreme your answer (at both the high and low end), the wronger it gets.
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