Report: Top tax rates not linked to growth

Will the Republicans please, please stop their mantra that raising the tax rates for the wealthy will be bad for the economy. On Nov. 1, The New York Times reported that Senate Republicans applied pressure to the nonpartisan Congressional Research Service in September, successfully persuading it to withdraw a report finding that lowering marginal tax rates for the wealthiest Americans had no effect on economic growth or job creation.

The CRS report, by researcher Thomas Hungerford, concluded:

“The results of the analysis suggest that changes over the past 65 years in the top marginal tax rate and the top capital gains tax rate do not appear correlated with economic growth. The reduction in the top tax rates appears to be uncorrelated with saving, investment, and productivity growth. The top tax rates appear to have little or no relation to the size of the economic pie.

“However, the top tax rate reductions appear to be associated with the increasing concentration of income at the top of the income distribution. As measured by IRS data, the share of income accruing to the top 0.1 percent of U.S. families increased from 4.2 percent in 1945 to 12.3 percent by 2007 before falling to 9.2 percent because of the 2007-09 recession. At the same time, the average tax rate paid by the top 0.1 percent fell from over 50 percent in 1945 to about 25 percent in 2009. Tax policy could have a relation to how the economic pie is sliced – lower top tax rates may be associated with greater income disparities.”

The CRS report can be found at www.docstoc.com/docs/134693051/CRS-Report-Top-Tax-Rates.

Robert Winslow

Durango

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