Top tier tax cuts don't guarantee economic growth, CRS still finds


Despite some changes to its language, a re-issued Congressional Research Service report still says that there is no clear relationship between reducing top level tax rates and economic growth, but that reductions do appear to be associated with increasing the amount of wealth at the top of the income distribution.

The new report (.pdf) released Dec. 12, is an update on the CRS report (.pdf) from Sept. 14 the legislative agency pulled following Senate Republican criticism. 

Its overall message has changed little.

Some of the changes soften the language, such as shifts from "millionaires" and "the rich" to "high-income tax payers."

However, there are also some significant additions that address issues related to the report's main focus, such as its summary now noting that the top 0.1 percent of taxpayers paid 9.6 percent of all income taxes in 1996 and 11.8 percent in 2006.

Despite these and other changes, the report still concludes that changes over the past 65 years in the top marginal and capital gains tax rates "do not appear correlated with economic growth" and that "lower top tax rates may be associated with greater income disparities."

It also notes that a tax increase for just a "small group of taxpayers at the top of the income distribution would have a negligible effect on economic growth."

"Republicans tried to suppress this evidence," said House Budget Committee ranking Democrat Rep. Chris Van Hollen (D.-Md.) at a Dec. 13 press conference.  Van Hollen said the reissued report "put a stake in the heart of the Republican argument that small increases in marginal tax rates for wealthy individuals somehow hurt economic growth."

The revised report now includes a methodology section to clarify how researcher Thomas Hungerford examined economic growth and its relationship to tax rates, and points to other economic research that used similar methods.

The revised version also includes more areas where the report specifically states it did not use "a comprehensive model to examine all the determinants of economic growth."

For more:
- read the updated CRS report (.pdf)
- download the original CRS report (.pdf)

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