Your Opinion: Study examines tax rates and effect on economy
Sunday, December 9, 2012
Congressional Republicans confronting the “fiscal cliff” are in a doubly difficult position. Their absolute commitment to protect the wealth of the top 2 percent in addressing our fiscal problems has created an absolute expectation by that 2 percent of continued protection. On Nov. 29 Republican fundraiser, Brent Bozell, after decades raising money for conservative Republicans, threatened not to raise “one penny more” should Republicans concede additional taxes from their wealthy donors, such as Sheldon Adelson, the Kochs and the millionaires opposing any proposal requiring them to sacrifice anything to resolve our fiscal issues.
The Congressional Research Service, a non-partisan service to the Congress similar to the CBO, compiled a substantively more problematic report addressing the Republican premise that asking more of “job creators” will have disastrous effects on investment and job creation.
The study, “Taxes and the Economy: An Economic Analysis of the Top Tax Rates Since 1945,” submitted on Sept. 14, 2012, was promptly killed by Republican since data in the study essentially undercuts that Republican premise. Discounting facts and data because they do not support a predetermined notion inevitably fosters bad policy.
Rather than characterizations, I cite extensively from the summary: “Throughout the late-1940s and 1950s, the top marginal tax rate was typically above 90 percent; today it is 35 percent. Additionally, the top capital gains tax rate was 25 percent in the 1950s and 1960s, 35 percent in the 1970s; today it is 15 percent. The real GDP growth rate averaged 4.2 percent and real per capita GDP increased annually by 2.4 percent in the 1950s. In the 2000s, the average real GDP growth rate was 1.7 percent and real per capita GDP increased annually by less than 1 percent.
“There is not conclusive evidence, however, to substantiate a clear relationship between the 65-year steady reduction in the top tax rates and economic growth. Analysis of such data suggests the reduction in the top tax rates have had little association with saving, investment or productivity growth. However, the top tax rate reductions appear to be associated with the increasing concentration of income at the top of the income distribution. 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.
“The evidence does not suggest necessarily a relationship between tax policy with regard to the top tax rates and the size of the economic pie, but there may be a relationship to how the economic pie is sliced.”