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CRS Resurrects Report Showing No Correlation Between Low Tax Rates on the Wealthy and Economic Growth

A couple months ago, under pressure from Republicans, the Congressional Research Service, basically the think tank of Congress, took down a study on tax rates for the rich and the economy that rebutted a key GOP argument, that tax cuts at the top spurred economic growth. It didn’t matter that the Congressional Budget Office found almost the same thing, Republicans didn’t want in print a study showing no relationship between tax cuts for the rich and growth. That would ruin their whole program.

Yesterday, the CRS republished the work, and while a bit of the language has changed – Republicans reportedly objected to the phrase “tax cuts for the rich” – the conclusion is exactly the same. These are pretty much all the changes:

But many of the changes reflect the GOP’s criticism of the original report. Republicans were incensed that the original report referred to “tax rates on the rich,” which the CRS has revised to “high-income taxpayers.” The new version of the CRS report is also padded with new citations to research in support of Republicans’ view that tax cuts view economic growth.

In the original report, for instance, the report says that “some have argued that raising tax rates, especially on higher-income taxpayers, to increase tax revenues is part of the solution for long-term debt reduction.” The new report pairs this statement (“On the one hand …) with the contrary view (“On the other hand, others argue that maintaining low tax rates is necessary to foster economic growth”), citing a House bill for extending the Bush tax cuts that had originally just been a footnote.

The revised report also includes a new section called “methods” that details how the researcher, Thomas Hungerford, went about examining the correlation between tax rates and economic growth.

So a little language has changed, and Hungerford shows his methodology. The bottom line is that “The results of the analysis suggest that changes over the past 65 years in the top margin rate and the top capital gains tax rate do not appear correlated with economic growth,” as House Democrats point out. CRS maybe had to look to future budgets, and make nice with Republicans. That in itself is a bit troubling. But the report shows exactly what it showed in September.

Even a majority of rank and file Republicans support the increase to the Bush tax rates above $250,000. They now have some academic strength behind that position.

Photo by Rob Crawley under Creative Commons license.

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David Dayen

David Dayen