posted November 03, 2012 11:51 AM            

Non-Partisan Congressional Tax Report Debunks Core Conservative Economic Theory-GOP Suppresses Study

What do you do when the Congressional Research Service, the completely non-partisan arm of the Library of Congress that has been advising Congress—and only Congress—on matters of policy and law for nearly a century, produces a research study that finds absolutely no correlation between the top tax rates and economic growth, thereby destroying a key tenet of conservative economic theory?

If you are a Republican member of the United States Senate, you do everything in your power to suppress that report—particularly when it comes less than two months before a national election where your candidate is selling this very economic theory as the basis for his candidacy.

Initially released on September 14, 2012, the study—authored by Thomas Hungerford who is a specialist in public finance at the C.R.S.—correlated the historical fluctuations of the highest income tax rates and tax rates on capital gains dating back to World War II with the economic growth (or lack of the same) that followed.

The conclusion?

Lowering the tax rates on the wealthy and top earners in America do not appear to have any impact on the nation’s economic growth.

This paragraph from the report says it all—

“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.”

These three sentences do nothing less than blow apart the central tenant of modern conservative economic theory, confirming that lowering tax rates on the wealthy does nothing to grow the economy while doing a great deal to concentrate more wealth in the pockets of those at the very top of the income chain.

Not surprisingly, the results of the study caught the attention of a great many conservatives—so much so that, according to a New York Times piece, Republican’s in the United States Senate successfully pressured the Congressional Research Service to withdraw the report shortly after it was released. The withdrawal came over the objection of the CRS economic team and the author of the study.

The Times further reports that, according to Senate Minority Leader Mitch McConnell’s spokesperson, Senator McConnell—along with additional GOP senators— “raised concerns about the methodology and other flaws,” adding that additional people outside of Congress were also criticizing the study.

The nature of these alleged flaws?

That the report included terms such as “the Bush tax cuts” and references to “tax cuts for the rich.”

Added Antonia Ferrier, spokesperson for the Republican members of the Senate Finance Committee, “There were a lot of problems with the report from a real, legitimate economic analysis perspective. We relayed them to C.R.S. It was a good discussion. We have a good, constructive relationship with them. Then it was pulled.”

While a spokesperson for the C.R.S. refused to comment on the discussions between the Senate Republicans and her agency, she did confirm that the report was no longer in ‘official circulation’. However, the New York Times reports that a source requesting anonymity confirmed that the decision to pull the study was done against the advice of the economics division and that the author, Mr. Hungerford, stood by the report’s findings.

On Thursday, Senate Democrats republished the study following a letter sent to the C.R.S. by the ranking Democratic tax expert in the House, Rep. Sander Levin (D-MI), which reads, in part—

“I was deeply disturbed to hear that Mr. Hungerford’s report was taken down in response to political pressure from Congressional Republicans who had ideological objections to the report’s factual findings and conclusion. It would be completely inappropriate for CRS to censor one of its analysts simply because participants in the political process found his or her conclusion in conflict with their partisan position. I would like your explanation as to why this report was removed from the CRS website, who made that decision and what considerations led to it.”

For almost 100 years, the Congressional Research Service has worked to assist Congress by providing well-researched and accurate data to be utilized in the creation of important public policy. It has done so when Congress was controlled by Democrats and when Congress has been under the control of Republicans. No matter what party was in charge, the C.R.S. has always endeavored to keep politics out of their work in the effort to provide data that would inform and advance our public policy.

Apparently, solid, well researched data no longer matters—at least not when it comes to the Congressional Republicans. (Reminds me of global warming. - AG)

For those of you who believe that lowered tax rates on the largest earners contribute to an improved economy, I strongly recommend that you read the report. You’ll be able to do so by following this link—
www.dpcc.senate.gov/files/documents/CRSTaxesandtheEconomy%20Top%20Rates.pdf

If, after reading the results of the research, you can identify some error in methodology, then carry on with your assumptions regarding economic theory.

However, if—like me—you can spot no such error in the study, you might consider the importance of forming economic policy based on real data rather than political expediency.

Of course, if you still want to root for lower taxes for the wealthiest Americans—knowing that the research clearly shows that it does nothing to grow our economy—then do so with the understanding that the economic health of the nation is not what is driving your philosophy and that pretending otherwise is of no benefit to anyone.

At least that will be a far more honest response than what we are getting from the Congressional Republicans. http://www.forbes.com/sites/rickungar/2012/11/02/non-partisan-congressional-tax-report-debunks-core-conservative-economic-theory-gop-suppresses-study/

posted November 03, 2012 12:53 PM            

Good reading. This is how the income inequality has grown so greatly.

Ian, it also tackles the double taxation issue.

There is no obvious relationship between capital gains taxes and economic growth

The heated rhetoric notwithstanding, there is no obvious relationship between tax rates on capital gains and economic growth. Figure 4 shows top tax rates on long-term capital gains and real economic growth (measured as the percentage change in real GDP) from 1950 to 2011. If low capital gains tax rates catalyzed economic growth, we’d expect to see a negative relationship–high gains rates, low growth, and vice versa–but there is no apparent relationship between the two time series. The correlation is 0.12, the opposite sign from what capital gains tax cut advocates would expect, and not statistically different from zero. Although not shown, I’ve tried lags up to five years and using moving averages, but there is never a larger or statistically significant relationship.
Page 12 (Figure 4 is there)

I also posted this chart on my blog on Forbes.com and offered the data to all comers. A half dozen or so people, including at least one outspoken critic of taxing capital gains, took me up on the offer, but nobody to my knowledge has been able to tease a meaningful relationship between capital gains tax rates and the GDP out of the data.

Does this prove that capital gains taxes are unrelated to economic growth? Of course not. Many other things have changed at the same time as tax rates on capital gains and many other factors affect economic growth. But the graph should dispel the notion that capital gains taxes are a very important factor in the health of the economy. Cutting capital gains taxes will not turbocharge the economy and raising them would not usher in a depression.

posted November 03, 2012 01:02 PM            

Under John F. Kennedy
Under Ronald Reagan
Under George W Bush

And, raising taxes on business, on investors in businesses, corporate taxes and capital gains taxes stifles economic growth, gets employees layed off or not hired, narrows the tax base, reduces family incomes and results in reduced federal revenues. THAT'S WHAT HAPPENS EVERY TIME IT'S DONE.

Under Franklin Roosevelt
Under Jimmy Carter
Under Bill Clinton..until Republicans made him see the light
Under Barack Hussein O'Bomber who talks incessently about raising taxes on the jobs creators of America.

O'Bomber is simply intellectually incapable of learning from the mistakes of others and from the lessons history teaches. So, he's doubled down on his class warefare reelection strategy and promises 4 more years of low or no ecomomic growth, high unemployment, falling family incomes, more Americans on food stamps, more Americans below the poverty level and all the other ills of a failing economy.

posted November 03, 2012 01:16 PM            

quote:

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And, raising taxes on business, on investors in businesses, corporate taxes and capital gains taxes stifles economic growth, gets employees layed off or not hired, narrows the tax base, reduces family incomes and results in reduced federal revenues. THAT'S WHAT HAPPENS EVERY TIME IT'S DONE.

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