The Congressional Research Service, the non-partisan research office for Congress, has released a report stating what progressives have been saying for years: “Tax cuts for the rich don’t spur growth.”
The analysis of top tax rates (since 1945) shows that not only do top earner tax cuts have zero positive effect on economic stimulus, they directly contribute to a widening income gap between the rich and others. From the report:
“There is little evidence over the past 65 years that tax cuts for the highest earners are associated with savings, investment or productivity growth.”
Further proving the progressive argument, the report finds that higher tax rates for the wealthy lead to higher levels of economic growth. As tax rates for the wealthy continue to be a talking point in the Presidential election, this report further disproves the ability of Mitt Romney’s economic “plan” to stimulate the economy. Rather, his ideas would only help the wealthy coffers.
According to the study, in 1945 the top tax rate was slightly over 90 percent; it dropped to 70 percent in the 1960’s and to a low of 28 percent in 1986, at the height of Reaganomics. Currently, the top tax rate is 35 percent.
To be sure, no one is arguing for a return to a 90 percent tax rate. This study merely explains how ineffective going below the current 35 percent rate would be.
The study includes information on capital gains taxes. From CNBC:
The tax rate for capital gains was 25 percent in the 1940s and 1950s, then went up to 35 percent in the 1970s, before coming down to 15 percent today — the lowest rate in more than 65 years.
The study said that lower marginal rates have a “slight positive effect” on productivity while lower capital gains rates have a “slight negative association” with productivity. But, again, neither effect was considered statistically significant.
The study also validates the Occupy movement’s gripe about income inequality:
There is one part of the economy, however, that is changed by tax cuts for the rich: inequality. The study says that the biggest change in the distribution of U.S. income has been with the top 0.1 percent of earners — not the one percent.
The share of total income going to the top 0.1 percent hovered around 4 percent during the 1950s, 1960s and 1970s, then rose to 12 percent by the mid-2000s. During this period, the average tax rate paid by the 0.1 percent fell from more than 40 percent to below 25 percent.
While President Obama has pledged to return tax rates on those making $200,000 or more to Clinton-era levels, candidate Romney has suggested that making $200,000 to $250,000 annually is “middle income.” Current standards, however, place the middle income amount in the $30,000 to $100,000 range, displaying once again Romney’s razor-sharp ability to be out of touch.
The report specifically calls into question the logic of House Republicans and their crusade to preserve Bush-era tax cuts for those making above $200,000. With the sure-to-be gory Presidential debates on the horizon, this report could be referenced by President Obama since the source will not necessitate a single grain of salt.