Cutting top tax rates doesn’t boost economy, study says

It’s back.

A report showing that cutting top tax rates does not stimulate the economy -- a cornerstone of the tax philosophy of many Republicans -- was reissued this week after being pulled in early November amid complaints from Senate Republicans. An analysis of 65 years of data showed no relationship between cutting upper-income taxes and savings, investment or productivity growth.

“It is reasonable to assume that a tax-rate change limited to a small group of taxpayers at the top of the income distribution would have a negligible effect on economic growth,” the report from the Congressional Research Service, a nonpartisan organization that serves lawmakers and their offices, concluded.

Democratic lawmakers were quick to hold up the finding as evidence that Republican resistance to letting upper-income tax rates rise was unfounded.

“This is a very important report that again drives a stake in the heart of the Republican fiction on this important issue,” Rep. Chris Van Hollen, D-Md., the top Democrat on the House Budget Committee said at a news conference on Thursday.

Van Hollen and several fellow Democratic lawmakers praised CRS for standing by and reissuing its updated finding. The report also concluded that cuts to top tax rates over the past 65 years appear to be connected to the growing concentration of wealth among the richest Americans.

President Obama has long encouraged lawmakers to let upper-income tax cuts expire at the end of the year in order to raise revenue to pay down the nation’s ballooning debt. A combined $500 billion in tax hikes and spending cuts--which comprise the so-called fiscal cliff--are set to take effect at the end of the year if no action is taken to avert them. Economists warn that the impact could throw the economy into recession.

Some Republicans argue that hiking taxes on the wealthy discourages economic activity and that tax cuts actually do more to generate revenue.

"I would argue, and history would prove, that tax cuts actually generate the revenue for economic growth to get you to a balanced budget,” Rep. Steve Scalise, R-La., said at an event hosted by the conservative American Enterprise Institute on Tuesday. Scalise is the incoming head of the Republican Study Committee, a standard-bearer of conservative thought in Congress. “That's really the problem. Should we focus on fixing the problem or just appeasing the president's pound of flesh that he wants to get.”
Stay up-to-date with federal news alerts and analysis — Sign up for GovExec's email newsletters.
FROM OUR SPONSORS
JOIN THE DISCUSSION
Close [ x ] More from GovExec
 
 

Thank you for subscribing to newsletters from GovExec.com.
We think these reports might interest you:

  • Sponsored by G Suite

    Cross-Agency Teamwork, Anytime and Anywhere

    Dan McCrae, director of IT service delivery division, National Oceanic and Atmospheric Administration (NOAA)

    Download
  • Data-Centric Security vs. Database-Level Security

    Database-level encryption had its origins in the 1990s and early 2000s in response to very basic risks which largely revolved around the theft of servers, backup tapes and other physical-layer assets. As noted in Verizon’s 2014, Data Breach Investigations Report (DBIR)1, threats today are far more advanced and dangerous.

    Download
  • Sponsored by One Identity

    One Nation Under Guard: Securing User Identities Across State and Local Government

    In 2016, the government can expect even more sophisticated threats on the horizon, making it all the more imperative that agencies enforce proper identity and access management (IAM) practices. In order to better measure the current state of IAM at the state and local level, Government Business Council (GBC) conducted an in-depth research study of state and local employees.

    Download
  • Sponsored by Aquilent

    The Next Federal Evolution of Cloud

    This GBC report explains the evolution of cloud computing in federal government, and provides an outlook for the future of the cloud in government IT.

    Download
  • Sponsored by LTC Partners, administrators of the Federal Long Term Care Insurance Program

    Approaching the Brink of Federal Retirement

    Approximately 10,000 baby boomers are reaching retirement age per day, and a growing number of federal employees are preparing themselves for the next chapter of their lives. Learn how to tackle the challenges that today's workforce faces in laying the groundwork for a smooth and secure retirement.

    Download
  • Sponsored by Hewlett Packard Enterprise

    Cyber Defense 101: Arming the Next Generation of Government Employees

    Read this issue brief to learn about the sector's most potent challenges in the new cyber landscape and how government organizations are building a robust, threat-aware infrastructure

    Download
  • Sponsored by Aquilent

    GBC Issue Brief: Cultivating Digital Services in the Federal Landscape

    Read this GBC issue brief to learn more about the current state of digital services in the government, and how key players are pushing enhancements towards a user-centric approach.

    Download

When you download a report, your information may be shared with the underwriters of that document.