Congressional Research Service Study Concludes That Tax Cuts For Rich Do Not Increase Growth

Congressional Research Service

 This is a summary of a report on tax policy done by the non-partisan Congressional Research Service.  It was pulled out  of circulation after concerns raised by Republican's about its findings.  The research shows that cutting taxes for those in the top income brackets does not increase savings, investment,  productivity or economic growth. 

Summary

"Income tax rates have been at the center of recent policy debates over taxes. Some policymakers
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. For example, the Senate recently passed the
Middle Class Tax Cut (S. 3412), which would allow the 2001 and 2003 Bush tax cuts to expire
for taxpayers with income over $250,000 ($200,000 for single taxpayers). The Senate recently
considered legislation, the Paying a Fair Share Act of 2012 (S. 2230), that would implement the
“Buffett rule” by raising the tax rate on millionaires.
Other recent budget and deficit reduction proposals would reduce tax rates. The President’s 2010
Fiscal Commission recommended reducing the budget deficit and tax rates by broadening the tax
base—the additional revenues from broadening the tax base would be used for deficit reduction
and tax rate reductions. The plan advocated by House Budget Committee Chairman Paul Ryan
that is embodied in the House Budget Resolution (H.Con.Res. 112), the Path to Prosperity, also
proposes to reduce income tax rates by broadening the tax base. Both plans would broaden the tax
base by reducing or eliminating tax expenditures.
Advocates of lower tax rates argue that reduced rates would increase economic growth, increase
saving and investment, and boost productivity (increase the economic pie). Proponents of higher
tax rates argue that higher tax revenues are necessary for debt reduction, that tax rates on the rich
are too low (i.e., they violate the Buffett rule), and that higher tax rates on the rich would
moderate increasing income inequality (change how the economic pie is distributed). This report
attempts to clarify whether or not there is an association between the tax rates of the highest
income taxpayers and economic growth. Data is analyzed to illustrate the association between the
tax rates of the highest income taxpayers and measures of economic growth. For an overview of
the broader issues of these relationships see CRS Report R42111, Tax Rates and Economic
Growth, by Jane G. Gravelle and Donald J. Marples.
Throughout the late-1940s and 1950s, the top marginal tax rate was typically above 90%; today it
is 35%. Additionally, the top capital gains tax rate was 25% in the 1950s and 1960s, 35% in the
1970s; today it is 15%. The real GDP growth rate averaged 4.2% and real per capita GDP
increased annually by 2.4% in the 1950s. In the 2000s, the average real GDP growth rate was
1.7% and real per capita GDP increased annually by less than 1%. 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% of U.S. families
increased from 4.2% in 1945 to 12.3% by 2007 before falling to 9.2% due to the 2007-2009
recession. 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."

Romney Contradicts Himself Again

Last month the BLS released a report that showed a decline in the unemployment rate.  Romney and his allies quickly responded by by suggesting the BLS data were fudged in order to make Obama's policies look better.  This month the BLS reported a slight increase in the unemployment rate and Romney used the data to argue that the economy was getting worse under Obama.  For Romney and his allies, the numbers are only real when they confirm his campaign slogans. 

The job growth last month was also pretty good, and job growth for the previous two months was revised upwards.  That is a good sign the economy is recovering.  Unfortunately, the Romney campaign has benefited from its campaign lies.  The majority of the public believes that Romney would be better for the economy.  Somehow the believe that returning to the Bush policies of cutting taxes and deregulating the economy would solve our economic problems.

On a more positive note.  The press is coming down hard on Romney's lies about Jeep production going to China because of Obama's bailout.  That is pretty easy to do when the CEO's of Chrysler and GM have willing to call Romney's claims what they are.  Damn lies.

All of The Obama Conspiracy Theories On One Chart

The Internet is full of Obama conspiracy theories.  They show the ingenuity and inventiveness of those who understand the mind of a substantial portion of the population.  They are all represented on one chart.  Actually, I have heard some that are not on the chart.  Many American's cannot accept the fact that he is smarter than they are.  His academic record has been challenged because he has not released his transcripts.  The most prestigious honor that a Harvard law student can receive is to be named the Editor of the Harvard Law Review.  He did not achieve that award by using a teleprompter.

Romney's Ecnonomic Plan Via His Economic Adviser And His Own Pronouncements

Glenn Hubbard is Romney's chef economic adviser.  In one paragraph he describes Romney's plan for restoring economic growth.  Romney description is somewhat different, although he would not disagree with Hubbard.  His version includes the magic of his persona.  The business world will be so glad to see him in office that confidence will be restored and they will rush to hire people and rebuild the economy.  He is the confidence fairy that everyone has been talking about.

America's Global Election

Joe Stiglitz explains why Romney's policies do not sell well in the rest of the world.  They don't see any difference between his policies and those of George Bush.  They lost a lot of respect for American ideals during the Bush administration, and they are not looking forward to an America led by a president that has the same ideology.

The Impact Of Austerity On UK and Eurozone

This is a report on research which estimates the effect of austerity programs in the UK and the eurozone.  The estimates are for the period between 2011 and 2013.  GDP will be down 5% in the UK, 12% in Greece, almost 10% in Portugal, and 6.7% in Spain.  Monetary policy can do little to counter the contraction from fiscal policy because it is at the zero bound.  That is, interest rates cannot be reduced any further.

The study also shows that cutting debt does not increase confidence in the private sector so that spending is encouraged.

Secessionist Movements In Europe Raise Many Questions

Scotland wants to become an independent state; Flanders wants to be independent from Belgium, and Catalonia is going to vote on independence from Spain.  Among other things, this raises a question about their membership in the European Union as independent states.  Spain represents the most difficult problem for the European Union.  It is a very large state and it has a history of conflict with the central government in Madrid.  The crisis in the eurozone has led to reactions against the efforts of preserving the union under stressful economic conditions.