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| Dark money and politics Who pays for policy Who pays/avoids paying taxes |
Taxes and the Economy CRS report
Excerpt, minor edit, brief comment by
Carolyn Bennett
As we know, income tax rates have been at the center of recent policy
debates over taxes, CRS lays the background for its report. Some policymakers argue that raising tax rates,
especially on higher income taxpayers, to increase tax revenues is part of the
solution for long-term debt reduction.
The Senate 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); and considered legislation, the
Paying a Fair Share Act of 2012 (S. 2230), that would implement the [billionaire Warren] ‘Buffett
rule’ by raising the tax rate on millionaires.
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ower tax rates advocates argue “that reduced rates would
increase economic growth, increase saving and investment, and boost
productivity (increase the economic pie).”
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igher tax rates proponents argue “that higher tax revenues
are necessary for debt reduction: that tax rates on the rich are too low (that
is, they violate the [billionaire Warren] ‘Buffett rule’) and that higher tax rates on the rich
would moderate the increasing income inequality. …
Throughout the late-1940s and
1950s, the top marginal tax rate was typically above 90 percent. Today it is 35
percent.
The September 14, 2012 Congressional Research Service report
“Taxes and the Economy: An Economic Analysis
of the Top Tax Rates Since 1945” attempted to sort out “whether or not there is
an association between the tax rates of the highest income taxpayers and economic
growth.”
The report concluded that the analysis suggests ─
Changes over the past 65 years in
the top marginal tax rate and the top capital gains tax rate do
not appear correlated with economic growth.
The reduction in the top tax rates
appears to be uncorrelated with saving, investment, and productivity growth.
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| White House 1600 Pennsylvania Ave |
The top tax rates appear to have little
or no relation to the size of the economic pie.
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| Capitol Hill Washington |
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he top tax rate reductions,
however, appear to be associated with the increasing concentration of income at the top of the income distribution.
As measured by IRS data, the share
of income accruing to the top 0.1 percent of U.S. families increased from 4.2 percent
in 1945 to 12.3 percent by 2007 before falling to 9.2 percent due to the recession
of 2007-2009.
At the same time, the average tax rate paid by the top 0.1 percent
fell from over 50 percent in 1945 to about 25 percent in 2009. Tax policy
could have a relation to how the economic pie is sliced—lower top tax rates may
be associated with greater income disparities.
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n my opinion, it is impossible to govern effectively for the public good
when politicians pander to narrow interests and for any number of their own
reasons ─ even as they have enormous varieties of impartial sources at their disposal ─ they stand before millions of people and bald-facedly lie.
This is why the entrenched corruption sweeping across all political parties and
partisans in Washington must be swept out of office. From Capitol Hill to the house at 1600
Pennsylvania Avenue, all must be swept clean.
Sources and notes
“Taxes and the Economy: An Economic: Analysis of the Top Tax
Rates Since 1945” by Thomas L. Hungerford, Specialist in Public Finance, September
14, 2012
CRS Report for Congress
Prepared for Members and Committees of Congress
Congressional Research Service, 7-5700, www.crs.gov, R42729
PDF: http://graphics8.nytimes.com/news/business/0915taxesandeconomy.pdf
See also
“The Simple Truth: You Can’t Have Growth and Austerity at
Once” (Imara Jones),
Wednesday, February 13 2013, 10:17 AM EST, http://colorlines.com/archives/2013/02/the_simple_truth_we_wont_face_you_cant_have_growth_and_austerity_at_once.html
Imara Jones is Economic Justice contributor for
Colorlines.com. He holds a master’s degree in economics from the London
School of Economics and a baccalaureate in political science from Columbia University. Jones has worked on international trade policy with the U.S. government and has been an executive
at Viacom. http://colorlines.com/archives/author/imara-jones/
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