High-End Tax Hikes Would Have 'Negligible' Impact On Growth, Revised CRS Report Says

WASHINGTON, DC - DECEMBER 01:  House Ways and Means Committee Chairman Sander Levin (D-MI) speaks during a rally against the
WASHINGTON, DC - DECEMBER 01: House Ways and Means Committee Chairman Sander Levin (D-MI) speaks during a rally against the cut off of unemployement benefits at the U.S. Capitol December 1, 2010 in Washington, DC. Two million jobless stand to lose federal unemployment benefits beginning today and millions more in the months to follow if Congress doesn't act to extend the benefits. (Photo by Chip Somodevilla/Getty Images)

WASHINGTON -- A Congressional Research Service report that was reissued Thursday after Republicans complained about it before the elections still finds little evidence that the Bush-era tax cuts spurred growth or that hiking the top rates would have more than a "negligible" impact on the economy.

The CRS study did find, however, that the lower tax rates in place since 2001 have had a strong impact on increasing income inequality in America.

"Analysis of such data conducted for this report suggests the reduction in the top tax rates has had little association with saving, investment, or productivity growth," the study says. "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 study focused on tax rates and economic growth since World War II. Democrats saw it as a key piece of evidence in their argument that tax rates on the top 2 percent of earners should go back up to Clinton-era levels to help deal with growing debt, deficits and the nearing "fiscal cliff." Republicans have balked, arguing that any tax hikes will hurt jobs and the economy.

"What this report demonstrates is at the core of the debate we're having right now," said Maryland Rep. Chris Van Hollen, the top Democrat on the House Budget Committee, adding that it "put a stake in the heart of the Republican argument that small increases in marginal tax rates for wealthy individuals somehow hurt economic growth."

Van Hollen noted that the economy under President Bill Clinton boomed in spite of tax hikes and it slowed under President George W. Bush after the tax cuts.

"What this CRS report does is take away the last little fig leaf that [Republicans] had to justify big tax cuts for very wealthy individuals," Van Hollen said.

"Republicans have simply failed to face up to the reality," said Rep. Sander Levin (D-Mich.), the top Democrat on the House Ways and Means Committee. "I hope that this CRS report will add further impetus to the speaker to sit down with Republicans, because when I've talked to a few of them, I don't think they've had this discussion."

Republicans had complained about the study's methodology and said that it was biased because it used phrases such as the "Bush tax cuts" and "tax cuts for the rich."

Antonia Ferrier, a spokeswoman for Sen. Orrin Hatch (R-Utah), the top Republican on the Senate Finance Committee, said in a statement that the GOP still believes the report has problems, and that it was Democrats who politicized the issue.

"What is disheartening ... is that a simple conversation between congressional staff and CRS about their economic analysis was turned into a political football by Democrats," Ferrier said.

"House Democrats are doing a bizarre victory dance with this report," she added. "Since it concludes that lower statutory tax rates have little to do with economic growth and could increase income inequality, the question to those Democrats is how high do you want to jack up those taxes? Are you suggesting that we could go to pre-Kennedy era tax rates –- 91 percent top marginal tax rate and 52 percent corporate rate -– and it would NOT have an impact? We look forward to seeing that legislation."

While the CRS is the non-partisan research arm of Congress, Ferrier pointed to studies by outside groups that she said support the GOP position.

Democrats, however, offered their ideas on why they thought the GOP quashed the original document.

"Republicans tried to suppress this evidence," Van Hollen said. "They tried to prevent this report from really seeing the light of day because they don't like any evidence that exposes the fiction of their economic theory."

"The CRS report today just provides the final nail in the coffin of a fictional theory," he added.

Michael McAuliff covers Congress and politics for The Huffington Post. Talk to him on Facebook.



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