Nonpartisan congressional study: Tax breaks for rich don’t grow jobs
A congressional research service is challenging the candidates who say that preserving Bush-era tax breaks for the rich are a way to increase jobs.
In fact, the non-partisan Congressional Research Service not only found no evidence that six decades of relief for the wealthy helped the nation’s economy, they also warned that this may have expanded the gap between the rich and the poor.
“The reduction in the top tax rates appears to be uncorrelated with saving, investment and productivity growth,” researchers wrote in their latest report to Congress.
Top federal income tax rates have changed considerably since World War II ended in 1945.
Throughout the late 1940s and 1950s, the top marginal rate typically was above 90 percent, the report states. It now stands at 35 percent.
The top rate on capital gains was 25 percent in the 1950s and 1960s, reached 35 percent in the 1970s, and stands today at 35 percent.
Meanwhile, the growth rate in real gross domestic product — the value of all goods and services produced, adjusted for inflation — averaged 4.2 percent in the 1950s but just 1.7 percent in the 2000s.
“The top tax rates appear to have little or no relation to the size of the economic pie,” the report states, ” … but there may be a relationship to how the economic pie is sliced.”
The nonpartisan service found the share of income accruing to the top 0.1 percent of American families rose from 4.2 percent in 1945 to a peak of 12.3 percent in 2007. And though it fell during the last recession, it remains more than double the post-war level at 9.2 percent.
Income tax rates have been at the center of policy debates in numerous races this fall.
President Obama wants to extend the cuts enacted under President George W. Bush only on the first $250,000 of taxable income, Mitt Romney, the Republican nominee, has said he would extend the Bush cuts for all earners.
Romney also has proposed cutting high-end marginal tax rates and taxes on capital gains, as well as eliminating the estate tax. Each of these would disproportionately benefit the rich.
In Connecticut, Republican U.S. Senate candidate Linda McMahon frequently touts a plan that would cut middle class income taxes, eliminate the capital gains tax for this group and increase the tax deduction on student loans.
But it also would preserve the top Bush income tax rate of 35 percent, keep the capital gains tax for the wealthy at 15 percent, exempt a portion of capital gains tied to the inflationary growth in a stock’s value and eliminate estate and gift taxes.
“We don’t have any comment on the report,” McMahon campaign spokesman Todd Abrajano said Monday.
“Linda McMahon’s plan to give even more tax cuts for millionaires and billionaires like her is simply wrong for middle-class families and the economy here in Connecticut,” Eli Zupnick, a spokesman for the Murphy campaign, said Monday. Murphy’s stand on the Bush tax cuts largely mirrors Obama’s, favoring the cuts for households earning less than $250,000, and opposing them for incomes above that level.
“McMahon can spend millions of dollars trying to kick up mud, but she can’t change the fact that she’s trying to sell Connecticut voters on the same old right-wing Republican trickle-down policies they’ve rejected again and again,” Zupnick added.
“Chris [Murphy] is fighting to create jobs, help people and invest in the middle class here in Connecticut, while Linda McMahon is fighting to give herself and millionaires and billionaires like her another massive tax cut,” he said.
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