Bruce Bartlett held senior policy roles in the Reagan and George H.W. Bush administrations and served on the staffs of Representatives Jack Kemp and Ron Paul. He is the author of “The Benefit and the Burden: Tax Reform – Why We Need It and What It Will Take.”

On Sept. 14, the nonpartisan Congressional Research Service published a report, one of hundreds it puts out every year, titled “Taxes and the Economy: An Economic Analysis of Top Tax Rates Since 1945.” Although the C.R.S. reports are not released directly to the public, they tend to leak out within days. The New York Times posted this one on the Economix blog on Sept. 15 because of its provocative conclusions.

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In essence, the report, written by the economist Thomas L. Hungerford, who has a Ph.D. in economics from the University of Michigan, concluded that changes in the top statutory tax rate and the rate on capital gains had no discernible effect on economic growth in the period since 1945. It noted that the top rate was over 90 percent in the 1940s and 1950s, 70 percent in the 1960s and 1970s, 50 percent during most of the 1980s and has been below 40 percent ever since.

These changes were correlated with various measures of saving, investment, productivity and gross domestic product growth. No relationship could be found.



Intuitively, everyone knows this is true. The 1950s are today considered almost an idyllic era, economically, in which most families could prosper with only a single breadwinner. The top tax rate was well above today’s top rate of 35 percent in the 1960s and during Ronald Reagan’s administration, two periods of exceptional growth.

And, as I often note, growth increased after Bill Clinton raised the top rate to 39.6 percent in 1993 from 31 percent, contrary to every Republican’s expectations, and growth has been stagnant since George W. Bush reduced the top rate to 35 percent in 2003, as well as slashing the tax rate on capital gains and dividends to 15 percent.

Republicans assured us that these measures would lead to rapid growth. They did not.

Right-wing think tanks were quick to jump on the Congressional Research Service report. In brief blog posts on Sept. 17, both the Heritage Foundation and the Tax Foundation simply dismissed its conclusions without offering any remotely convincing evidence of error. Their purpose was not to offer a serious critique but rather to send a signal to Republicans in Congress that the study contradicted party dogma.

Republicans believe, as we know from the infamous video of Mitt Romney speaking to supporters or the interview with the financier Edward Conard in the New York Times Magazine in May, that the world is divided between makers and takers. The rich are the makers, and they must be given the maximum incentive to work, save and invest. The takers contribute nothing; the rich carry them on their backs.

Tax cuts for the rich and for corporations are the core Republican idea for how to jump-start growth. That is why Mr. Romney proposes to keep the 15 percent tax rates on dividends and capital gains permanently and drop the top statutory rate to 28 percent, as well as to reduce the corporate tax rate to 25 percent from 35 percent.

Therefore, the Congressional Research Service report was a political threat that Republicans had to quash – and fast, with the election looming. According to an article in The New York Times on Nov. 2, a number of Senate Republican offices complained to the head of the C.R.S. about the report and succeeded in having it taken down from its internal Web site, accessible only by those within Congress.

It is not known precisely what objections were made beyond the insignificant points raised in the Heritage and Tax Foundation blog posts. All C.R.S. reports undergo thorough internal review by experts with advanced degrees in their fields before they are released, and this particular report was also reviewed by an outside expert as well. All the reviewers signed off on the report as consistent with generally accepted statistical techniques and with the published literature.

Among those who have commented on the C.R.S. report publicly is Prof. Alan Auerbach of the University of California, Berkeley, who is among the nation’s leading public finance economists. He told Bloomberg Businessweek that he agreed with the report’s findings.

Further supporting the report’s conclusions is a July 24 paper by the economist Owen M. Zidar, also of the University of California, Berkeley. It concludes, “The empirical relationship between tax cuts for the top 10 percent and job creation is negligible in magnitude, statistically insignificant and much weaker than that of equivalently sized tax cuts for the bottom 90 percent.”

One problem with cutting through the assertions and responses to them about taxes and growth is that a lot depends on where you are starting from and what other policies are being enacted simultaneously. It was much more plausible for Reagan to argue that dropping the top rate to 50 percent from 70 percent would stimulate growth than it was for President Bush to say that a reduction to 35 percent from 39.6 percent would do so.

In Reagan’s case, those affected by the top rate went from keeping 30 cents on their last dollar to keeping 50 cents – a 67 percent increase in their after-tax reward. In Bush’s case, the increase was from 60 cents on the dollar to 65 cents – an 8 percent increase in incentives.

Elsewhere, I have noted that federal purchases increased significantly under Reagan because of his military buildup and that Federal Reserve policy strongly supported growth in the early 1980s. Today, there is enormous pressure to cut spending and the Fed is severely constrained by the fact that its target interest rate is already at zero.

The appropriate response for Republicans critical of the Congressional Research Service report’s findings would have been to convene a conference, at which I am sure the author would have gladly participated, or to get the House Ways and Means Committee, which is under Republican control, to call a hearing.

Getting the report withdrawn smacks of censorship. Andrew Rosenthal, editor of The New York Times’s editorial page, commented, “Congressional Republicans seem to think that the C.R.S. should function like Pravda.” Pravda was, of course, the official organ of the Soviet Communist Party.

The irony is that the Republican effort to quash the report has led to it getting vastly more attention than if they had simply ignored it. Censorship has a funny way of doing that.