Many policymakers cite as fact that cuts in the top income and capital gains tax rates spur much greater economic growth and that increases in those tax rates significantly hurt growth. A new Congressional Research Service (CRS) report suggests, however, that such easy assumptions are highly problematic.

The report found no statistically significant correlation, all the way back to 1945, between the top capital gains or top marginal income tax rates and: (1) economic growth (in real per capita GDP); (2) private saving; (3) investment; or (4) growth in labor productivity.

CRS did, however, find a correlation between reductions in these tax rates and greater income inequality.

That’s not surprising: as tax policy expert Leonard Burman and my colleague Jared Bernstein have noted, there is no clear link between the top capital gains rate and investment or GDP growth. As Burman has explained, “Many other things have changed at the same time as [capital] gains rates and many other factors affect economic growth. But the [evidence] should dispel the silver bullet theory of capital gains taxes. Cutting capital gains taxes will not turbocharge the economy and raising them would not usher in a depression.”

This caution also applies to the CRS report: it’s not airtight statistical proof that cutting capital gains or income tax rates has no effect on growth, savings, investment, or productivity. Other things happening in the economy might have obscured any such effects. But there’s no evidence for some policymakers’ assertion that cutting marginal income tax and capital gains tax rates would have very large, positive effects on the economy.

Indeed, raising tax rates within reasonable bounds on high-income households could help reduce deficits without harming economic growth — and might even help long-term growth by increasing national saving, as we explain here. Furthermore, CBO has concluded that if Congress extends President Bush’s tax cuts from 2001 and 2003 indefinitely without offsetting the costs, the large increases in deficits that would result would likely create a net drag on national saving and economic growth.

As noted, the CRS report finds a statistically significant relationship between cuts in the top tax rates and rising income concentration at the top. As with the relationship between tax rates and economic growth, lots of other factors are at play. But this finding, together with the lack of evidence that those rate cuts spur economic growth, also undermines the argument for top income and capital gains rate cuts.