If last week was all about politics, maybe this week we can put ideology and partisanship aside and apply a more objective, scientific approach to some of the tough issues we face. What do history and data suggest might be the best course for our nation to follow? Specifically, what is the impact of increasing the top marginal tax rate on investment and job creation?
If the numbers showed that raising the top tax rate injured job creation, I would reconsider my belief that the wealthy should pay more, because job creation is issue No. 1. On the other hand, if the record established that raising the top marginal rate did not in any way injure investment and job creation, then those who have been unalterably opposed should be forced to reconsider their views. Analysis should trump ideology.
And we now have the analysis, a fascinating report just issued by the Congressional Research Service. The CRS is a nonpartisan entity that produces academic-quality research to answer tough policy questions. The bottom line conclusion of the CRS report is this:
The reduction in top tax rates appears to be uncorrelated with saving, investment, and productivity growth. The top tax rates appear to have little or no relation to the size of the economic pie. However, the top tax rate reductions appear to be associated with the increasing concentration of income at the top of the income distribution.
The report notes that tax rates were at the highest when growth was at its peak, and that the reduction in rates has not had any discernible impact on the types of investment that lead to growth. Rather than acknowledge the findings, however, Senate Republicans successfully pressured the CRS to withdraw the report. It is reminiscent of a different era, when news the government didn’t like was simply suppressed.
The important point here is the rigorous conclusion reached by the study: Raising the top income tax rate to 39.6 percent will not have any of the damaging consequences that the Grover Norquists of the world suggest. A week after the political and ideological battle for slightly higher taxes on the wealthy was won, we now have a careful analysis supporting the same course. Facts matter. And in this case, fairness wins.