Congressional report finds higher tax rates don't hurt growth, so Republican party has it pulled

"Changes in the top marginal tax rate do not appear correlated with growth."

A new report from the US's Congressional Research Service has been suppressed by Republicans after it concluded that tax rates are uncorrelated with economic growth or saving, investment, and productivity growth – but do affect the extent of income inequality in the nation.

The report concludes:

The top income tax rates have changed considerably since the end of World War II. Throughout the late-1940s and 1950s, the top marginal tax rate was typically above 90%; today it is 35%. Additionally, the top capital gains tax rate was 25% in the 1950s and 1960s, 35% in the 1970s; today it is 15%. The average tax rate faced by the top 0.01% of taxpayers was above 40% until the mid-1980s; today it is below 25%. Tax rates affecting taxpayers at the top of the income distribution are currently at their lowest levels since the end of the second World War.

The results of the analysis suggest that changes over the past 65 years in the top marginal tax rate and the top capital gains tax rate do not appear correlated with economic growth. The reduction in the 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. As measured by IRS data, the share of income accruing to the top 0.1% of U.S. families increased from 4.2% in 1945 to 12.3% by 2007 before falling to 9.2% due to the 2007-2009 recession. At the same time, the average tax rate paid by the top 0.1% fell from over 50% in 1945 to about 25% in 2009. Tax policy could have a relation to how the economic pie is sliced—lower top tax rates may be associated with greater income disparities.

The report is particularly important for its treatment of capital gains tax as well as just income tax. The former is significantly lower than the latter, and has been for all but three years of the US's post-WWII history. As a result, it is a significant avenue for tax avoidance.

The argument for keeping capital gains tax low is that it stimulates investment, by encouraging people to invest rather than spend income. If, as the report concludes, it is in fact unconnected with investment rates, then that method of tax-dodging could be closed without harming the economy much, if at all.

The report, which was written by a neutral government body, was not welcomed by the Republican party, which is opposed to much taxation. The New York Times' Jonathan Weisman writes:

Senate Republican aides said they had protested both the tone of the report and its findings. Aides to Mr. McConnell presented a bill of particulars to the research service that included objections to the use of the term “Bush tax cuts” and the report’s reference to “tax cuts for the rich,” which Republicans contended was politically freighted.

They also protested on economic grounds, saying that the author, Thomas L. Hungerford, was looking for a macroeconomic response to tax cuts within the first year of the policy change without sufficiently taking into account the time lag of economic policies. Further, they complained that his analysis had not taken into account other policies affecting growth, such as the Federal Reserve’s decisions on interest rates.

“There were a lot of problems with the report from a real, legitimate economic analysis perspective,” said Antonia Ferrier, a spokeswoman for the Senate Finance Committee’s Republicans. “We relayed them to C.R.S. It was a good discussion. We have a good, constructive relationship with them. Then it was pulled.”

The Republican congressional leadership. Photograph: Getty Images

Alex Hern is a technology reporter for the Guardian. He was formerly staff writer at the New Statesman. You should follow Alex on Twitter.

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The English left must fall out of love with the SNP

There is a distinction between genuine leftism and empty anti-establishmentarianism.

After a kerfuffle on Twitter the other night, I am all too aware that writing something even mildly questioning of the SNP government is the British equivalent of approaching a lion pride on a kill. Nevertheless, seeing the almost hero-levels of mental gymnastics tweeted by Mhairi Black, in the week of the Hillsborough inquiry whereupon Nicola Sturgeon posed with a copy of The Sun endorsing her re-election, prompted me once more to consider just how spectacular the distance has become between the SNP that stood against Ed Miliband versus the SNP today and in government.

Mhairi tweeted: “So Kezia wants to put up the taxes of Scottish people to subsidise Tory cuts that her party supported in Westminster?”. Confused? So am I.

This follows in a series of SNP revisionism on what austerity is and the excuses the SNP has hidden, not quite so conspicuously, up its sleeve to not act on its new tax powers, so as not to break its bond with Middle Scotland. They insist that Labour’s plans for a penny tax are not progressive, and have framed it in such a way that an anti-austerity plan has now become a subsidy for cuts Labour actually haven’t supported for more than a year now. Just like that, the SNP is a low-tax mimicry of Toryism.

But it isn’t ‘just like that’. The SNP have governed from an economically cautious stance for seven years. For a brief period, they borrowed Ed Miliband’s clothes. But once the Red Wedding had been completed, they returned back to where they started: as successors to New Labour, though that is hardly fair: they are far, far less redistributive.

So why is it, in the 2015 election, and even today, many of us on the left in England still entrust our faith in SNP rhetoric? Still beat the drum for an electoral ‘progressive’ coalition with a party that doesn’t seem very happy to embrace even the concept of higher taxes?

My theory is that the SNP have successfully, indeed more successfully than any party in Britain, adopted the prime hobby of much of the Left: ‘againstism’.

‘Againstism’, clumsy I admit, is to be against everything. This can include a negative framing of being anti-austerity but not pro-anything in its place. But in this instance, it means to be anti-establishment. The latter, the establishment, is what Labour as a party of government always has aspired to be in competing to be the national government in Westminster - which is why elements of the Left will always hate it and will always vote against it. In a way, some of the left is suspicious of governance. This is occasionally healthy, until it prevents real progressivism from ever being elected.

While in government, Labour could be seen as sell-outs, rightly or wrongly, because they became the establishment and had no one but themselves to blame. The SNP are the establishment, in Scotland, but can nevertheless exercise ‘againstism’, even with new tax powers. They always will so long as Westminster exists, and so long as their main motivation is independence. This is why the bogeymans that sustain nationalism are not natural allies of social democracy; to achieve social democracy would be to remove the bogeyman. This means that the Lesser New Labour tradition within which they govern will continue to go unnoticed, nor be doomed to eventual death as New Labour itself suffered, nor be looked back on as an era of neoliberalism. The SNP can just avert attentions back to the Westminster establishment. ‘Againstism’. Paradoxically, the way the SNP have managed to come to exploit this is because of New Labour's devolution. Devolution has created, for the first time, the perfect environment for an establishment in one part of the country to blame the establishment in another. It has allowed for the rise of an incumbent insurgent. The SNP can campaign as insurgents while still being incumbents. It is a spectacular contradiction that they alone can manage.

Insurgency and anti-establishment politics are not, of themselves, a bad thing. We on the Left all dip our toes in it. It is a joy. It is even more fun for us to be successful. Which is why the celebratory mood that surrounded the SNP gains in Scotland, a paradigm shift against one incumbent for another, is, objectively, understandable. But these insurgents are not actually insurgents; they are the illusion of one, and they have had the reigns of power, greater now for the Scotland Bill, for seven years. And they have done little radical with it. The aim of an anti-establishment politics is to replace an establishment with something better. All the SNP have done is inherit an establishment. They are simply in the fortunate position of managing to rhetorically distance itself from it due to the unique nature of devolution.

This is why some of the Left still loves them, despite everything. They can remain ‘againstists’ regardless of their incumbency. They do not have the stench of government as a national Labour government did and inevitable would have. So the English Left still dream.

But now, with this mounting evidence and the SNP’s clumsy revisionism, it is up to the English Left to distinguish between genuine leftism and empty anti-establishmentarianism, and to see the establishment -via governance- as something to define for itself, to reshape as something better, rather than something to be continuously against. This is, after all, what Attlee's government did. The SNP have not defined the establishment, they have continued someone else's. It's up to us to recognise that and fall out of love with the SNP.