Senate Minority Leader Mitch McConnell (R-Ky.) and other Republican senators objected to a report from the Congressional Research Service (CRS), the Economic Policy Institute (EPI) reported, which led to the report being withdrawn by the CRS. The report shows that CRS found no correlation between reductions in top tax rates and economic growth, and little association with savings, investment or productivity.
The evidence does not suggest necessarily a relationship between tax policy with regard to the top tax rates and the size of the economic pie, but there may be a relationship to how the economic pie is sliced.
The report is consistent with a wide range of independent research analyses, which refute the Republican talking point that cutting taxes for the rich leads to job growth and increased government revenue. The one significant and consistent economic change, the research shows, is the gap between rich and poor.
McConnell and his Republican allies complained that the findings of the CRS study were inaccurate, despite the fact that their specific claims challenging the report are easily refuted.
So what are the allegedly substantive objections raised by GOP senators to this report? The Times reports:
“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.”
The second criticism—that the report does not control for policies other than tax rates that could affect growth—is just flat incorrect. Table A-1 from the report is reproduced below, showing the other controls the report uses (and even the specific control noted in the Times piece—the effect of Federal Reserve decisions on interest rates—would be accounted for through the inclusion of the AAA bond rate).
The first criticism—that the report does not allow for effects that happen with long lags—has some merit, as explicit regressions with the longer lags are not displayed. However, in a later story, the report’s author notes that he examined lags of three and five years, and the results did not change. One imagines he’d be happy to append these results to the study if it would allow it to be re-released.