Taxes and the Economy - CRS Report Withdrawn

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The Congressional Research Service (CRS) is a legislative branch agency within the Library of Congress. CRS is known for providing authoritative, objective and nonpartisan analysis.  The CRS published and then withdrew a report titled “Taxes and the Economy: An Economic Analysis of the Top Tax Rates Since 1945.”  This report analyzed the correlation between tax rates and economic growth. The report questioned whether lower tax rates promoted economic growth.  The fact that the report has been withdrawn is attracting more attention than its conclusions would have drawn on their own.

The report was made available to the public at http://www.dpcc.senate.gov/files/documents/CRSTaxesandtheEconomy%20Top%20Rates.pdf.  The report traced top tax rates and GDP growth over the past 65 years.  The report noted that the top marginal tax rate has generally declined since 1945. The report stated that “the reduction in the top tax rates [has] had little association with saving, investment, or productivity growth.” The report further concluded that it would be “reasonable to assume that a tax rate change limited to a small group of taxpayers at the top of the income distribution would have a negligible effect on economic growth.”

Republicans objected to the tone of the report which included phrases such as “tax cuts for the rich.”  Republicans also objected to the methodology used in the report.  Republicans and others argued that the economy is far more complicated than is reflected by the simplistic approach taken in the report, and that the report's author failed to take into account various factors and policies such as the Federal Reserve's actions on interest rates.  In response to the growing criticism, the CRS withdrew the report.

Democrats on the other hand were very concerned about the report’s withdrawal and wrote a letter to the CRS director indicating that they believed it was “completely inappropriate for CRS to censor one of its analysts simply because participants in the political process found his or her conclusion in conflict with their partisan position.”

Hard to say if the report or its withdrawal influenced a significant number of voters.  But the timing of its release and withdrawal were somewhat odd.   In any event, regardless of who wins the election, our elected officials need to put sustained economic growth as priority number one.


AND ONE MORE THING. In an effort to create jobs in Ohio, the legislature enacted a new "InvestOhio" Tax Credit to reward investments in an eligible small business. Under the new law, a non-refundable 10% tax credit is available for any qualifying “cash for equity” investment in a small business up to $1 million per eligible investor ($2 million for spouses filing jointly). An eligible investor is an individual, estate or trust subject to Ohio personal income tax. The Director of Development is authorized to award up to $100 million in tax credits during the current State of Ohio fiscal biennium, which ends on June 30, 2013. If you have any questions about how to apply for the InvestOhio tax credit, please contact me at Jsenney@pselaw.com or 937-223-1130.