Thursday, November 01, 2012

Economist Stands By Tax Cut Study After GOP Successfully Demands Its Withdrawal


The author of a Congressional Research Service study, who found no evidence that tax cuts for high income earners lead to economic growth, is standing by his work, after the legislative branch’s nonpartisan research arm withdrew the report under pressure from Republican leaders. And Democratic principals are demanding to know why CRS caved to GOP pressure.
CRS quietly and quickly pulled the six-week old report, despite the wishes of the research arm’s economic team, the New York Times reported Thursday.
“I wasn’t involved in the decision, as a matter of fact I was on vacation when the decision was made, so I can’t really add anything to what was reported in the NY Times,” Thomas Hungerford, the author of the study, told TPM in an email Thursday afternoon. “However, I certainly stand behind my work.”
Rep. Sander Levin (D-MI) — the top tax writing Democrat in the House — wants CRS to answer for its decision.
“I was deeply disturbed to hear that Mr. Hungerford’s report was taken down in response to political pressure from Congressional Republicans who had ideological objections to the report’s factual findings and conclusion,” Levin wrote in a letter (PDF) to CRS Director Mary Mazanec. “It would be 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. I would like your explanation as to why this report was removed from the CRS website, who made that decision and what considerations led to it.”
Senate Minority Leader Mitch McConnell (R-KY) and Senate Finance Committee Ranking Member Orrin Hatch (R-UT) voiced concerns with the study. McConnell’s spokesman Don Stewart told the Times that his boss “raised concerns about the methodology and other flaws” and said CRS “decided, on their own, to pull the study pending further review.” The Times reported that McConnell objected to CRS’ use of the phrases “Bush tax cuts” and “tax cuts for the rich,” noting their political connotations. Stewart didn’t immediately respond to a request to elaborate on the concerns about the study’s methodology.
Hatch’s spokeswoman Antonia Ferrier told the Times, “There were a lot of problems with the report from a real, legitimate economic analysis perspective. We relayed them to C.R.S. It was a good discussion. We have a good, constructive relationship with them. Then it was pulled.” She also didn’t immediately return a request to elaborate.
Senate Democrats republished the report Thursday. One staffer accused Republicans of seeking to “censor” the study because it challenges their party’s economic doctrine.
“This is a completely shocking attempt by the Republicans to censor a nonpartisan analysis because they didn’t like the findings,” a senior Democratic aide told TPM.
The study, which TPM and others reported on at the time, delved into the last 65 years of U.S. tax policy — specifically how marginal rates on high incomes and capital gains taxes impact decision-making. It concluded that reducing effective taxes on the rich does not generate economic growth, but that it does correlate with rising income inequality in the short term.
The report’s conclusions aren’t terribly controversial in mainstream economics.
“We really don’t have any evidence that [personal income tax rates have] any effect on growth,” Alan Auerbach, who runs the Robert D. Burch Center for Tax Policy & Public Finance at the University of California, Berkeley, told Bloomberg when the report first came out. “A lot of the research showing otherwise is based on theoretical calculations.”
“I don’t think there’s a conclusion that there’s no relationship,” Auerbach added, “only that it’s not so big that it comes through.”

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