WASHINGTON (Reuters) - Democratic lawmakers on Thursday lauded an updated congressional report that suggested there is no conclusive link between higher taxes on the affluent and economic growth, challenging a key tenet of Republican ideology amid the fiscal cliff debate.
The nonpartisan Congressional Research Service pulled a report on the issue from circulation last month, after Republican lawmakers, including Senate Minority Leader Mitch McConnell, complained about its methodology and disputed its conclusion.
The CRS issued a revised report on Wednesday coming to similar conclusions.
Its analysis of tax rates and growth over the past 65 years finds “the reduction in top tax rates has had little association with saving, investment or productivity growth.”
“It is 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,” the report said.
President Barack Obama and fellow Democrats are locked in a battle with U.S. House Speaker John Boehner to avert the so-called fiscal cliff of $600 billion in tax hikes and spending cuts waiting at year’s end.
A key point of dispute is how to treat tax rates on the wealthiest Americans. Democrats want to extend lower rates for all individuals except about the top 3 percent of taxpayers.
Republicans want to renew low tax rates on all income levels, and say raising them will mar economic growth, particularly for small business.
“This puts a stake in the heart of the Republican argument that small increases in the marginal tax rates for wealthy individuals somehow curb economic growth,” said Democratic Representative Chris Van Hollen, a member of the House leadership from Maryland.
A spokeswoman for Senator Orrin Hatch, the top Republican on the tax-writing Senate Finance Committee, applauded the CRS for revising its report, but said it was still reviewing the 22-page document.
“Hats off to CRS for hearing out our concerns and agreeing that the report needed to be modified to reach their standards,” spokeswoman Antonia Ferrier said. “What is disheartening, however, is that a simple conversation between staff and CRS about their economic analysis was turned into a political football by Democrats.”
Editing by Alistair Bell and Stacey Joyce