I seldom post a LTE which didn't get published. The data in this one, however, is stuff others should use. Also, while it is way over USA Today's space guidelines, it's information I hope to get into the mind of some editor or reporter on the issue.
We need to have the information on the past be part of the discussion of dynamic scoring.
Congressional Republicans are pressing for "dynamic scoring" for tax cuts. This means that the cost of a tax cut will be calculated taking into account the greater growth that Paul Ryan's Ouija board tells him will result from the tax cut. (The growth expected from a spending increase will not be considered, although various kinds of spending have a track record of accelerating growth.)
Let us look at the record, though. The marginal tax rate for the top bracket in the period from 1965 to 2011 (I don't have data since then.) looks as follows with transitional years 1987 and 2002 omitted:
1965-1981 top rate, 70%; average growth, 3.26% /year
1982-1986 top rate, 50%; average growth, 3.53% /year
1988-1992 top rate, 28%; average growth, 1.84% /year
1993-1994 top rate, 31%; average growth, 3.15% /year
1993-2001 top rate, 39.6%; average growth, 3.46% /year
2003-2011 top rate, 35%; average growth, 1.74% /year.
These results are all over the map, and the individual years differ even more wildly. The correlation between top-racket tax rate and the rate of growth from 1975 through 2011 is +0.17. This is a very weak correlation, which supports the consensus of most economists that the top-bracket rate has no influence on growth. What correlation there is, however, is positive. That means that if the rate on the highest bracket has any influence on economic growth, then higher marginal rates bring greater growth.
Is the dynamic scoring going to reflect that correlation?
TYPO
1993-2001 top rate, 39.6%; average growth, 3.46% /year
should have been:
1995-2001 top rate, 39.6%; average growth, 3.46% /year
I had the typo in the actual Letter To the Editor, and didn't catch it until I was rewriting it for Joe Klein.