Cutting taxes for the wealthy does not generate faster economic growth, according to a new report. But those cuts may widen the income gap between the rich and the rest, according to a new report.
A study from the Congressional Research Service -- the non-partisan research office for Congress -- shows that "there is little evidence over the past 65 years that tax cuts for the highest earners are associated with savings, investment or productivity growth."
In fact, the study found that Higher tax rates for the Wealthy are statistically associated with Higher levels of Growth.
The finding is likely to fuel to the already bitter political fight over taxing the rich, with President Obama and the Democrats calling for higher taxes on the wealthy to reduce the deficit and fund spending. Mitt Romney and the GOP advocate lower marginal tax rates for top earners, saying they fuel investment and job creation.
The CRS study looked at tax rates and economic growth since 1945. The top tax rate in 1945 was above 90%, and fell to 70% in the 1960s and to a low of 28% in 1986.The top current rate is 35%.
The tax rate for capital gains was 25% in the 1940s and 1950s, then went up to 35% in the 1970s, before coming down to 15% today - the lowest rate in more than 65 years.
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The study said that "as top tax rates are reduced, the share of income accruing to the top of the income distribution increases" and that "these relationships are statistically significant."
In other words, cutting taxes on the rich may not grow the economic pie. But the study found that those cuts can effect "how that economic pie is sliced."
