Do tax hikes kill job creation?

[Flaylo]

'Job-Killing' Tax Hikes May Not Be So Lethal - Businessweek

Barack Obama had barely finished announcing his deficit-reduction plan this week before John Boehner, the Republican House Speaker, dismissed the President’s proposed tax increases on wealthy Americans as a blow to “job creators.” That phrase has been coming up a lot lately in Washington. The notion that the rich drive job creation and that taxing upper incomes is a “job killer” is a powerful line and difficult to refute between commercial breaks. But like a lot of political memes, it suffers from one shortcoming: It’s not at all clear that it’s true.

“There’s very limited evidence to support the claim that increased personal income tax rates on higher-income people would reduce hiring,” says Joel Slemrod, who served as senior tax economist for President Ronald Reagan’s Council of Economic Advisers. Cutting taxes on upper incomes may have economic benefits, but it’s not an especially powerful way to create a lot of jobs quickly.

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If politicians are looking to create jobs right away, they’d be better off concentrating their efforts lower down on the income ladder. The poor and middle class are more apt to spend extra money, maybe on groceries or a new refrigerator, helping to spur the economy immediately. The No. 1 reason small business owners say they’re not hiring is poor sales. A Congressional Budget Office report looking at economic multipliers found tax cuts for low- and middle-income families are more than twice as powerful in stimulating immediate demand as tax cuts for the wealthy. “The short-run/long-run is the critical thing,” Viard says. “If the goal is to have more jobs 6 months, 12 months from now, you want to increase aggregate demand. If the goal is to have a high standard of living 10, 20 years from now, you want to increase national savings.”

Even that long run picture is not so clear. Under Bill Clinton, taxes on higher-income families were high compared to now, at 39.6 percent. Yet almost 23 million jobs were added vs. net job growth of 1.1 million during George W. Bush’s lower-tax years. In the 1950s, a Golden Age of growth, the top marginal tax rate was as high as 91 percent. There were many other economic forces at work in each of these periods, making direct comparisons difficult. Still, says Slemrod, now a professor at the University of Michigan, “it disproves the idea tax increases are the kiss of death.”

I like how GOP politicians keep repeating debunked talking points, LMAO, they have it backward and Obama is right, denying the middle class a tax cut would hurt the economy, higher tax rates on the rich would not.