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发帖数: 29846 | 1 by Robert Farley
In press conferences on the so-called fiscal cliff, House Speaker John
Boehner greatly exaggerated the negative effect on the economy of raising
taxes on upper-income individuals.
Boehner erred when he said that “the problem with raising tax rates on
the wealthiest Americans is that more than half of them are small-business
owners.” That’s incorrect. Boehner’s spokesman said the speaker simply
misspoke, but Boehner is a repeat offender with this bogus claim.
Boehner repeatedly cited an Ernst & Young analysis to claim that raising
taxes on upper-income earners would “destroy nearly 700,000 jobs in our
country.” But that analysis assumes revenue from the taxes would be used “
to finance a higher level of government spending,” even though Obama would
use the added revenue to reduce the deficit. The analysis also takes an
extremely long view: Only “two-third to three-quarters of the long-run
effect” is expected to occur within a decade.
Boehner said raising taxes on those making over $250,000 “would slow
our economy.” But according to a recently released report by the
nonpartisan Congressional Budget Office, the effect on the economy would be
“relatively small.”
The “fiscal cliff” is shorthand for a $560 billion mix of tax hikes and
deep spending cuts that are scheduled to kick in at the end of 2012. The
Congressional Budget Office warned that absent intervention by federal
legislators, the confluence of tax hikes and spending cuts “will lead to
economic conditions in 2013 that will probably be considered a recession.”
President Barack Obama and congressional Democrats have advocated that the
George W. Bush tax cuts be allowed to expire for those making over $250,000.
In a press conference on Nov. 9, Boehner said he believes a tax hike on the
wealthy would harm an already fragile economy.
Boehner has got a point — some small-business owners will see taxes go up,
and the CBO projects some restraint on economic growth as a result. But he
and other Republicans exaggerate this greatly, even to the point of making
statements that are downright false sometimes.
Half of wealthy people are small-business owners?
In his news conference on Nov. 9, Boehner repeated an incorrect talking
point about the percentage of wealthy Americans who are small-business
owners.
Boehner, Nov. 9: The problem with raising tax rates on wealthy Americans
is that more than half of them are small-business owners. Raising tax rates
will slow down our ability to create the jobs that everyone says they want.
It’s not true that more than half of the people who earn more than $250,000
are small-business owners. Boehner’s spokesman, Michael Steel, said
Boehner misspoke, that he meant to say half of small-business income, not
half of small-business owners. If it’s an honest mistake, it’s one Boehner
has made before.
Steel pointed to a July 14, 2010, report from the Joint Committee on
Taxation that found 53 percent of the $1.3 trillion of business income would
be reported on tax returns in the top two tax brackets that Obama proposes
to raise taxes on. However, the JCT study makes clear that not all of this
income might be considered “small”; that in 2005, “12,862 S corporations
and 6,658 partnerships had receipts on more than $50 million.”
In 2011, the Treasury Department’s Office of Tax Analysis took a more in-
depth look at the issue using a more realistic definition of “small
business” and it shows that more than 90 percent of small-business owners
wouldn’t be affected by Obama’s proposal to raise taxes on individuals
making over $200,000 and couples making over $250,000. Moreover, about 90
percent of those who would be affected by the tax increase are not small-
business owners.
Using the Treasury report’s “narrow” definition of small business — one
with $10 million maximum in income (or deductions) — and defining “owner”
as anyone who gets at least one-fourth of all his or her income from a “
small business,” then:
Only 8 percent of small-business owners have income of $200,000 or more.
So 92 percent of small-business owners wouldn’t be affected by Obama’s
proposal. (Table 14, Small Business Owners, Narrow Definition) They account
for 57 percent of the income of small-business owners, so Boehner would have
been on more solid ground had he said — as his spokesman says he meant to
say — “small-business income” instead of “small-business owner.”
Of the 1,191,000 taxpayers who fall into the top two tax brackets that
would see increases under Obama’s plan, only 133,000 (11 percent) reported
any small-business income at all, and only 105,000 (9 percent) qualify as
small-business owners under the narrow definition. (Table 17)
Furthermore, despite Boehner repeatedly referring to small businesses
and “job creators” interchangeably, the notion that small businesses are
necessarily “job creators” is also a big exaggeration. “Slightly more
than one-fifth of small businesses” qualify as an “employer,” the report
states. (Page 1)
The Ernst & Young Study
In making his case for the Bush tax cuts to be extended for everyone,
Boehner has repeatedly cited a study done by the accounting firm Ernst &
Young.
Boehner, Nov. 7 press conference: The independent accounting firm Ernst
and Young says going over part of the fiscal cliff and raising tax rates on
the top two brackets will cost our economy more than 700,000 jobs.
Boehner, Nov. 9 news conference: On Wednesday I outlined a responsible
path forward to avert the fiscal cliff without raising tax rates. About 24
hours after I spoke, the Congressional Budget Office released a report
showing that the most harmful consequences of the fiscal cliff come from
increasing tax rates. According to Ernst & Young, raising the top rates
would destroy nearly 700,000 jobs in our country.
Boehner, Nov. 10 weekly radio address: Raising those rates on January 1
would, according to the independent firm Ernst & Young, destroy 700,000
American jobs.
Boehner is referring to a study prepared by two economists at Ernst & Young
on behalf of pro-business groups: the Independent Community Bankers of
America, the National Federation of Independent Business, the S Corporation
Association, and the United States Chamber of Commerce — all of which lean
strongly Republican. One of the study’s authors, Robert Carroll, once
worked in the Treasury Department under President George W. Bush.
Boehner accurately cited the figures in the report, but left out some
important caveats.
Ernst & Young, July 2012: This report finds that the increase in the top
tax rates would reduce long-run output by 1.3% when the resulting revenue
is used to finance additional government spending. Employment is found to
fall by 0.5%. In today’s economy, these results would translate into a
reduction of gross domestic product (GDP) of $200 billion and employment by
710,000 jobs.
There’s an important caveat in there that some may miss; the projection
assumes the revenue generated by raising taxes on those making over $250,000
would be “used to finance additional government spending.” The report did
not examine what would happen if the additional revenue were used to reduce
future federal deficits. As we noted when the report was raised during the
vice presidential debate, Moody’s chief economist, Mark Zandi, called that
omission “odd” and said, “It seems to me that is the more relevant
scenario. And my sense is that if they did, the results would be very
different.”
In its analysis of fiscal cliff alternatives, the nonpartisan Congressional
Budget Office assumed that “a significant part of the decrease in taxes (
relative to those under current law) would be saved rather than spent.”
We asked Boehner spokesman Michael Steel about that Ernst & Young report’s
assumption, and he responded by email: “How would additional revenue reduce
government spending? Given that President Obama’s budget includes a
trillion-dollar deficit, isn’t it obvious that new revenue would go to
spending?”
But the Ernst & Young report assumed the revenue would be used for “
additional government spending.” According to the 2013 budget proposed by
Obama, spending would go down. As part of the Budget Control Act agreed to
by both parties, discretionary spending will be reduced by $1 trillion over
10 years. The projected deficit for the 2012 fiscal year, $1.33 trillion, is
expected to drop to $901 billion in FY 2013.
There’s another small-print caveat to the Ernst & Young report, the
definition of “long run.” A footnote at the bottom of the report explains
that “roughly two-third to three-quarters of the long-run effect is reached
within a decade.” In other words, when the report cites the loss of 700,
000 jobs, a quarter to a third of those job losses would happen more than a
decade from now.
Slow the economy?
In addition to costing Americans jobs, Boehner contended in his Nov. 9 press
conference that “we also know that it would slow down our economy.” If it
does, it won’t be by much, according to the Congressional Budget Office.
In a November report looking at the impact of the fiscal cliff and several
alternative scenarios, the CBO concluded that raising taxes just on those
earning above $250,000 would have a “relatively small effect” on the
economy. (Page 2)
According to the report, if instead of allowing the Bush tax cuts to expire,
they were extended for everyone, it would result in a 1.4 percent inflation
-adjusted increase in the GDP (and 1.8 million jobs). Conversely, if the
Bush tax cuts were extended only for those who earn less than $250,000, then
the GDP would rise 1.3 percent (and add 1.6 million jobs). In other words,
as the House Ways and Means Committee Democrats noted in a Nov. 8 press
release, 0.1 percent of GDP and 200,000 jobs are attributable to the upper-
income Bush tax cuts.
– Robert Farley |
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