The Bureau of Labor Statistics today came out with a fresh set of unemployment data showing an economy puttering along at low growth (see analysis here by AEI's Jim Pethokoukis. With unemployment at 7.7 percent, a shrinking labor force, and job growth not keeping pace with what the economy needs, it's time to see which of President Obama's 2013 tax increases will best give a boost to job creation.
Below are your choices. Good luck.
"Which of the following 2013 tax increases supported by President Obama will create the most new jobs?"
_____A. An increase in the tax rate on the majority of small business profits. Under the Obama plan, the tax rate faced by a majority of small employer profits will rise from 35 percent today to 39.6 percent (or higher) in 2013. This is a marginal tax rate increase on one million small and medium-size businesses, the ones that create most of the jobs in that sector of the economy.
_____B. An increase in the capital gains tax from 15 to 23.8 percent as well as an increase in the dividend tax rate from 15 to 43.4 percent. President Obama's plan raises these taxes in two steps. First, the capital gains tax is raised to 20 percent and the top rate dividends tax raised to 39.6 percent in 2013. At the exact same time, Obamacare imposes a new 3.8 percent surtax on investment income for individuals earning as little as $200,000. Combined, this results in a massive increase in these tax rates, to levels far higher than when President Clinton left office. This higher tax wedge will have to be priced into the value of stocks (reducing stock prices), so every American will take a hit in their IRAs and 401(k) plans.
_____C. An increase in death tax rate from 35 to 45 percent and a shrinking of the death tax "standard deduction" from $10 million to $3.5 million. Starting in January 2013, the "death tax" could again become a tax on the middle class. For a married couple, they can currently exclude up to $10 million (plus inflation) from the death tax. Under President Obama’s budget request, that number shrinks to $3.5 million. That may sound like a lot until considering real estate, 401(k) values, IRAs, small business equity, etc. all count toward that $3.5 million. Under the President’s budget request, the rate also rises, from an already-confiscatory 35 percent today to 45 percent in 2013. Family farms and small businesses will have to be sold just to pay the taxman, and workers will be laid off in the process.
_____D. The new Obamacare medical device tax of 2.3 percent on gross receipts. One of the twenty new or higher taxes in Obamacare imposes a 2.3 percent tax on the revenues (not profits) of medical device manufacturers. Industry estimates peg the job losses from this tax at 43,000. Even senator-elect Elizabeth Warren (D-Mass.) supports repealing this tax because of the damage it will do to her home state of Massachusetts.
_____E. None of the above. What, are you crazy? Raising any of these taxes will kill jobs, not create them. Anyone should be able to see that.