This week, the U.S. House will vote to prevent the most damaging aspects of Taxmageddon from taking effect on January 1, 2013. Below is a comprehensive resource list of all the economic studies showing how many jobs Taxmageddon will kill, and what Taxmageddon will do to damage economic growth:
- According to the Joint Committee on Taxation, President Obama’s income tax proposal would force 940,000 taxpayers with business income (that is, owners of small- and medium-sized businesses) to pay higher taxes at top marginal rates of 36% or 39.6%.
CBO Analysis: “Under those fiscal conditions, which will occur under current law, growth in real (inflation-adjusted) GDP in calendar year 2013 will be just 0.5 percent, CBO expects—with the economy projected to contract at an annual rate of 1.3 percent in the first half of the year and expand at an annual rate of 2.3 percent in the second half. Given the pattern of past recessions as identified by the National Bureau of Economic Research, such a contraction in output in the first half of 2013 would probably be judged to be a recession.”
- From the same CBO report; extending the tax cuts: “CBO analyzed what would happen if lawmakers changed fiscal policy in late 2012 to remove or offset all of the policies that are scheduled to reduce the federal budget deficit by 5.1 percent of GDP between calendar years 2012 and 2013. In that case, CBO estimates, the growth of real GDP in calendar year 2013 would lie in a broad range around 4.4 percent, well above the 0.5 percent projected for 2013 under current law.”
Ernst and Young
- According to Ernst & Young LLC, the lower after-tax rewards to work resulting from end-of-year tax increases on upper-income individuals will 1) reduce long-run output by 1.3%, or $200 billion, 2) reduce long-run employment by 0.5%, or roughly 710,000 jobs, 3) reduce long-run capital stock and investment by 1.4% and 2.4%, respectively, and 4) reduce real after-tax wages to all workers by 1.8%, which will negatively impact their standard of living.
Ways and Means
- According to the House Committee on Ways & Means, Taxmageddon could quintuple the tax liability of a family of four that makes $50,000 per year — a tax hike of $2,200. Under this scenario, married seniors making $40,000 per year could pay $1,700 in higher taxes, and single mothers earning $36,000 per year could face up to $1,100 in higher taxes. This would constitute a doubling of both cohorts’ tax liabilities.
- From Speaker Boehner, “Roughly 940,000 small businesses will be hit by a big tax hike. According to the National Federation of Independent Business (NFIB), ‘75 percent of small businesses are organized as pass-through entities meaning they pay taxes on their business income at the individual rate.’”
House Majority Leader
- Eric Cantor released a statement citing an Ernst & Young study “showing the President’s small business tax hike will cost the economy more than 700,000 jobs, over 19,000 in Virginia.”
House Majority Whip
- According to Majority Whip Kevin McCarthy, “The White House and Congressional Democrats have focused their energies on the divisive rhetoric of class warfare. Just last week, President Obama introduced a proposal that would raise taxes on hundreds of thousands of small businesses. According to a new report by Ernst and Young, this tax hike is expected to shrink our economy by 1.3% and over 700,000 jobs would be lost.
According to James Pethokoukis at AEI: “If taxes were to go up in January of 2013, the economy might well have notched averaged growth of less than 2% over the same span given how 2012 is shaping up. Growth that weak puts the U.S economy in the recession red zone where it doesn’t take much to spark another downturn. As it is, Citigroup thinks letting just the upper-end Bush tax cuts expire would knock 0.4 percentage points from GDP growth.”
- AEI recently found that if the tax cuts were allowed to expire they “would reduce taxable income, increase unemployment, depress consumption and retard growth.” However if those cuts do not expire, AEI found that "growth in 2013 is projected to be robust, at 4.4 percent.”
“A tsunami of tax hikes is set to hit the American people in 2013 if Congress fails to act. Here are some snapshots of how Taxmageddon affects the country, drawn from the research of The Heritage Foundation’s Center for Data Analysis (CDA):”
- The Nation: $494 billion total tax increase on all Americans
- Families: $4,138 average tax increase
- Baby Boomers: $4,223 average tax increase
- Millennials: $1,099 average tax increase
- Low-Income Workers: $1,207 average tax increase
- Retirees: $857 average increase
- States: $1,929 (WV) to $5,161 (CT) range in average tax hikes per return
- Congressional Districts: $1,236 (NY-16) to $13,951 (NY-14) range in average tax hikes per return.
- Larry Kudlow writes that, “Raising the tax on the upper-two income brackets would slam the 3.5 percent of small-business owners who generate 53 percent of the small-business income, according to the Joint Tax Committee. And that’s where the jobs are. Ernst & Young estimates a job loss of 710,000 if those upper tax brackets are raised. And when you combine all that with scheduled new taxes from Obamacare, you’re looking at substantially higher tax rates than anything Bill Clinton ever had.”
18 Chief Executive Officers
- A letter from 18 CEOs to Secretary Geithner, “The administration’s plan to increase the top tax rate on dividends from 15 percent to 39.6 percent in 2013 will very likely have a seriously disruptive effect on this economic sector, reducing the incentive to pay dividends. Lower dividend yields and higher taxes on dividends would also hurt economic security for taxpayers at every income level.”