New Ernst and Young report: proposed tax increases will cost 710,000 jobs

Here’s the news from The Hill:

Allowing tax rates for the country’s highest earners to rise, an idea endorsed by top Democrats, would have a dire effect on the economic recovery, according to a new report prepared for business groups that was released Tuesday.

The study from Ernst & Young found that letting tax rates for the wealthiest Americans lapse would sap $200 billion and some 700,000 jobs out of the economy, reduce wages by 1.8 percent and lead to a decrease in investment.

“These results may suggest to policy makers that allowing the top tax rates to increase comes with economic consequences,” Ernst & Young’s Robert Caroll and Gerald Prante wrote in the report for the Independent Community Bankers of America, the National Federation of Independent Business, the S Corporation Association and the U.S. Chamber of Commerce.

“Long-run output can be expected to fall, and, depending on the use of the revenues, living standards, as reflected by workers‟ real after-tax wages, may also be lower.”

Top Republicans, including House GOP leaders and committee chairmen, jumped on the Tuesday report, as they continue to battle with President Obama and Democrats over how to proceed on tax issues and the broader fiscal cliff.

Obama reiterated last week his plan to only extend the Bush-era rates for annual family incomes up to $250,000 for another year, a proposal many congressional Democrats have coalesced behind. Republicans on the Hill want to extend all current rates for a year.

The key findings are here on the House Ways and Means Committee‘s web site:

Lower wages, fewer jobs and less investment

  • Output in the long-run would fall by 1.3 percent, or $200 billion in today’s economy.
  • Employment in the long-run would fall by 0.5 percent, meaning roughly 710,000 fewer jobs in today’s economy.
  • Capital stock and investment in the long-run would fall by 1.4 percent and 2.4 percent, respectively.
  • Real after-tax wages would fall by 1.8 percent, reflecting a decline in workers’ living standards relative to what would have occurred otherwise.

Every state in the U.S. feels the impact of tax hikes

  • The report, which offers a state-by-state look at the impact on economic output and employment, finds that every state is affected negatively by the tax increases contemplated by the Obama Administration.

Ernst & Young is one of the top financial firms in the world. The report is entitled “Long-run macroeconomic impact of increasing tax rates on high-income taxpayers in 2013”.

Even though Obama has increased our debt by nearly 6 trillion in less than four years, that money hasn’t created any jobs because government is not efficient at creating jobs that last. When you take money away from people who create jobs, you lose the jobs.  Wasting money on green energy firms that go bankrupt is a great plan to pay back your campaign fundraisers, but it’s not a good plan to create jobs. Bailing out labor unions with billions of taxpayer dollars so that they can create electric cars that catch fire is not the right way to create jobs, either. That’s what the stimulus was – $800 billion dollars taken out of the hands of businesses and sent directly to Obama’s allies. We need to get the government out of our business if we want job creation.

6 thoughts on “New Ernst and Young report: proposed tax increases will cost 710,000 jobs”

  1. I expect it to be worse than this. You’ve probably seen the paper by Obama’s former economic advisor for hire, Christina Romer. When she’s not in the White House, she knows exactly what effect tax increases will have:

    —————–

    Christina Romer Knows Tax Hikes Will Kill the Recovery

    http://www.forbes.com/sites/charleskadlec/2012/04/23/christina-romer-knows-tax-hikes-will-kill-the-recovery/

    “The behavior of output following these more exogenous changes indicates that tax increases are highly contractionary. The effects are strongly significant, highly robust, and much larger than those obtained using broader measures of tax changes.”

    Wow! That’s about as strong a statement as you will ever read in a paper published in the AER.

    The Romers’ baseline estimate suggests that a tax increase of 1% of GDP (about $160 billion in today’s economy) reduces real GDP by 3% over the next 10 quarters.

    In addition, the Romers used a variety of statistical tests to take into account other factors that could influence economic growth at the time of the tax changes, including government spending, monetary policy, the relative price of oil, and even whether the President was a Democrat or Republican (it doesn’t matter much). A summary of the statistical work estimates that a tax increase of 1% of GDP would lead to a fall in output of 2.2% to 3.6% over the next 10 quarters.

    ——————

    The mistake would be to think that Obama doesn’t know this. Also, note that Obamacare is really a tax increase. If $160 billion reduces GDP by 3% over 2.5 years, what will a tax many times this amount do? It’s almost too painful to think about …

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  2. I’m just wondering …

    If the stimulus was just “$800 billion dollars taken out of the hands of businesses and sent directly to Obama’s allies,” why did so many Republicans vote for it (it passed the House 244–188)? Since they did so apparently believing it was necessary in order to avoid slipping into depression, were they just wrong about that? Or could it be just faintly possible that the $800 billion actually did keep things from being much, much worse?

    Given that the president knows his reelection is closely tied to the performance of the economy, why would he want to allow taxes on the wealthiest to go up if it “would sap $200 billion and some 700,000 jobs out of the economy, reduce wages by 1.8 percent and lead to a decrease in investment.” Well, I guess you could always assume that he’s stupid. Or so committed to socialism that being defeated for a second term is a price he’s willing to pay to crash the economy.

    Just wondering.

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    1. The Democrats controlled the house from early 2007 to early 2011 under Nancy Pelosi and Harry Reid.

      Three Republicans voted for the $800 billion stimulus, all of them RINOs.
      http://www.time.com/time/politics/article/0,8599,1877971,00.html

      The budget deficit was 160 billion when the Republicans had the House and Senate. It shot up to about 600 billion when the Democrats took over in 2007, and well over a trillion in each year when Obama was elected.

      The Stimulus was predicted to reduce unemployment to below 6.5% but instead unemployment shot up over 10%. We are currently down 5 million jobs from what Obama and his “financial advisors” (university professors Lawrence Summers and Christina Romer) promised in 2009:
      https://winteryknight.wordpress.com/2012/06/06/obamanomics-a-closer-look-at-the-economic-achievements-of-barack-obama/

      Note that both his professorial advisors are now gone from the administration.

      Here is some help for you on what stimulus does:
      https://winteryknight.wordpress.com/2012/05/30/cbo-each-job-created-by-stimulus-cost-between-4-1-million-and-540000/

      Those figures are from the Congressional Budget Office.

      People who are pro-abortion and pro-gay-marriage and anti-religious liberty will be happy with Obama in spite of this – and they will defend him. They got what they wanted from Obama on social issues, so to Hell with fiscal issues. Obama has opposed all of George W. Bush’s pro-life (Mexico City) and pro-marriage (DOMA) policies and violated the consciences of Christian organizations by forcing them to cover abortion-causing drugs in their insurance plans. He’s a great President for non-Christians who masquerade as Christians but aren’t the slightest bit Christian in any way shape or form.

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      1. Actually, I am none of the things you accuse me of: not pro-abortion, nor pro-gay-marriage (see http://www.pennlive.com/editorials/index.ssf/2012/07/gay_marriage_issue_splits_blac.html, for which I am being pilloried by pro-gay-marriage advocates), nor pro-Obama. I’m simply a Christian who tries to be fair to both sides, which I don’t see happening a lot. My comments elsewhere point out how wrong the president is in his stance on issues of biblical righteousness. But I try to bring a counter point of view when I think the criticism of him is unfair.

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    2. “Well, I guess you could always assume that he’s stupid. Or so committed to socialism that being defeated for a second term is a price he’s willing to pay to crash the economy.”

      Obama is definitely not stupid.

      I think it’s easy to figure out what he’s doing. His calculation is that his leftist policies will still get him elected. He just needs to promise a certain level of benefits to the interest groups that support him. His socialist policies create government dependency. With more people dependent on government, they will then respond positively to more government support, and negatively if someone wants to reduce spending.

      Almost everything he’s done has been to achieve greater dependency on government. This goes for simple things, like reducing charitable tax deductions, to the largest, Obamacare, where the government will take control of healthcare. For example, reducing charitable deductions will reduce giving, making people rely more on government for support rather than looking to private institutions, churches, etc. for help.

      For Obama, government is the answer, and all that is needed is for enough people to depend on government and then vote for him. Not all of his support comes from those on government support, but if enough of those who are supported do vote for him, along with other die hard liberals, then he may be re-elected.

      We make a mistake to think this is not part of his concerted plan. It is well thought out, pervasive in all his policies, and effective in achieving his philosophical ends.

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