The Big Question: Would tax breaks for the rich hurt the U.S.?

Dean Baker, co-director of the Center for Economic and Policy Research, said:

There is a great deal of data showing that upper-income people spend a relatively small share of their tax cuts. Therefore, the tax increase will have very little effect on their consumption.

Opponents of repeal have tried to make a loon tune argument that allowing repeal for the richest 2 percent of the population will devastate small businesses. This is proof that they have no serious case, since they wouldn’t make up nonsense if they actually had something serious to say.

First of all, 98 percent of small businesses are not affected at all by the repeal. So we are only talking about a tax increase that will affect 2 percent of small businesses.

Furthermore, most of the small businesses who are affected will only be affected in a trivial way. The tax hit on families with an income between $250,000 and $500,000 (the vast majority of the 2 percent of small businesses that are affected by repeal) will average $700 according to Congressional Joint Tax Committee.

A tax hit of $700 is not going to devastate a well-run business. In fact, in almost no cases will it affect the decision to hire even a single worker. So, the small business story is a joke.

Of course, most of us can remember back to the ’90s when the Clinton-era tax rates were in effect. There was plenty of investment back then — it actually fell in the ’00s when the Bush tax cuts were in effect.

If we had serious reporters in this country they would be writing stories about how the opponents of repeal have no serious case and have to make up ridiculous stories about small businesses being devastated. This is a great news story, but unfortunately the media have chosen to ignore it.

Dick Morris, Pundits Blog contributor, said:

Yes, the wealthy account for 30% of all consumer spending in the country and an even larger percentage of the owners of companies that create jobs. By raising their taxes, we sap the economy and make our unemployment permanently high.

Peter Navarro, professor of economics and public policy at U.C.
Irvine, said:

The “rich” include a lot of small businesses that will invest less and
hire fewer people once taxes rise.  Can we stop this bs Robin Hood
rhetoric please?

Michelle D. Bernard, president and CEO of the Independent Women’s Forum, said:

Higher Tax Rates Will Deter Job Creation

Proponents of higher taxes on “the rich” dismiss the idea that many of those who are hit by the highest income tax bracket are small businesses—and therefore, are key to job creation.  But this isn’t just a political talking point.  As AEI’s Kevin A. Hassett and Alan D. Viard recently explained in The Wall Street Journal:    

“According to IRS data, fully 48% of the net income of sole proprietorships, partnerships, and S corporations reported on tax returns went to households with incomes above $200,000 in 2007.”  It’s very clear, therefore, that small businesses will be affected by the scheduled tax increase.

Having to pay more in taxes means companies (and high-income individuals, for that matter) will have less to spend on other items, from luxury goods to new computer equipment to hiring workers.   In that same Wall Street Journal piece, Hassett and Viard cite a study that estimates that the higher tax rates will reduce gross receipts of the effected businesses by 7 percent.  That means they’ll have less money—and significantly less money in many cases—to spend and use to expand and hire new workers.  Indisputably, higher tax rates on businesses mean fewer new jobs, which is exactly the wrong prescription for this economy.

Justin Raimondo, editorial director of, said:
All taxation — whether it is on the rich, the middle class, or the indigent — hurts the economy, because it transfers wealth from productive private citizens and hands it over to parasitic unproductive government. Government produces nothing — all wealth is created by private individuals.

Johanna Schneider, Executive Director of External Relations at Business Roundtable, said:

We are still at a fragile point in our recovery; new taxes will not help us grow the economy.

We must think about how every policy will impact business and America’s ability to compete in the global market. While Business Roundtable companies are not directly affected by these tax changes, the small businesses that serve as our distributors and suppliers certainly are. 

The taxpayers affected by these rates are highly entrepreneurial, with a significant share of their income earned through ownership of small businesses. American business – small and large together – drives economic growth and job creation. Higher taxes on these small businesses will affect job creation and the overall pace of recovery. 

The best way to reduce the deficit in a sustainable manner while maximizing job creation is by reducing spending — not increasing taxes.


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