This week, the National Association of Manufacturers issued a statement against HR 4853 (the Middle Class Tax Relief Act), which extends the Bush tax cuts for all income under $250,000 a year. Instead, they support extending the Bush tax cuts for all income. They state:
Manufacturers strongly support extending the 2001 and 2003 tax rates for all taxpayers. According to the non-partisan Congressional Budget Office, fully extending the 2001 and 2003 tax cuts would add between 600,000 and 1.4 million jobs in 2011 and between 900,000 and 2.7 million jobs in 2012.
There’s just one problem. The CBO job numbers they quote are compared to not extending the tax cuts for anyone, not compared to the jobs created by HR 4835.
In fact, the CBO did estimate the jobs created by the compromise HR 4853, and found that it would create between 500,000 and 1.2 million jobs in 2011. So in the best possible case, extending the Bush tax cuts for all income will create an additional 200,000 jobs. At the same time, this will cost $4 Trillion over the next 10 years, and will cost $61 Billion in 2011.
So lemme see … $61 billion divided by 200,000 jobs means that even in the best case, those jobs will cost $305,000 each. Yow! I can think of far cheaper ways to create jobs. And isn’t it ironic that if you just handed $305,000 to 200,000 people, that would give them enough income to qualify for the higher tax rate.
Not only that, but the Association is cherry picking their data. Note that they only quote the job numbers for 2011 and 2012, because the CBO went on to say that job creation would sharply fall off after 2012 because of the ballooning deficit. According to PolitiFact “CBO found that the economic benefits from a permanent repeal for all taxpayers are higher in the first two years, but that policy comes with troublesome side effects after that.”
Go figure…
UPDATE: As a commenter points out, HR 4853 does give a tax cut to all Americans, rich or poor, but only on income below $250,000 a year. If someone earns $250,001 in a year, they would only pay the higher tax rate on one dollar. And even then the highest tax bracket is only 4% higher, so it would cost you 4 cents in extra tax (compared to keeping the lower tax rate for all income).
5 Comments
“…which extends the Bush tax cuts for everyone except the rich.”
IK, please stop using this phrasing, because it plays into the GOP’s narrative that the rich are being punished. The correct phrasing should be, “…which extends the Bush tax cuts for all but the top tax bracket.” The rich will still get a tax break, it would just be limited to the first $250,000 (or $1,000,000) of their income. I.e., their break just wouldn’t be as much.
Michael, you are totally correct. That is even a pet peeve of mine. I guess the Republicans really do control the narrative (either that, or it is difficult to describe how taxes actually work).
And even your phrasing doesn’t make it clear that everyone gets a tax cut in HR 4853.
IK – I believe your numbers got somewhat twisted…
In fact, the CBO did estimate the jobs created by the compromise HR 4853, and found that it would create between 500,000 and 1.2 million jobs in 2011. So in the best possible case, extending the Bush tax cuts for all income will create an additional 200,000 jobs. At the same time, this will cost $4 Trillion over the next 10 years, and will cost $61 Billion in 2011.
I think what you we’re trying to say was extending tax cuts for all will only produce 200k more in jobs then eliminating the current tax rate for the wealthy. This would save 700 bill over ten years. Not extending any of the current rates would cost 4 trillion over ten years.
A note, this is not a tax cut. It is an extension of the current rate, which has been in effect for the last 8-10 years.
I agree about the cost to produce a job by the gov’t is a true waste of money. IMO it may have been more stimulating if we had combined the TARP and Stimulus (1.5 trill) and just given it to the the taxpayers, minus the evil rich of course and politicians. That could have meant 5,000 for every man, women and child, which might have translated into 20-25 thousand for some families, staved off many foreclosures, paid off some consumer credit allowing them to spend more and resulted in many spending increases. Instead the gov chose to give it to the wealthy TARP (where none has trickled down), and stimulus (which produced no real jobs since the market on its own must produce 150k new jobs per month just to keep pace).
I thought I said that!
PatriotSgt, one third of the Stimulus bill was a tax cut for the middle class. It sounds good to add in the TARP money, except that now that the money has been paid back, the government actually made money on TARP.
My main complaint about TARP was that it was supposed to loosen up credit, and it didn’t do that at all. The banks took the money, didn’t lend much if any of it out, and used the cash to buy up other banks — creating banks that are now even more too big to fail.
Roger that IK, however the $67 or so dollars each month in tax savings had no effect on the economy. Sort of like trying to put out a house fire with a toy water gun. You are absolutely correct on the TARP, not to mention we bailed out some foriegn banks and the IMF with taxpayer $’s. But the problem with the lending was more the tightening of credit rules IMO. For instance, my net worth is ralatively high compared to my self employed small business income. My credit score is excellent. Where the banks were allowed to consider my net worth before as potential income under the new rules they are not. There is no loan I can get, even though I have 5 mortgages on 5 different properties and never missed a payment , have greater then 25-50% in positive equity on each. Suprisingly, I also cannot get a credit card and have been rejected several times. This after they “improved” consumer credit. I wanted to do a small home equity loan to make some improvements and help stimulate the local economy, but could find no lender. Thats what over regulation can do, and I bet there are a ton of other small business in the same situation, ready to grow, can’t get dough.