Tuesday, September 14, 2010

Letting the Bush Tax Cuts Expire: The Jobs Impact

The prospects of Democrats’ allowing the Bush tax cuts expire seem to be increasing by the day, as both sides are seeking to use the issue as a campaign issue.  Jamie Dupree covers some of the political brawling in his Washington Insider blog post today:


House GOP Leader John Boehner (R-OH) refined his stance Monday on what should happen with the expiring Bush tax cuts, a day after he opened the door to accepting a deal to raise taxes on the wealthy.

"We should stop all the hikes because that is what's best for the economy," Boehner said on Twitter, as some House Republicans did their best to further smother any talk about Boehner cutting some deal with Democrats.

"Leader Boehner and I agree that we must do everything possible to stop these job killing tax hikes," said Rep. Dave Camp (R-MI), the top Republican on the House Ways and Means Committee.

That came as another Senator said there should be a temporary extension of all the tax cuts - even those for the top tax brackets, as Sen. Joe Lieberman (I-CT) said that in a speech in his home state, making it even more clear that only a partial extension would not have close to 60 votes in the Senate.

Meanwhile, President Obama again slammed that idea, saying the wealthy should not get such special treatment and the White House tried to fan the flames of any GOP differences on taxes.


Dupree, using figures from the Associated Press, shows the average financial impact of letting the tax cuts expire in this table:

 

2011 Income           

Tax Returns

Average Tax Increase

Less than $10,000     

28,681,000

$70

$10,000 to $20,000    

24,383,000

$410

$20,000 to $30,000    

18,523,000

$756

$30,000 to $40,000    

15,679,000

$893

$40,000 to $50,000    

13,001,000

$923

$50,000 to $75,000    

23,972,000

$1,126

$75,000 to $100,000   

15,245,000

$1,837

$100,000 to $200,000  

16,885,000

$3,672

$200,000 to $500,000  

3,757,000

$7,187

$500,000 to $1 million

608,000

$18,092

$1 million and over               

315,000

$101,587

That’s an interesting data set.  The largest number of taxpayers—those making less than $10,000—will have the least impact, averaging about $70.  Those making the most at $1 million and over will have the greatest impact at $101,587.  That’s going to average no worse than about 10% of ones income.  If I’m the owner of a small business—almost all of whom claim their business’ income on their personal taxes—that’s a pretty big chunk of change.  So, what might the impact on jobs be, if the tax cuts are allowed to expire.  Let’s take a look by extending Dupree’s table out and incorporating median family income:

2011 Income           

Tax Returns

Average Tax Increase

Total Tax Increase

Jobs @ $50,000

Less than $10,000     

28,681,000

$70

$2,007,670,000

40,153

$10,000 to $20,000    

24,383,000

$410

$9,997,030,000

199,941

$20,000 to $30,000    

18,523,000

$756

$14,003,388,000

280,068

$30,000 to $40,000    

15,679,000

$893

$14,001,347,000

280,027

$40,000 to $50,000    

13,001,000

$923

$11,999,923,000

239,998

$50,000 to $75,000    

23,972,000

$1,126

$26,992,472,000

539,849

$75,000 to $100,000   

15,245,000

$1,837

$28,005,065,000

560,101

$100,000 to $200,000  

16,885,000

$3,672

$62,001,720,000

1,240,034

$200,000 to $500,000  

3,757,000

$7,187

$27,001,559,000

540,031

$500,000 to $1 million

608,000

$18,092

$10,999,936,000

219,999

$1 million and over         

315,000

$101,587

$31,999,905,000

639,998

Total Impact

$239,010,015,000

4,780,200

My estimate of $50,000 for median family income is a little on the high side.  The real number is a bit smaller (around $47,000), but the $50,000 makes the math easier to understand and it probably underestimates the number of jobs impacted (which means I’m being conservative, not ginning up the numbers to magnify the effect).

Let the Bush tax cuts expire, and the economy will feel the effect equivalent to 4.78 million jobs annually.  The total annual financial impact: $239 billion.  That’s $239 billion sucked out of the hands of American citizens, consumers and small businesses and placed in the coffers of a government that has all the moral and fiscal constraint of Lindsey Lohan.

Between the highest income groups—those making $100,000 or more and most likely to be claiming business income on personal taxes—the impact is the equivalent of 2.64 million jobs, well more than half of the total jobs impact of letting the tax cuts expire. 

Ask yourself—with an economy that is absolutely staggering along and struggling to create a few tens of thousands of new jobs each month, can we really afford a punch of 4.78 million jobs and $239 billion in economic output?

0 comments :