How Many Rich People Does It Take to Create a Job?

 barack obamajohn boehner

I woke up this morning to the sound of WFYI.  It was a round-table discussion about various topics.  I tuned in as they were discussing the debate over increasing the tax rates for individuals earning over $200,000 a year (and couples who earn over $250,000).  One commentator pointed out that these are not necessarily the “job creators” John Boehner and his Republican co-horts portray them to be.  It made me wonder.

So I got up and surfed the Net until I found this (July 20, 2012) article by Richard Rubin posted on Bloomberg.com  called, appropriately enough, “Top 2% Not Job Creators or Millionaires in Tax Debate“.  Rubin contends that both sides in the debate tell incomplete truths about whether a tax hike on the wealthiest earners would affect small businesses.  Rubin writes –

“Much of the debate in Washington over income tax cuts centers on whether the higher taxes would affect small businesses. Companies structured as S corporations, partnerships or sole proprietorships don’t have to pay the corporate tax of up to 35 percent. Instead, business owners report profits on their individual tax returns, and those are known as pass- through or flow-through businesses.

Each side has its own favorite statistics on the subject, which are accurate and incomplete.

Obama and congressional Democrats like to mention that 97 percent of small businesses wouldn’t be affected by tax increases, because they’re not in the top two tax brackets.

That’s true and misleading, Republicans counter. They note that 53 percent of business income reported on individual income tax returns is earned by taxpayers who would be affected by Obama’s proposal.”

So some business owners, namely those trying to save a tax buck or two by forming an S corporation would see their taxes increased.  But would this lead to an economic downturn and a loss of jobs?  Rubin continues –

“Beyond the debate over who would be affected, lawmakers also disagree as to how households and businesses would respond to higher marginal tax rates. Democrats point to economic growth during the 1990s with higher tax rates, while Republicans say a reduction in after-tax rates of return would lead to slower growth.

The economic evidence is mixed, Bakija said.

‘There would be some reduction of incomes of top earners if we raise their tax rates, but it’s probably going to be modest,’ he said. ‘Anybody who claims to have really convincing evidence that this is going to hurt job creation, there just isn’t such convincing evidence.'”

Of course, Rubin’s is not the only perspective.  For my next post, I’ll search for an alternative viewpoint.  I do think, though, that much of the posturing of both Obama’s camp and Boehner’s is more ideological bullying than practical common sense and I just hope they can each find a more humble path to create solutions that will work for our economy before it’s too late.

(photo of Barack Obama from jamesomalley, some rights reserved)

(photo of John Boehner from Talk Radio News Service, some rights reserved)

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