President Obama Threatens Veto Unless Taxes Go Up
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Today’s Driving the Day links to the Washington Post reporting that President Obama threatens to veto any bill to fix the “fiscal cliff,” tax increases and spending cuts set to hit the economy in 2013, if taxes don’t go up for high-income earners.
Raising taxes would be an awful idea. A few months back, Caroline Harris, Chief Tax Policy Counsel and Executive Director of Tax Policy for the U.S. Chamber, wrote about how misguided it would be:
The economy is still fighting its way out of a recession. Not one economic school of thought suggests it is a good idea to increase taxes when there is an 8.2 percent jobless rate [now slightly lower at 7.8%]. Christina Romer, President Obama's own former economic adviser, has concluded that "tax increases are highly contractionary." Even Obama himself has said "The last thing you want to do is raise taxes in the middle of a recession."
Most businesses are structured as s-corporations, partnerships, sole proprietorships, and other “pass-through entities.” Business owners pay income on their individual tax return, which makes individual tax rates important to business growth.
How important? Ernst & Young concluded that through a combination of tax hikes and the elimination of certain tax deductions, the top income tax rate would rise to 44.7% and cost 710,000 jobs and $200 billion in economic output.
I know the election is sucking up everyone’s attention, but Robert Samuelson is right. Fixing the fiscal cliff is “the single most important federal policy affecting the economy's near-term prospects.” With businesses preparing for the tax increases and spending cuts headed our way, they agree. But raising taxes would stifle what little growth we have and could throw the economy into a recession.