Letter: Higher tax rates affect job creation

Mary Black stated in her letter published Nov 8. that raising personal income tax rates “at the top” would affect very few small businesses that pay taxes on business income as personal income. While that is technically true, it misses the point about the effect of higher tax rates on job creation.

According to the latest published (2008) IRS data on Subchapter “S” corporations, only about 300,000 out of 4 million “S” corporations would average enough taxable income to be affected by increasing the top two tax rates. But that small number of “S” corporations pays 70 percent of all wages and salaries.

The averaged wage and salary expense for the 2.9 million “S” corporations with gross incomes of $500,000 or less was $15,000 a year — equal to one and a half minimum-wage workers per business. The averaged payroll expense for the 300,000 businesses that would have been affected by higher taxes was $1.3 million per business, or 35 employees per business at average 2008 earnings (or 140 minimum wage workers).

Her miscalculations don’t stop there. She further states “End the Bush tax cuts for the richest 2 percent and reinvest the $1 trillion in savings.” That would be a neat trick, since the most the federal personal income tax has ever collected (2007) from all taxpayers is $1.1 trillion.

The total collected from the top two brackets for incomes over $200.000 was $325 billion. Had the $686 billion of taxable income at the top tax bracket been taxed at the pre-Bush tax rate of 39.6 percent instead of 35 percent, it could have yielded an additional $31.6 billion. And had the $258 billion of taxable income from the next-highest tax bracket been taxed at 36 percemt instead of 33 percent, it would have yielded an additional $7.8 billion, for an additional total of $39.4 billion. That is about 96 percent short of her trillion-dollar “savings.”

On the other hand, if the pre-Bush tax rates were applied to 2007 taxable income for all tax filers with incomes below $200,000, it could have generated an additional $138 billion, which is over three and half times the amount of “tax cuts for the rich.” So from the standpoint of lessening the impact on job creation and raising more revenue, perhaps it makes sense to have the middle class start paying their fair share again. That is what we were doing under Clinton.

williiam Hall

financial analyst

Baton Rouge

Comments

1) Comment by DMJ - 21/11/2012

Good point, Kensey... Republicans think labor is the fruit of capital, not the other way around. I reject this philosophy. Apparently, most people do as well.

2) Comment by Old Man Kensey - 21/11/2012

And Atilla, I don't expect you to listen to me, so I will offer Teddy Roosevelt as a reference. Google him. He was a fascinating man. Read his speech given August 31, 1910 in support of the inheritance tax to prevent the accumulation of wealth. >> "Labor is prior to, and independent of, capital. Capital is only the fruit of labor, and could never have existed if labor had not first existed. Labor is the superior of capital, and deserves much the higher consideration." >>>>>>>> This from a time when the Republican Party understood economics and represented the whole of our country.

3) Comment by Old Man Kensey - 21/11/2012

More early morning humor, albeit tired humor, from Atilla this morning. Let me ask you Atilla, the Bush tax cuts have been in effect for a decade now-- where are the jobs? Ya see, if you turned off the Fox channel (I still won't call it news), you may actually learn that trickle down doesn't work. There is more economic expansion from a strong, well paid, middle class. Spending is what makes the economy work. Accumulation of wealth at the top undermines the economy.

4) Comment by Attila - 21/11/2012

Twinkie: When was the last time you asked a poor man for a job? Be honest!

5) Comment by DMJ - 21/11/2012

Also, I think Republicans should start differentiating between "small businesses" and businesses that simply don't have but a few employees...like law firms, financial firms, hedge funds, etc. Not the same thing, and they shouldn't be lumped together.

6) Comment by DMJ - 21/11/2012

You gotta hand it to the corporate and finance guys; they're crafting a narrative right now that those on the right seem eager to eat up. It goes something like this: the government makes corporations provide for their employees and this comes out of the dividends....instead of making the investor class take a hit, they start firing employees and/or raising prices... Then, they tell these employees it's Obama's fault. Sure, they could have done the right thing...but why do that when you can make more money, shaft your employees and customers and blame your political opponents in the process? This is everything that's wrong with American capitalism. That being said, I partly agree with part of Mr. Hall's letter- eventually, all tax rates will need to return to Clinton-era levels. We'll never get our debt under control otherwise. But, I think this should wait until unemployment drops another 2 or 3 points. In America, we tend to lower taxes when times are good and raise them when times are bad. We should do the exact opposite.

7) Comment by agagent - 20/11/2012

If higher taxes are the way to go then Illinois and California must be rolling in revenue after their tax increases. Government will take that money from the private sector and they will spend it ever so wisely . . . . And none will be loss to waste, fraud, abuse, corruption, and the cost of bureaucracy. The liberal utopia has arrived.

8) Comment by twinkie1cat - 20/11/2012

So you are saying that middle income people should pay more in taxes. You are not considering that the rich are not damaged by paying higher taxes. They still have plenty left after paying their share, but poor and even middle class people are going to suffer if their paychecks go down by even $50. I am tired of the wealthy being referred to as "job creators". During this recession they have avoided creating jobs, fought programs that would increase employment and, especially in the case of Republican governors, sent faithful state workers to the unemployment lines in droves. And they did this in order to unseat President Obama regardless of its effect on the economy or human suffering. The rich are not job creators. They are job destroyers and job outsourcers. Rich business people accept huge salaries and benefits for doing basically nothing, slave their few employees for low wages and try to influence American politics with their tons of spare money or else hoard it in a tax free country. They are not job creators. And that is why they lost the election.

9) Comment by chem - 20/11/2012

The non-partisan Congressional Research Service did a study recently about taxes and jobs which shows that greater economic growth occurred when taxes were higher. http://www.ctmirror.org/story/17498/nonpartisan-congressional-study-tax-breaks-rich- dont-grow-jobs.

10) Comment by agagent - 20/11/2012

Since we depend more on small businesses for job creation the extra taxes on small businesses would have a greater impact on jobs.