Is Obama's tax plan a 'job-killer'?

Conservatives say the tax plan will harm small businesses ? the nation's top job creators. But Obama says only about 3 percent of such firms are affected, while others call the tax-hiring link 'simplistic.'

By Peter Grier,?Staff writer / July 10, 2012

President Obama calls on Congress to pass a temporary, one-year extension of the Bush-era tax cuts for people who make less than $250,000 a year, during a statement in the East Room of the White House in Washington on Monday.

Susan Walsh/AP

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If it became law, would President Obama?s proposal to repeal Bush-era income tax cuts for households making more than $250,000 a year actually reduce US job growth?

Skip to next paragraph Peter Grier

Washington Editor

Peter Grier is The Christian Science Monitor's Washington editor. In this capacity, he helps direct coverage for the paper on most news events in the nation's capital.

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That question arises because it is presumptive GOP nominee Mitt Romney?s central criticism of the plan. Mr. Romney doubled down on this assertion at a campaign event Tuesday in Grand Junction, Colo., saying that higher taxes on ?job creators and small businesses? are the last thing the struggling economy needs.

?That will kill jobs,? Romney said at the event.

On one level this analysis reflects basic Keynesian economics, say some conservative economists. Repealing tax cuts is indistinguishable from raising taxes, whatever the income level of the affected taxpayers. And raising taxes takes money out of the economy that otherwise might get spent on food, clothes, cars, and so forth.

?Perhaps [Obama] is unaware that the economy is struggling and that no reputable economic research supports the idea that raising taxes is good policy,? writes Douglas Holtz-Eakin, former chief economic adviser to Sen. John McCain?s 2008 presidential campaign, in National Review's The Corner blog.

On another level, say conservatives, the proposal to increase taxes on wealthier individuals will disproportionately hurt the largest job creation machine in the US economy ? small businesses. That is because about 4 million small businesses with employees ? sole proprietorships, partnerships, and other so-called ?flow-through? firms ? report their income on individual tax returns, according to US Treasury figures.

Of these, about 1.2 million report income greater than the cutoff for Mr. Obama?s proposed tax increase: $250,000 for couples filing jointly or $200,000 for individuals. This small, relatively successfully group reports about $341 billion in income. That?s 91 percent of the money earned by all flow-through employer businesses, according to Curtis Dubay, senior tax policy analyst at the Heritage Foundation.

Source: http://rss.csmonitor.com/~r/feeds/csm/~3/KeStW7cicL8/Is-Obama-s-tax-plan-a-job-killer

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