Another study warns of slower economic growth with higher taxes
The Congressional Budget Office (CBO) warned back in May that failing to extend the 2001 and 2003 tax cuts would, in these very tough economic times, lead to yet another recession. Higher taxes would, according to the CBO, “discourage people from working and saving, further reducing output and income.” That would seem to most like a basic understanding of economics. Unfortunately, President Barack Obama is unconcerned and is leaving no one to believe that he is willing to make a deal to keep this from happening.
But another study shows that if taxes aren’t kept at current rates, that it will slow economic growth, taking the economy down a tumultuous path:
A new study released Friday shows that letting any of the Bush-era tax cuts expire will weigh heavily on economic growth and lead to millions of job losses, likely plunging the economy back into recession.
The report by the American Council for Capital Formation (ACCF) shows that if Congress fails to take any action and to address the so-called fiscal cliff, a combination of expiring tax provisions and automatic spending cuts, the economy will lose $855 billion from gross domestic product, more than 1 million jobs next year and up to 3 million in 2014 along with an average of $1 trillion in lost consumer spending.
Economic growth would drop by 2.6, 3.3 and 0.5 percentage points from 2013 through 2015.
The unemployment rate, which stands at 8.2 percent, would increase by 0.4 percentage points in 2013 and 1.5 percentage points each year in 2014 and 2015.
“The prudent course of action would be to extend all those tax reductions that both Republicans and Democrats already agree upon,” said Allen Sinai, chief global economist and president of Decision Economics, who conducted the study.
“Congress and the administration, as soon as possible, should join together before the presidential election and change the current law that triggers all of these tax increases, focusing not on differences such as disagreements on whether to tax the rich but on commonalities,” he said.
Obama has been obsessed with raising taxes on higher income earners, despite the fact that they already carry a substantial tax burden. Mark Perry recently noted that the top 400 taxpayers pay nearly as much income taxes as the bottom 50% of income earners.
Instead of focusing on pro-growth reforms, Obama has tried to push through the so-called “Buffett Rule” gimmick, which at first was about raising revenue. However, when that argument was proven to be laughable — it would raise only $5 billion annually, the White House and Senate Democrats then said it was about “fairness” in the tax code. Even if the Buffett Rule was passed, the Joint Committee on Taxation explained why it wouldn’t work as intended.
The underlying problem here is that President Obama believes that government can make the United States a prosperous nation. Despite the failures of his economic policies, he somehow still believes that. And at this point it looks like he’s willing to trash the economy by sticking to his guns and raising taxes while the system is blinking red.