Facts are Stubborn Things: High Income Tax Rates and Job Creation

Throughout the campaign and through the fiscal cliff discussions, Republicans have consistently espoused the idea that modestly raising top marginal rates will destroy job creation. For instance, here is Sen Lindsey Gram from ABC’s “This Week”,

“[T]o avoid becoming Greece, … Republicans should put revenue on the table. We’re this far in debt. We don’t generate enough revenue. Capping deductions will help generate revenue. Raising tax rates will hurt job creation. So I agree with Grover [Norquist], we shouldn’t raise rates. But I think Grover is wrong when it comes to we can’t cap deductions and buy down debt. … I will violate the pledge, long story short, for the good of the country, only if Democrats will do entitlement reform.”

Laura Tyson and I wrote a column in NYTimes Economix showing that this simply isn’t in the data. She follows up with this piece today in project syndicate and summarizes where things stand on the top tax rate job creation issue:

So far, Obama’s Republican opponents are adamant that the cuts be extended for all taxpayers, arguing that increases in top rates would discourage job creation. This claim is not supported by the evidence. Recent research finds no link between tax cuts for top taxpayers and job creation. In contrast, tax cuts for the bottom 95% have a positive and significant effect on job growth.

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About ozidar

Graduate student at UC Berkeley, studying public finance & labor economics. https://sites.google.com/site/omzidar/
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