Economists appear to be in broad agreement that the possibility of
ending the Bush-era tax levels next year would have about twice the
impact on economic growth as the automatic cuts to government spending
under the sequester.
An informal survey of economists shows that they see increased marginal income tax rates as causing up to 40 percent of the slowdown in economic growth if the United States were to "jump off" the so-called fiscal cliff. In contrast, they attribute about 20 percent of the slowdown to reductions in government spending.
This assessment mostly reflects the amount of money the higher taxes would take out of the economy compared to the lower spending. Returning marginal income tax rates to where they were in the Clinton administration would take a bit more than $200 billion out of the private sector, while the sequester would require a cut of about $100 billion in 2013 government spending.
The reality of these numbers is already putting pressure on Republicans and Democrats — which have both promised to focus on economic growth — to reach some agreement on taxes before the end of this year.
But the numbers may also justify Democratic arguments to keep tax rates higher on upper income earners.
Specifically, the analyses seem to agree that raising taxes on Americans earning less than $250,000 would have a much larger impact on revenue and GDP than raising taxes on people above that income level.
For example, Moody's Analytics Chief Economist Mark Zandi's analysis says raising taxes on lower incomes would stunt GDP by about 1.1 percent, while raising them on upper incomes would only slow GDP by about 0.25 percent.
Read more: http://thehill.com/blogs/floor-action/house/264135-economists-see-tax-hike-as-twice-the-problem-for-growth-than-spending-cuts
An informal survey of economists shows that they see increased marginal income tax rates as causing up to 40 percent of the slowdown in economic growth if the United States were to "jump off" the so-called fiscal cliff. In contrast, they attribute about 20 percent of the slowdown to reductions in government spending.
This assessment mostly reflects the amount of money the higher taxes would take out of the economy compared to the lower spending. Returning marginal income tax rates to where they were in the Clinton administration would take a bit more than $200 billion out of the private sector, while the sequester would require a cut of about $100 billion in 2013 government spending.
The reality of these numbers is already putting pressure on Republicans and Democrats — which have both promised to focus on economic growth — to reach some agreement on taxes before the end of this year.
But the numbers may also justify Democratic arguments to keep tax rates higher on upper income earners.
Specifically, the analyses seem to agree that raising taxes on Americans earning less than $250,000 would have a much larger impact on revenue and GDP than raising taxes on people above that income level.
For example, Moody's Analytics Chief Economist Mark Zandi's analysis says raising taxes on lower incomes would stunt GDP by about 1.1 percent, while raising them on upper incomes would only slow GDP by about 0.25 percent.
Read more: http://thehill.com/blogs/floor-action/house/264135-economists-see-tax-hike-as-twice-the-problem-for-growth-than-spending-cuts
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