Friday brought yet another grim jobs report. The economy created 431,000 jobs in May according to the report, but 411,000 of them were temporary government jobs working on the Census. All those jobs will disappear when the Census is complete. The jobs report is the latest signal that the stimulus has failed to create jobs and that the economy is still far from full recovery.
With the economy still in a precarious position, this is no time to raise taxes on anyone. Yet that is just what Congress and President Obama plan to do.
Congress is currently working on a bill that will raise taxes by $43 billion.These tax hikes will slow job creation and economic recovery – especially the higher taxes on international businesses. These latest tax hikes come close on the heels of the health care law that raised taxes more than $500 billion. It seems like Washington can never get enough of our hard earned money.
The next tax hike on the docket is allowing the 2001 and 2003 tax relief to expire. Most expect Congress to keep the tax relief in place for families making less than $250,000 a year ($200,000 for singles), but families earning above that mark will likely see their tax rates go up from 35 percent to 39.6 percent. But that’s not all. Tax rates on dividends could go up from 15 percent to 39.6 percent and the rate on capital gains from 15 percent to 20 percent.
Supporters of these tax increases will argue that they won’t hurt the economy because the families paying them can afford to pay more taxes. But that shouldn’t be the way we evaluate tax policy. A better, more telling standard is to ask what effect on the economy the tax hike will have. Using this more informative measure it is clear that raising top income tax rates and the rates on capital gains and dividends will have serious negative consequences for the economy at the worst possible time.
Higher income tax rates and taxes on capital gains and dividends will cause investment to fall which means fewer jobs and lower wages for American workers that aren’t “rich”. This will slow recovery even further. For the millions of unemployed Americans Washington “sticking it to the rich” will be little consolation for their continued lack of employment.
Congress and President Obama have repeated again and again that their first focus is on creating jobs, but the policies they are pursuing will destroy more jobs and keep the economy mired in its long slump. In fact, raising taxes could lead to another recession. If the president and Congress are really concerned with creating jobs they will put off all the tax hikes they are threatening until the economy has returned to a more acceptable unemployment rate.