posted 08-07-2012 03:40 PM                  

Study by Ernst & Young concludes that raising taxes on high-income Americans would reduce hiring by businesses.

Kent HooverWashington Bureau ChiefEmail | Twitter
A new study by Ernst & Young concludes that increasing taxes on higher-income Americans will hurt economic growth and lead to 710,000 fewer jobs being created.

The study was commissioned by four business groups that are opposed to this tax increase, which will go into effect Jan. 1 under current law. Those groups include the National Federation of Independent Business, the U.S. Chamber of Commerce, Independent Community Bankers of America and the S Corporation Association.

This study should give these groups more ammunition in their fight to ward off this tax hike. They have an uphill battle as far as public opinion is concerned: A new Pew Research Center poll found that 44 percent of Americans think raising taxes on households with more than $250,000 in income would help the economy, while only 22 percent said it would hurt the economy.

About 900,000 business owners are in the top two income tax brackets, the study found. Tax rates for these brackets are scheduled to increase next year from 33 percent to 36 percent, and from 35 percent to 39.6 percent, respectively. But these taxpayers face other tax increases as well: higher tax rates on capital gains and dividends, an increase in the 2.9 percent Medicare tax to 3.8 percent for high-income taxpayers, a new 3.8 percent tax on investment income; and the reinstatement of limits on itemized deductions for wealthy Americans.

The combination of these tax hikes would increase the top individual income tax rate on business income from 35 percent to 44.7 percent next year, the study found.

Most small businesses are flow-through entities, where profits are taxed at the individual owner. The study found that taxpayers in the top two brackets earn more than $576 billion in flow-through business income, through S corporations, partnerships, limited liability companies and sole proprietorships.

Subjecting this business income to higher taxes is a bad idea if we want to encourage economic growth, business groups argue.

”Americans would see fewer jobs and lower wages,” said Brian Reardon, executive director of the S Corporation Association.

Research shows a correlation between tax rates and hiring, said Robert Carroll of Ernst & Young, co-author of the study.

Senate Democrats, however, are playing hardball on taxes, saying they won’t agree to extend lower tax rates for high-income Americans even if it that refusal means taxes will go up for everyone else as well.

President Barack Obama contends that 97 percent of small businesses would be spared higher taxes if Congress does what he wants and extends lower tax rates for households making under $250,000.

But Denny Dennis, a senior research fellow at the NFIB Research Foundation, contends the president’s figure includes part-time businesses and other marginal small businesses. He estimates that 15 percent of small businesses that actually employ people would be hit with higher taxes if the top two tax rates are increased.

posted 08-07-2012 03:41 PM                  

By Olivier Knox

July 17, 2012

Republican House Speaker John Boehner hammered President Barack Obama on Tuesday after accounting firm Ernst and Young released a study showing that his proposed tax hikes on the wealthy could cost the already sputtering economy more than 700,000 jobs.

"Our economy is still struggling under President Obama's policies, and his massive tax hike will only make things tougher," Boehner said in a statement. "It's one of the worst possible ideas at one of the worst possible times for families and small businesses."

Obama has been campaigning on calls to extend the Bush-era tax cuts on income up to $250,000 but let them expire above that level. He and fellow Democrats have accused Republicans of holding middle-class tax relief hostage to help the very rich (in fact, the wealthy would see the benefits on their first $250,000 of income). Recent polls have suggested that the public broadly supports the president in principle, though Republicans have noted that his proposal does not yet exist as legislation, and Democrats are expected to water down some of the president's recommended changes.

The Ernst and Young study looked at the impact of seeing the top marginal tax rates rise—but also studied the effects of a range of other proposals included in the president's budget and broader tax plans:

This report examines four sets of provisions that would increase the top tax rates:

· The increase in the top two tax rates from 33 to 36 percent and from 35 to 39.6 percent.

· The reinstatement of the limitation on itemized deductions for high-income taxpayers (the "Pease" provision).

· The taxation of dividends as ordinary income and at a top income tax rate of 39.6 percent and increase in the top tax rate applied to capital gains to 20 percent.

· The increase in the 2.9 percent Medicare tax to 3.8 percent for high-income taxpayers and the application of the new 3.8 percent tax on investment income including flow-through business income, interest, dividends and capital gains.

Here is what the accounting firm concluded would happen:

· Output in the long run would fall by 1.3 percent, or $200 billion, in today's economy.

· Employment in the long-run would fall by 0.5 percent, or roughly 710,000 fewer jobs, in today's ?economy.

· Capital stock and investment in the long run would fall by 1.4 percent and 2.4 percent, respectively.

· Real after-tax wages would fall by 1.8 percent, reflecting a decline in workers' living standards ?relative to what would have occurred otherwise.

Ernst and Young prepared the report on behalf of several pro-business groups, including the Independent Community Bankers of America, the National Federation of Independent Business, the S Corporation Association and the United States Chamber of Commerce.

"This report shows the president's small business tax hike threatens hundreds of thousands of jobs, and will lead to even less economic growth, less investment and lower wages for American workers," Boehner said.

The speaker underlined that the Republican-led House will vote this month to extend all of the Bush-era tax cuts and set the stage for a broader debate on overhauling the tax code.

posted 08-07-2012 03:43 PM                  

From Wikipedia, the free encyclopedia

Ernst & Young (EY) is one of the largest professional service firms in the world and one of the "Big Four" accounting firms, along with Deloitte, KPMG and PricewaterhouseCoopers (PwC).

Ernst & Young is a global organization of member firms in more than 140 countries, headquartered in London, UK.[4] It was ranked by Forbes magazine as the 8th largest private company in the United States in 2011.[5]

posted 08-08-2012 01:42 PM                  

New study examines Romney tax plan
August 01, 2012|By Todd Allen Wilson, tawilson@dailypress.com | 804-643-0056

A study released Wednesday by the non-partisan Brookings Institution said GOP presidential candidate Mitt Romney's tax plan would lower taxes for the richest 5 percent of Americans while increasing the tax burden on lower- and middle-income taxpayers.

posted 08-08-2012 02:07 PM                  

quote:

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Originally posted by reechee:
http://articles.dailypress.com/2012-08-01/news/dp- nws-study-romney-tax-plan-20120801_1_tax-plan-bush-era-tax-cuts-income-tax

New study examines Romney tax plan
August 01, 2012|By Todd Allen Wilson, tawilson@dailypress.com | 804-643-0056

A study released Wednesday by the non-partisan Brookings Institution said GOP presidential candidate Mitt Romney's tax plan would lower taxes for the richest 5 percent of Americans while increasing the tax burden on lower- and middle-income taxpayers.

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Good post.

I don't undertsnad why none of our politicians will get behind the Fair Tax plan.

posted 08-09-2012 10:57 AM                  

Wonder how they will vote?