Forbes: Fiscal Cliff Follies: Four Myths

By John Wasik
Forbes, Nov 29, 2012 

Is the fiscal cliff dilemma a complete muddle to you?

Some of the issues are so buried in political rhetoric that you will need a front-end loader to get at the truth. Here are some myths that should be noted in the process of fact checking arguments.

1) Small businesses will be hurt by income-tax increases.  According to the group Business for Shared Prosperity, (BSP) “the vast majority of small business owners have less than $250,000 in taxable income and receive the middle-class tax cuts, not the extra tax cuts for the wealthy. Less than 3 percent of households with business income are above the $250,000 threshold, and that includes hedge fund managers, corporate lobbyists, big business CEOs paid to sit on the boards of other big corporations, and wealthy people renting out their vacation homes.”

2) Income-tax increases will hurt job creation. In the six years between the 2001 Bush tax cuts and the Great Recession, employment grew just 4.8 percent compared with 16.2 percent in the six years after President Clinton’s 1993 tax increase, notes BSP.  “The record is clear that lower tax rates for the highest incomes don’t generate better job creation,” said David Levine, CEO of the American Sustainable Business Council. “Congress should seize this unique moment to end these tax cuts and drive investment in our infrastructure, education and other critical areas that strengthen our economy for long-term job creation.” ...

4) The top earners need lower tax rates to prime the “trickle-down” effect for job creation. There’s never been any credible academic evidence that this has ever been true.  While it’s true that the top earners may create jobs, tax rates probably don’t have anything to do with them starting businesses and hiring. There’s much more employment growth when the general economy, that is, Main Street, is strong, rather than the smallest segment of the population reaping the lion’s share of tax breaks.  If fact, evidence shows that debt grows during periods when “supply-side” economics fails to provide a stimulus to the broader economy. The trickle-down effect has been one of the greatest hoaxes of the last 30 years. There’s a reason why George H. W. Bush called it “voodoo economics.”

“Small business owners believe the pathway to economic growth and job creation is more investment in Main Street America – not continued tax cuts for the top 2 percent paid for by everyone else. The last thing we need is more layoffs of teachers, first responders and infrastructure workers, or cuts to Medicare, Medicaid or Social Security called for by many Wall Street and Big Business CEOs,” said Scott Klinger, Tax Policy Director of BSP. ...

Read more:

Copyright 2012 Forbes