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Economics

'Job-Killing' Tax Hikes May Not Be So Lethal

Low rates on the rich can help the economy—but it takes a long time

Barack Obama had barely finished announcing his deficit-reduction plan this week before John Boehner, the Republican House Speaker, dismissed the President’s proposed tax increases on wealthy Americans as a blow to “job creators.” That phrase has been coming up a lot lately in Washington. The notion that the rich drive job creation and that taxing upper incomes is a “job killer” is a powerful line and difficult to refute between commercial breaks. But like a lot of political memes, it suffers from one shortcoming: It’s not at all clear that it’s true.

“There’s very limited evidence to support the claim that increased personal income tax rates on higher-income people would reduce hiring,” says Joel Slemrod, who served as senior tax economist for President Ronald Reagan’s Council of Economic Advisers. Cutting taxes on upper incomes may have economic benefits, but it’s not an especially powerful way to create a lot of jobs quickly.