Heritage Foundation predicts “substantial job losses” among earners of less than $250,000
The Heritage Foundation, a D.C.-based policy institute, has released a scathing report on the prospect of income tax increases for the coming year. The authors contend that while high income households may be targeted, everyone will pay the price through lower economic growth and fewer employment opportunities. In the case of Louisiana, they project that the approximately $5 billion increase in total tax revenue over the next ten years would cost the state an average of over 9,000 lost jobs each year for the next decade.
The tax increases would come about by letting some of the 2001 and 2003 tax cuts expire, which President Barack Obama has already publicly called for. Additionally, the “death tax” is set to re-emerge at a rate of 55 percent, with a $1 million exemption. According to the White House, these increases would be assigned to the “wealthiest two percent of families” – those households or businesses earning more than $250,000 per year – as part of a “comprehensive tax policy plan.”
Concurrently lower income earners may receive tax cuts, depending how congress proceeds, along with changes to available deductions. Obama is promoting this approach “to ensure we are restoring fairness and returning to fiscal responsibility.” According to Obama’s website, his “tax plan will help restore bottom-up economic growth that helps create good jobs in America and empowers all families achieve [sic] the American dream.”
The Heritage Foundation economists, however, contend that the “steep tax hikes” on businesses and households earning more than $250,000 per year will lead to “substantial job losses” for those earning less; “no income earner will be unscathed.” They point out that these taxes target investment, “one of the main drivers of economic growth and hence jobs and wages.”
The report’s authors used a method of analysis developed by IHS Global Insight, the World’s largest economic forecasting company. They then calibrated the model to American data and compared the retention of all current tax rates through to 2020 with the tax changes proposed by the Obama administration.
On the national level, with the tax proposal they found almost 700,000 fewer jobs each year for the next ten years and a $1.1 trillion total decline in the economy’s production.* For Louisiana, their breakdown places the job loss at an average of 9,244 jobs per year, peaking at 11,676 in 2016, and an average of $3,125 less disposable personal income per household.