Increasing Taxes on America’s Job Creators Will Harm Economic Growth and Jobs

By September 26, 2011Taxation

Yesterday’s Washington Post “Outlook” section included a column entitled “5 Myths about Millionaires”  that seeks to dispel some of the myths that are central to the need for the so-called “Buffett Rule.”

               3. Millionaires pay proportionately less income tax than poorer people.

In a speech on Monday, Obama said raising taxes on millionaires isn’t class warfare, but “math.” His math may be off: According to the IRS, those with adjusted gross incomes of more than $1 million paid an average of 23.3 percent in federal income taxes in 2008; those earning between $100,000 and $200,000 paid 12.7 percent; and those earning between $50,000 and $100,000 paid 8.9 percent. Nearly half of American families don’t make enough money to pay federal income taxes at all.

Quite simply, despite what the President and his advisors are saying in interviews, the nation’s top earners already pay the lion’s share of federal income taxes. And increasingly these earners are the nation’s job creators. And a review of the facts makes this clear.

The NAM has long advocated for making permanent the lower tax rates on small and medium size manufacturers. More than 70 percent of manufacturers operate as “flow through” entities and pay taxes at individual rates. Raising taxes on these and other businesses that operate in this manner will only hurt jobs. In 2008, these types of entities employed 54 percent of the private sector workforce.

In his testimony to the U.S. House of Representatives Committee on Budget on September 14th, Scott Hodges, President of the non-partisan Tax Foundation pointed out that:

Fully 68 percent of private business income is earned by taxpayers with AGI above $200,000—the target range of President Obama’s proposed tax rate increases. Some 35 percent of all private business income is earned by taxpayers with AGIs above $1 million.

Another way of looking at the distribution of business income is to see how many taxpayers at the highest tax brackets have business income. According to Tax Policy Center estimates, more than 74 percent of tax filers in the highest tax bracket report business income, compare to 20 percent of those at the lowest bracket…more than 40 percent of private business income is earned by taxpayers paying the top marginal rate.

That brings me to “Myth #5: Obama’s ‘millionaires’ tax’ won’t seriously limit investment.” Raising taxes on these individuals, will seriously impact these business owners, reducing resources available for investment and jobs.  

Finally, if the “Buffett Rule” seeks to address the rate at which capital gains and dividends are currently taxed – 15 percent, then it’s important to remember what the NAM has been saying for many years that taxes on capital gains and dividends are a form of double taxation. Companies already pay a 35 percent corporate income tax – the second highest rate in the world – and then individuals when receiving dividends or realizing capital gains from appreciated stock must pay a second 15 percent tax on their personal income tax returns.

Manufacturers have long called for policymakers to support our manufacturing strategy that puts forward a pro-growth, pro-competitiveness, pro-manufacturing agenda. We need regulations that are balanced and clear, a tax code that is competitive, and an agenda that fosters job creation. We do not need increased taxes on America’s job creators.

Carolyn Lee is senior director of tax policy, National Association of Manufacturers.

Carolyn Lee

Carolyn Lee

Executive Director of The Manufacturing Institute at The Manufacturing Institute
Carolyn Lee is Executive Director of The Manufacturing Institute, the non-profit affiliate of the National Association of Manufacturers (NAM), the nation’s largest industrial trade association. Carolyn drives an agenda focused on improving the manufacturing industry through its three centers: the Center for the American Workforce, the Center for Manufacturing Research, and the Center for Best Practices.

In her role, Carolyn leads the Institute’s workforce efforts to close the skills gap and inspire all Americans to enter the U.S. manufacturing workforce, focusing on women, youth, and veterans. Carolyn steers the Institute’s initiatives and programs to educate the public on manufacturing careers, improve the quality of manufacturing education, engage, develop and retain key members of the workforce, and identify and document best practices. In addition, Carolyn drives the agenda for the Center for Manufacturing Research, which partners with leading consulting firms in the country. The Institute studies the critical issues facing manufacturing and then applies that research to develop and identify solutions that are implemented by companies, schools, governments, and organizations across the country.

Prior to joining the Institute, Carolyn was Senior Director of Tax Policy at the NAM beginning in 2011, where she was responsible for key portions of the NAM’s tax portfolio representing the manufacturing community on Capitol Hill and in the business community and working closely with the NAM membership. She served as the Director of Legislative and Government Affairs at the Telecommunications Industry Association, Manager of State and Federal Government Affairs for 3M Company, and in various positions on Capitol Hill including as Legislative Director for former U.S. Senator Olympia Snowe (R-ME), and as a senior legislative staff member for former U.S. Rep. Sue Kelly (R-NY).

Carolyn is a graduate of Gettysburg College in Gettysburg, Pennsylvania graduating with a B.A. in Political Science. She resides in Northern Virginia with her husband and three children.
Carolyn Lee

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