BEYOND THE NUMBERS
Would Rep. Cantor’s “Job Creation” Tax Cut Create Jobs?
Though billed as a measure to create jobs by aiding small businesses, House Majority Leader Eric Cantor’s (R-VA) proposal for a 20 percent tax deduction in 2012 for businesses with fewer than 500 employees would benefit many high-income taxpayers — including many affluent doctors, lawyers, and stockbrokers — while failing to generate the promised economic benefits. The Urban-Brookings Tax Policy Center estimates that nearly half — 49 percent — of the $46 billion tax cut that the measure would provide would go to people with incomes over $1 million a year (see graph).
The Congressional Budget Office (CBO) rated this general approach as one of the least cost-effective ways that policymakers were considering to encourage growth or create jobs in a weak economy. For one thing, the tax benefits would flow disproportionately to high-income people who would spend a relatively small share of their additional income; thus, CBO estimated that the deduction would generate just 0 to 20 cents in economic growth for every dollar in budgetary cost. For another, firms would receive this tax break whether they hired new workers or not; thus, CBO estimated that in 2012 it would create one job or fewer per $1 million of budgetary cost.Click here for the full report.