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Chris
07-18-2012, 12:33 PM
The following is the summary to a study of the consequences of raising tax rates on high-income taxpayers in 2013. Follow link for data and other details.


The confluence of fiscal policy changes scheduled to occur at the end of 2012 – sometimes referred to as the “fiscal cliff” – poses serious challenges for policy makers. One area of disagreement is whether the increase in the top tax rates due to the sunset of elements of the 2001 and 2003 tax cuts, as well as the increase and expansion of the Medicare tax to unearned income for high-income taxpayers, should be allowed to occur.

This study examines the impact of these higher top tax rates for the US economy in the longrun. Some of these provisions, particularly the increase in tax rates on dividends and capital gains, can be expected to adversely affect investment and the capital stock by reducing the after-tax return to investment. Other provisions, such as the increase in the top two ordinary tax rates and the increase in the Medicare tax on labor income of high-income taxpayers can be expected to both reduce disposable incomes and reduce labor supply by reducing the price of leisure.

Overall, this study finds that the higher tax rates would reduce output in the long-run by 1.3% when the proceeds are used to finance additional government spending. Employment would fall by 0.5%. In today‟s economy these changes would translate into a decline in GDP of $200 billion and employment by roughly 710,000 jobs. Investment, the capital stock (net worth) and real after-tax wages would also fall. Under the alternative assumption that resulting revenues are used to finance an across-the-board tax cut, output would only fall by 0.4% and real aftertax wages would rise. A sensitivity analysis using “low” and “high” responsiveness of household and firm behavior bounds these results, but does not appreciably change the qualitative results.

These results may suggest to policy makers that allowing the top tax rates to increase comes with economic consequences. Long-run output can be expected to fall, and, depending on the use of the revenues, living standards, as reflected by workers‟ real after-tax wages, may also be lower.

Long-run macroeconomic impact of increasing tax rates on high-income taxpayers in 2013 (http://www.nfib.com/LinkClick.aspx?fileticket=OMV7uZczVaM%3D&tabid=1083) (.PDF)

Peter1469
07-18-2012, 03:46 PM
That is the study that concluded that the tax increases would drop the GPD by 1.8%, correct?

Chris
07-18-2012, 08:38 PM
Only 1.8% I see in report is:
Real after-tax wages would fall by 1.8%, reflecting a decline in workers‟ living standards
relative to what would have occurred otherwise.

roadmaster
07-18-2012, 10:14 PM
I am taxed enough and don't get these loop-holes.

PT Again
07-19-2012, 07:43 PM
I am taxed enough and don't get these loop-holes.

What loophole?

Chris
07-19-2012, 07:50 PM
Love the avatar, PT!