Following President Obama's speech on deficit reduction, Fox & Friends revived the myth that lowering the tax rate for the wealthy creates jobs. In fact, reducing taxes for the wealthy is consistently rated as one of, if not the, least effective policies for creating jobs or stimulating the economy.
Fox & Friends Pushes Tired Myth That Tax Cuts For Wealthy Create Jobs
Kilmeade: Raising Taxes For Wealthy Will Give Money To Government Instead Of “Hiring More People.” On the April 14 edition of Fox News' Fox & Friends, co-host Brian Kilmeade reacted to Obama's plan to raise taxes on the wealthiest Americans by claiming it would give more money “to the government as opposed to investing it in different areas, starting a different company, hiring more people.” From Fox & Friends:
KILMEADE: So OK, so you have the federal tax, outside states like Florida, then you have a state tax of another 10 percent. So you're already giving -- so you're already working -- you're only getting 60 percent of what you earn.
And by the way, the stats also show that the most fortunate ones, you know, the ones that inherit all that money, they also start foundations and give more money than almost everybody else. So, in other words, they're supposed to feel bad about this, feel humble about what they've earned, give more of it to the government as opposed to investing it in different areas, starting a different company, hiring more people. I mean, that to me -- in one sense, you have 73 pages of a specific way forward to address a $14.2 trillion deficit, and this speech was, I'd like to be president again. That's what this speech was. [Fox News, Fox & Friends, 4/14/11]
Tantaros: “You Can't Argue That You're Going To Hurt Joe Six-Pack's Boss” Without Hurting “Joe Six-Pack.” Later on Fox & Friends, after Fox News contributor Juan Williams pointed out that under Rep. Paul Ryan's (R-WI) budget plan “all the sacrifice goes to the seniors and the poor,” Fox contributor Andrea Tantaros claimed, "[Y]ou can't argue that you're going to hurt Joe Six-Pack's boss without implying it's going to hit Joe Six-Pack." [Fox News, Fox & Friends, 4/14/11]
Economists Agree That Lowering Taxes For Wealthy Does Not Create Jobs
Gleckman: “Higher Income Households Are More Likely To Bank the Cash Than Spend It.” In an August 31, 2010, post, Tax Policy Center economist Howard Gleckman pointed out that tax cuts for the wealthy generally do not go back into the economy. Gleckman noted: “We know that higher income households are more likely to bank the cash than spend it. As a result, tax cuts for these high-earners will do relatively little to boost the economy in the short run.” [Tax Policy Center, 8/31/10]
CBO: "[I]ncreasing The After-Tax Income Of Businesses Typically Does Not Create Much Incentive" For Them To Hire. In a January 2010 report titled, “Policies for Increasing Economic Growth and Employment in 2010 and 2011,” the Congressional Budget Office (CBO) stated:
Deferring the scheduled increases in tax rates in 2011 would help some businesses as well as households. In particular, it would keep lower tax rates in place in that year for businesses that do not pay the corporate income tax (the pass-through entities such as sole proprietorships, partnerships, S corporations, and limited liability companies). However, increasing the after-tax income of businesses typically does not create much incentive for them to hire more workers in order to produce more, because production depends principally on their ability to sell their products. [Congressional Budget Office, January 2010]
CBO Scored "[D]eferring The Scheduled Increases In Tax Rates" As The Lowest-Scoring Policy Proposal To Stimulate Economy. In its January 2010 report, CBO stated:
[P]olicies that would temporarily increase the after-tax income of people with relatively high income, such as an across-the-board reduction in income taxes or an increase in the exemption amount for the AMT, would have smaller effects [than other options] because such tax cuts would probably not affect the recipients' spending significantly. [Congressional Budget Office, January 2010]
The report further stated that “a permanent extension [of the Bush tax cuts] would entail large revenue losses after the recovery is over.”
According to a table in the report, CBO estimated that reducing income taxes in 2011 would have the least stimulative effect of the policy options considered.