Cantor Proposal for 20 Percent Business Tax Deduction Would Provide Windfall for Wealthy, Not Jobs
Source: Center on Budget
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.[1] 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.[2]
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.
The Cantor proposal is even more troubling than his earlier version of it in 2010. Whereas the earlier version did not provide tax breaks for high-paying businesses that one would not ordinarily view as “small businesses” — such as stock brokerage firms and professional sports teams — the new proposal contains no such exclusion and lets these firms, as well, enjoy lucrative tax cuts.
The Cantor proposal also ignores the emerging consensus among economists that young small firms, not small ones in general, are particularly important “job creators.” As a recent study concluded, “policies targeting firms based on size without taking account of the role [of] firm age are unlikely to have the desired impact on job creation.”
Read more: http://www.cbpp.org/cms/?fa=view&id=3734
How does this politician continue to bamboozle his constituents.......
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