Tax cuts for the top 2-3% percent of households have not created significant job growth or economic demand. These households have enjoyed tax cuts since 2001 and 2003—even as job growth in the United States declined and as exports of jobs increased and expanded to higher paying jobs.
According to the Congressional Budget Office (CBO), reducing income taxes for 2011 is one of the least effective ways to spur economic growth. NETWORK supports the following alternatives, which the Congressional Budget Office found as effective ways to spur growth and development. (Rankings based on proposed effectiveness.)
Beginning in 2010
Beginning in 2011
Source: Congressional Budget Office
The CBO’s report, Policies for Increasing Economic Growth and Employment in 2010 and 2011, states that maintaining lower taxes for businesses that do not pay corporate income tax, generally does not creates jobs. Even if businesses are left with higher after-tax income, without increasing demand in the economy there is no incentive to hire more workers.
The CBO finds it more cost-effective to allow the top income brackets’ tax cuts to expire rather than extending all tax cuts “…because the higher income households that would be excluded would probably save a larger fraction of their increase in after-tax income.” In other words, high-income households typically make enough to pay for expenses, and any tax benefit they receive goes into savings. On September 28, 2010, in front of the Senate Budget Committee , CBO director Douglas Elmendorf testified that even “…compared with the options examined here for extending the expiring tax cuts, various other options for temporarily reducing taxes or increasing government spending would provide a bigger boost to the economy per dollar of cost to the federal government.”
NETWORK maintains that when the economy is struggling with such high unemployment (9.6% in August), it is certainly not the time to implement the least effective instruments available to boost employment and output, solely for the benefit of the wealthy. With income inequality so pervasive, economic disparities will only get worse