On this Labor Day weekend a few thoughts on letting the Bush tax cuts expire for those with incomes greater than $250,000. The rhetoric from the right is that doing so will impact those who run small businesses and consequently negatively impact job growth in these tough economic times. Keep in mind that the expiration of these tax cuts will only raise the marginal personal income tax rate by a few percentage points.
The first question one must ask is who belongs to the two percent that makes over $250.000/year? Professional athletes, movie stars, corporate officers of big and midsized companies, lobbyists, etc. In fact, only about three percent of that bunch run small businesses. Many of these are people like surgeons, consultants, etc., who are not in growth businesses. You can only operate on so many people or have so many clients. So there staff level is fixed.
Of those CEO’s of small businesses that make over $250,000/year, given the choice of giving their money to the government or reinvesting it back in their company, chances are they’d reinvest in their company. And how would this reinvestment be spent? Perhaps on capital improvements or new hires.
So it may be that allowing the Bush tax cuts to expire will actually encourage job growth.