CBO Report: Tax Hikes Will Slow--But Not Kill--Growth
On Thursday, the Congressional Budget Office (CBO) released a report that said letting the Bush tax cuts expire for those individuals making more than $200,000 and couples making more than $250,000 would not kill economic growth. The CBO also concluded that extending the Bush tax cuts for all income levels would allow the economy to grow at a slightly faster pace.
President Barack Obama and Democrats have insisted on letting the Bush tax cuts expire for those in the highest income brackets even if it means taking the country over the so-called fiscal cliff, and Republicans said the CBO report confirmed not extending the Bush tax cuts for everyone would lead to fewer jobs.
Republicans have claimed if the Bush tax cuts do not get extended for those in all income brackets, nearly 700,000 jobs would be lost across the economy.
A statement from the Republican-controlled House Ways and Means Committee said the report:
"confirms that raising taxes on all taxpayers will result in fewer ‘help wanted' signs hanging in the windows of businesses across the country. Job creators agree, and have made it clear, that raising taxes will result in a weaker economy and fewer jobs for the millions of Americans struggling to find work."
But Democrats used the report to argue for raising taxes.
Rep. Chris Van Hollen, the ranking member of the House Budget Committee said the report "underscored" the need to essentially let the tax cuts expire for those making over $250,000.
According to the CBO:
Extending all expiring tax provisions other than the cut in the payroll tax that has been in effect since January 2011—that is, extending the tax reductions originally enacted in 2001, 2003, and 2009 and extending all other expiring provisions, including those that expired at the end of 2011, except for the payroll tax cut—and indexing the alternative minimum tax (AMT) for inflation beginning in 2012 would boost real GDP by a little less than 1½ percent by the end of 2013.
The CBO estimated that if the Bush tax cuts were extended for everyone except those "earning less than $200,000 and couples earnings less than $250,000," growth would rise by 1.25 percent.