Calling President Obama's proposed tax plan, "the antithesis of the Reagan economic model," Sean Hannity falsely claimed that during President Reagan's term, 21 million jobs were created, revenues doubled, and the U.S. experienced the longest period of peacetime economic growth in U.S. history.
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During an interview with Rep. Paul Ryan (R-WI) on the April 9 edition of his Fox News program, Sean Hannity stated that President Obama's proposed "tax plan is the antithesis of the Reagan economic model, which led us to 21 million new jobs, the longest period of peacetime economic growth in history, and the doubling of revenues to the government." In fact, as Media Matters for America has noted, the number of total nonfarm payroll jobs increased by 16 million during Reagan's term, not 21 million. Additionally, when adjusted for inflation, federal revenue did not double during President Ronald Reagan's term in office; rather, it increased 15 percent ($1.077 trillion to $1.236 trillion). And the longest period of peacetime economic growth in U.S. history occurred between March 1991 and March 2001, largely during President Bill Clinton's term, according to the National Bureau of Economic Research.
Moreover, Hannity did not challenge Ryan's claims that "[o]ur corporate tax rate is the second-highest in the world." Conservatives in the media have pointed to the U.S. statutory corporate tax rate of 35 percent to claim that the United States has one of the highest tax rates in the world. In fact, as Media Matters has noted, World Bank and Government Accountability Office (GAO) data indicate that the U.S. effective corporate tax rate -- which accounts for exemptions, deferrals, credits, and other incentives -- is lower than 35 percent and lower than several other nations' effective corporate tax rate. In its August 2008 report, the GAO estimated that "[t]he average U.S. effective tax rate on the domestic income of large corporations with positive domestic income in 2004 was an estimated 25.2 percent." Further, in its Paying Taxes 2009 publication, based on its 2009 Doing Business report, the World Bank-International Finance Corporation estimated that the United States has a lower effective rate of current corporate tax than that of several other nations, including Germany, Canada, India, China, Brazil, Japan, and Italy.
Additionally, Hannity said to Ryan: "[T]he richest 1 percent pay nearly 40 percent of the bill. And so, we already have redistribution. We already are spreading the wealth around. You know, at what point do those people that have money say, forget it, I'm not going to invest anymore, or, I want to take my money overseas." Ryan responded in part, "[W]e're already soaking the rich. The problem is the people who pay these taxes are the small businesses." But Hannity did not note that only a small percentage of small businesses will see a tax increase under Obama's plan. According to the Tax Policy Center's table of 2007 tax returns that reported small-business income, 481,000 of those returns -- about 2 percent -- are in the top two income tax brackets, which include all filers with taxable incomes that would be affected by Obama's proposals to let portions of the Bush tax cuts for wealthy taxpayers expire and reduce the tax rate at which families making more than $250,000 could take itemized deductions.
From the April 9 edition of Fox News' Hannity:
HANNITY: Your tax plan is the antithesis of the Obama tax plan. It -- it's -- and the Obama tax plan is the antithesis of the Reagan economic model --
RYAN: That's right.
HANNITY: -- which led us to 21 million new jobs, the longest period of peacetime economic growth in history, and the doubling of revenues to the government. Why don't you explain how you would go the opposite direction from Obama and not raise the top marginal rates, but lower them?
RYAN: We're basically saying, let's go a completely different direction; let's get jobs back in this economy. A couple of things that are different than they were in the '80s: We're in the global economy in a 21st-century economy, and right now, we are taxing our businesses so much more than our competitors are taxing theirs, and we're losing jobs. Our corporate tax rate is the second-highest in the world.
So what we're proposing in our budget, in addition to all the spending control and the debt reduction we're proposing based on the Obama budget, we're saying lower the top rates to 25 percent for individuals, small businesses, and companies, and let's suspend the capital gains tax through the year 2010, so that we can actually re-grow the savings that people lost in their pension funds, their 401K plans, their college savings plans.
These are the things we want to see come back, and the Obama administration is proposing to raise all of these taxes. Raising taxes on the assets that make up our pensions, our savings, is not going to grow those back. Raising taxes on small businesses is not going to create jobs. And keeping taxes high on businesses so that we're taxing them more than our foreign competitors are taxing their own businesses is not going to get jobs back in this economy.
We know just from good economics that we're going to produce more jobs. We even have economic modeling that shows we're going to produce a lot more jobs than the president is, and the difference between our budget and his, not just in taxes, is that we're not proposing this gusher of new spending and this gusher of new borrowing that he's proposing in excess of the $1.5 trillion tax increase that the president's proposing.
HANNITY: For the latest year that I have seen numbers for, which is 2006, the bottom 50 percent of wage earners only pay 2.9 percent of the federal tax bill.
HANNITY: You know, the top 10 percent pay nearly 70 percent of the bill. You know, the richest 1 percent pay nearly 40 percent of the bill. And so, we already have redistribution. We already are spreading the wealth around. You know, at what point do those people that have money say, forget it, I'm not going to invest anymore, or, I want to take my money overseas.
RYAN: That's the whole point. The more you tax somebody on their next dollar, the less likely they're going to go and work for it -- the less likely they're going to take risks. We need people to take risks. We need people to start small businesses. We need entrepreneurs to come up with new ideas and innovations in this economy. And if we say to them, we're going to raise the hurdle rate, we're going to make it harder for you to achieve that success, we're going to get less success in this country.
Look, the president and the Democrats in Congress are doing a very good job of playing the class warfare card. Preying on people's emotions of fear and envy may make good politics, but it's really bad economics. It demoralizes the successful small businesses that are out there and it hurts those people who want to become successful small business people.
HANNITY: All right. What do you say --
RYAN: So the problem is --
HANNITY: Go -- go ahead and finish your thought.
RYAN: Well, the problem is when we're saying that we have to hit the rich, we have to soak the rich -- we're already soaking the rich. The problem is the people who pay these taxes are the small businesses. Seventy percent of our jobs come from these small businesses, and when we demagogue them and we demonize them, we're going to hurt our chances of having more of them, and that means we're not going to have as many jobs.
HANNITY: When you talk about the demonizing -- I mean, this has now become a mantra: tax cuts for the wealthy --
HANNITY: -- Republicans don't care about the poor. I mean, they've been very effective in their bumper stickers, and their slogans, and their propaganda. How do you convince people that this benefits everybody, that you're going to let people -- or incentivize people, and give people back more of their money, how do you say that that helps everybody in America when the Democrats are out there saying you don't care about the poor, which I know is a lie. But what's the answer?