Will Obama's Tax Plan Send The Economy "Off A Cliff?

Does Obama's Tax Plan Only Include Tax Hikes?

Will Raising Taxes “Kill Small Business”?

Are Americans Opposed To Increasing Taxes?

Is Ernst & Young Correct That Raising Taxes On Wealthy Would Hurt Economy?

Will Raising Taxes On Wealthy Not Help With The Deficit Crisis?

MYTH: Obama's Tax Plan Would Send The Economy “Off A Cliff”

Neil Cavuto: “I Feel Like I'm On The Deck Of The Titanic” And President Obama's Tax Plan Is An “Iceberg.” Fox's Neil Cavuto claimed he felt “like I'm on the deck of the Titanic,” and the first iceberg was Obama “sticking to his tax the rich bet”:

CAVUTO: Why do I feel like I'm on the deck of the Titanic and frantically trying to point out to the captain, is it me captain or is that a big chunk of ice out there? It's like I'm seeing this whole disaster play out in slow motion. I'd like to be wrong, actually I would love to be wrong, but my opinion here, I think we're sinking fast and we haven't even hit anything yet. We're just steering a very scary course, and little more than five weeks away from the ship hitting the span. Republicans and Democrats are doing it. Maybe something is going on behind the scenes, I'm just not seeing it. What I am seeing is a lot of icebergs. A lot of icebergs. Iceberg one: talk now the President is not only sticking to his tax the rich bet, he's doubling down on it, now insisting on 1.6 trillion dollars in revenues as part of any end-of-year budget fix. Says the economy can more than deal, even though it's actually weaker than it was two years ago. [Fox News, Your World with Neil Cavuto, 11/14/12]

Steve Forbes: Letting “The President Have All Of His Tax Increases” Amounts To Letting “The Economy Go Off A Cliff.” On Fox News' America's Newsroom, Fox regular Steve Forbes claimed if the Republicans in Congress “let the president have all of his tax increases,” the economy would “go off a cliff like what's happening in Europe”:

FORBES: If the Republicans, Bill, were absolutely cynical they would let the president have all of his tax increases, let the economy go off a cliff into recession like what's happening in Europe, and pick up the political pieces. But thankfully the House Republicans don't want to let that happen. And so I think you're going to get a hard fight. And I think the president's going to learn even though he won the election, he is not the only one who makes decisions in this country. [Fox News, America's Newsroom, 11/14/12]

FACT: Letting Tax Cuts For Wealthy Expire Doesn't Hurt Economy, Increases GDP

Congressional Budget Office: Allowing Tax Cuts For Wealthy To Expire Would Increase GDP By 1.3 Percent. In a November 2012 report, the non-partisan Congressional Budget Office (CBO) said that President Obama's proposal to allow the expiration of the Bush tax rates for higher wage earners while maintaining lower rates for those making $200,000 per year and less would increase GDP by 1.3 percent. From CBO:

The budgetary cost of extending the expiring tax provisions would be lower if certain provisions were allowed to expire that otherwise would apply to some high-income households. According to JCT and CBO's estimates, if the AMT was indexed for inflation beginning in 2012 and all of the other expiring tax provisions were extended except for the specific provisions affecting high-income taxpayers (and the payroll tax cut), revenues would be lower and outlays for refundable credits would be higher than $288 billion in fiscal year 2013 and by $382 billion in fiscal year 2014, compared with CBO's baseline projections.

CBO estimates that such changes would increase real GDP by 1.3 percent (by 0.3 percent to 2.3 percent under CBO's full range of assumptions), and increase full-time-equivalent employment by 1.6 million (with a range from 0.5 million to 2.8 million) in the fourth quarter of 2013. [Congressional Budget Office, November 2012]

Center On Budget And Policy Priorities: Tax Increases On High-Income Taxpayers “Would Not Hinder -- And Could Even Bolster -- Economic Growth.” According to the Center on Budget and Policy Priorities' (CBPP) Off the Charts blog, tax increases on high-income taxpayers “can reduce the deficit or fund investments that support growth” and “would not hinder -- and could even bolster -- economic growth”: 

This blog series and our new report have shown that tax increases on high-income people of the magnitude under consideration would not change their behavior in ways that would hurt economic growth. Moreover, the revenues from tax increases can reduce the deficit or fund investments that support growth.  

[...] 

Put simply, tax increases on high-income taxpayers of the sort under consideration would not hinder -- and could even bolster -- economic growth. With this in mind, policymakers should aim for a balanced deficit reduction package that shares the load through a mix of tax increases and spending cuts. [Off the Charts, Center on Budget and Policy Priorities, 5/2/12]

Wash. Post: Expiration Of Upper-Income Tax Cuts “Would Do Little Harm” To Economy. The Washington Post's Wonkblog, citing a recent CBO report, explained that the expiration of the Bush-era tax cuts for the wealthy “would do little harm” and would generate "$42 billion in 2013." The graph below accompanied the post:

[Wonkblog, The Washington Post, 11/8/12]

FACT: Tax Cuts For The Wealthy Do Not Lead To Economic Growth

Tax Policy Center: “Tax Cuts For These High-Earners Will Do Relatively Little To Boost The Economy In The Short Run.” In an August 2010 post, Tax Policy Center economist Howard Gleckman explained that “tax cuts for these high-earners will do relatively little to boost the economy in the short run”:

The Treasury Department figures that temporarily extending the 2001 and 2003 tax cuts would reduce federal revenues by roughly $200 billion in Fiscal 2011 and $260 billion in 2012. For technical reasons, those numbers may be off a bit, but you get the drift. Of that, about $75 billion would go to top-bracket taxpayers ($35 billion in 2011 and $40 billion in 2012). We know that higher income households are more likely to bank the cash than spend it. As a result, tax cuts for these high-earners will do relatively little to boost the economy in the short run. [Tax Policy Center, 8/31/10]

Economic Policy Institute: Bush Tax Cuts “Added $2.6 Trillion To The Public Debt Over 2001-10.” In a September 26, 2011 article, Andrew Fieldhouse of the Economic Policy Institute (EPI) explained tax cuts decreased federal revenue and in turn “added $2.6 trillion to the public debt over 2001-10”:

A spending-cuts-only approach is regressive in that it forces the brunt of deficit reduction on the backs of poor and working families while ignoring a prime culprit of the budget deficit: the expensive, ineffective, and unfair Bush-era tax cuts. These top-heavy tax cuts added $2.6 trillion to the public debt over 2001-10 and will add $3.8 trillion to deficits over the next decade if fully continued. [Economic Policy Institute, 9/26/11]

For more information about the bogus claim that taxes on the wealthy will hurt the economy and jobs, click here.

MYTH: Obama Is Only Proposing Tax Hikes

Martha MacCallum: “Why Does It Seem That Democrats Are So Unwilling To Entertain The Other Possibilities Of Raising Revenues Outside The Tax Hike?” On America's Newsroom, co-host Martha MacCallum asked why “Democrats are so unwilling to entertain” ideas “outside the tax hike”:

MacCALLUM: Let's address the revenue side because Republicans are going to argue, Doug, that you can get increased revenues from rich people in other ways. You can take out loopholes and that will increase the revenues that come in. Why does it seem that Democrats are so unwilling to entertain the other possibilities of raising revenues outside of the tax hike? [Fox News, America's Newsroom, 11/15/12]

Stuart Varney: “We Refuse To Cut Spending Now, No, We're Going To Tax The Rich To Bring In More Money.” On Fox and Friends, Fox Business' Stuart Varney claimed “we refuse to cut spending”: 

VARNEY: [European countries] have to cut spending because they've run out of money. We're going in that direction. But we refuse to cut spending now, no, we're going to tax the rich to bring in more money. That won't work. [Fox News, Fox and Friends, 11/15/12]

FACT: Obama's Deficit Plan Includes Far More Spending Cuts Than Other Proposals

CNN: Obama Seeking “A Balanced” Deficit Reduction Package That Is Heavily Weighted Toward Spending Cuts. Obama has expressed a desire to extend tax cuts for individuals with incomes below $250,000, but has said he would veto any bill that extends tax cuts for those making above that level. According to CNN, Obama's policy director, James Kvaal, said the president is seeking “a balanced plan that cuts the deficit by $4 trillion with $2.50 worth of spending cuts for every dollar in revenue.” [CNN, 11/9/12]

CBPP: $2 Trillion Of Deficit Reduction Is Enough To Stabilize The Debt Over The Next Decade. CBPP's Richard Kogan wrote that the $4 trillion figure for deficit reduction proposals “has assumed something of a life of its own,” and that “there is no single magic number” for deficit reduction. He added that “there can be risks in policymakers setting their sights too high. If the political obstacles facing a much larger deficit-reduction package are too great, then insistence on a package that goes well beyond [$2 trillion in deficit reduction] could lead either to failure” or “to a package that provides false security because it is dominated by budget gimmicks that don't actually reduce our long-term deficits but merely appear to do so.” [Center on Budget and Policy Priorities, 11/1/12]

Progressive Caucus Budget Includes More Revenue Proposals Without Cuts To Medicare Or Social Security Benefits. The Congressional Progressive Caucus released a budget for Fiscal Year 2013 that achieves $6.8 trillion in deficit reduction in a way that “makes no cuts to Medicare, Medicaid, and Social Security benefits.” The budget includes a variety of tax increases for high earners, including raising taxes on capital gains and dividends, eliminates fossil fuel subsidies, and invests trillions of dollars in jobs and infrastructure. [Congressional Progressive Caucus, accessed 11/15/12]

Senate Democrats Propose One Dollar Of Spending Cuts For Every Dollar Of Revenue; Obama Proposes $2.50 In Cuts For Every Dollar Of Revenue. Obama campaign advisor James Kvaal told CNN that the president wanted “a balanced plan that cuts the deficit by $4 trillion with $2.50 worth of spending cuts for every dollar in revenue.” Senate Democrats, on the other hand, are circulating a letter which says that “the president should insist on $1 in revenue for each $1 in spending cuts.” [CNN, 11/09/12; Politico, 11/14/12]

MYTH: Raising Taxes Will “Kill Small Business”

Charles Gasparino: “You Want To Raise Taxes? You Are Going To Kill Small Business.” During a discussion on America's Newsroom about a meeting Obama held with business leaders to discuss economic policy, Fox Business' Charles Gasparino claimed that Obama's plan to raise some taxes would “kill small businesses”:

GASPARINO: I would say that meeting with the president was one of the most intellectually dishonest confabs I've ever seen. Those guys went in there, they were spoken to by the president. If they had anything, any guts ... If they had any guts, they would have said this to the president: You want to raise taxes? You are going to kill small business, you are going to prevent us from hiring, you're going to destroy an already weak economy, and I guarantee those clowns did not say that. [Fox News, America's Newsroom, 11/15/12]

Cavuto: Small Businesses Are “Doomed To Their Own Execution.” On his Fox News show, Cavuto claimed “not one small business leader” was “invited to the White House” during meetings with business leaders following President Obama's re-election. He concluded asking, “why invite the doomed to their own execution?” [Fox News, Your World with Neil Cavuto, 11/14/12]

FACT: Risk To Small Businesses From Expiration Of High-Income Tax Cuts Is “Vastly Exaggerated”

CBPP: “Claims That Letting the High-Income Bush Tax Cuts Expire Would Harm Small Businesses Are Vastly Exaggerated.” A post on the Center on Budget and Policy Priorities' Off the Charts blog titled “Claims That Letting the High-Income Bush Tax Cuts Expire Would Harm Small Businesses Are Vastly Exaggerated” noted that “history refutes the doomsday claims” that “letting the high-income tax cuts expire would seriously harm small businesses”:

For starters, the frequently cited claim that letting the high-income tax cuts expire would seriously harm small businesses relies on a highly exaggerated definition of “business” that treats any filer with any pass-through income as a business owner.  (A pass-through entity passes its profits through to its owners, who pay tax on them at the individual rate.)

[...]

[H]istory refutes the doomsday claims. The arguments against allowing the high-end tax cuts to expire on schedule echo those made against President Clinton's proposed 1993 tax increases, which set marginal rates at the levels to which they are set to return when the Bush rate cuts expire. Critics claimed at the time that those tax increases would seriously harm economic growth.  As it turned out, job creation and economic growth proved significantly stronger following the 1993 tax increases than following the 2001 Bush tax cuts. Further, small businesses created jobs at twice the rate during the Clinton years than they did under the Bush tax code (see graph).

[Center on Budget and Policy Priorities, 7/19/12]

Joint Committee On Taxation: 3.5 Percent Of Small Business Taxpayers Will Have “Marginal Rates Of 36 Or 39.6 Percent Under The President's Proposal.” A memorandum from the Joint Committee on Taxation, a congressional panel that analyzes tax proposals, explains that “3.5 percent of all taxpayers with net positive business income” will face higher rates. All other small businesses that pay taxes as an individual will pay the lower rates. From the Joint Committee On Taxation:

The staff of the Joint Committee on Taxation estimates that in 2013 approximately 940,000 taxpayers with net positive business income (3.5 percent of all taxpayers with net positive business income) will have marginal rates of 36 or 39.6 percent under the president's proposal, and that 53 percent of the approximately $1.3 trillion of aggregate net positive business income will be reported on returns that have a marginal rate of 36 or 39.6 percent. [Joint Committee On Taxation, 6/18/12]

Tax Expert William Gale: “The Vast Majority Of Small Businesses Will Be Unaffected” By Higher Rates On Top Earners. William Gale, co-director of the Urban-Brookings Tax Policy Center, writing for the Washington Post explained how the idea that “allowing the high-income tax cuts to expire would hurt small businesses” was a “myth.” From the Washington Post:

If, as proposed, the Bush tax cuts are allowed to expire for the highest earners, the vast majority of small businesses will be unaffected. Less than 2 percent of tax returns reporting small-business income are filed by taxpayers in the top two income brackets -- individuals earning more than about $170,000 a year and families earning more than about $210,000 a year.

And just as most small businesses aren't owned by people in the top income brackets, most people in the top income brackets don't rely mainly on small-business income: According to the Tax Policy Center, such proceeds make up a majority of income for about 40 percent of households in the top income bracket and a third of households in the second-highest bracket. If the objective is to help small businesses, continuing the Bush tax cuts on high-income taxpayers isn't the way to go -- it would miss more than 98 percent of small-business owners and would primarily help people who don't make most of their money off those businesses. [The Washington Post, 8/1/10]

MYTH: Americans Don't Support Increasing Taxes

Cavuto: “I Didn't See That In Any Exit Voter Survey” Obama Won “A Mandate To Tax The Rich.” Cavuto claimed “union leaders and progressives” were in “total denial” because they “say the election was a mandate to tax the rich and the hell with addressing spending. Now, I didn't see that in any exit voter survey, but maybe you did.” [Fox News, Your World with Neil Cavuto, 11/14/12] 

Bret Baier Distorts Americans' Support For Increasing Taxes On Wealthy. On America Live, Fox host Bret Baier misleadingly cited recent polling to falsely imply Americans are evenly split on whether income taxes should be raised for the wealthy: 

BAIER: I think that's what we'll hear from the President, about uniting, moving forward, but we'll also probably hear what we heard from his senior adviser David Plouffe that this election also sent a message that Americans, he'll probably say, are for this balanced approach to have the wealthy pay their fair share. The one thing that's interesting is if you look at the exit polls, on the question of -- on income tax rates, you have 47 percent want an increase for only those above $250,000, 35 percent no increase for anyone on tax increases, and 13 percent for increase for all. So basically, 47 percent want 250,000 or above, and 48 percent don't raise them at all or raise them for everyone. So, you know, if you look at the exit polls, there's not really a definitive answer there. [Fox News, America Live, 11/9/12, via Media Matters]

FACT: Polls Show Americans Support Raising Taxes On Wealthier Americans

Pew Research Center: Two-Thirds Of Americans Support Raising Taxes On Incomes Over $250,000. An October 2012 Pew Research Center survey found that two-thirds of Americans support increasing taxes on Americans making more than $250,000:

Public concern over the debt and deficit, already extensive, is only likely to increase as the so-called “fiscal cliff” approaches at the end of the year. Yet among a dozen specific options for reducing the debt and deficit, only two win majority approval from the public -- raising taxes on annual incomes over $250,000 (64% approve) and limiting corporate tax deductions (58%).

A new national survey by the Pew Research Center for the People & the Press, conducted Oct. 4-7, among 1,511 adults, including 1,201 registered voters, finds that cuts in education spending are particularly unpopular. Fully 75% disapprove of reducing federal education funding and 61% oppose cuts in funding for student loans. [Pew Research Center, 10/12/12]

2012 Election Exit Polls: 6 In 10 Voters Favor Increasing Taxes. National exit polling from the 2012 election also shows public support for raising taxes. From Politico:

Six in 10 voters nationwide say they think taxes should be increased, a welcome statistic for President Barack Obama and a sign that the president's attacks on Mitt Romney's proposed tax cuts for the wealthy may have been effective.

Almost half of voters said taxes should be boosted on Americans making more than $250,000 per year, and one in seven voters said taxes should be increased on all Americans.

Only about a third of voters said taxes should not be increased at all, the exit polls showed. [Politico, 11/6/12]

MYTH: Ernst & Young Report Is Evidence That Raising Tax Rates On The Wealthy Would Hurt The Economy

Megyn Kelly: Ernst & Young Report Predicts “Raising Tax Rates Even On The Wealthy Would Hurt The Economy.” On America Live, Fox host Megyn Kelly noted that President Obama's economic plan included “budget cuts and tax hikes,” but cited an Ernst & Young study that predicts “raising tax rates even on the wealthy would hurt the economy”:

KELLY: President Obama scheduled now to meet with business leaders -- busy day at the White House -- to talk about budget cuts and tax hikes. It's all part of his plan to help avoid the fiscal cliff. But in the last 24 hours we got reports on two different studies, one by Ernst and Young, the other by the Congressional Budget Office, that predict that raising tax rates even on the wealthy would hurt the economy. [Fox News, America Live, 11/14/12]

Elizabeth MacDonald Cites Ernst & Young Study To Claim "Higher Marginal Tax Rates Will Result In A Smaller U.S. Economy." Fox Business' Elizabeth MacDonald repeatedly cited the Ernst & Young study to claim “higher marginal tax rates will result in a smaller U.S. economy, fewer jobs, less investment, and lower wages”:

MacDONALD: According to a new study by the accounting firm Ernst & Young, the tax hikes wipe out about 710,000 jobs at small businesses across the country and increase unemployment by 0.5 percent. The tax hikes would cause real after tax wages to fall by 1.8 percent, triggering a decline in workers' living standards. That's what Ernst & Young says. Now the accounting firm also found U.S. GDP would fall 1.3 percent, or by 200 billion dollars. The president's tax hikes could hit a broad range of small businesses, Ernst & Young says. The new tax hikes would hit small businesses that employ 54 percent of the private-sector workforce but pay 44 percent of federal business income taxes. Ernst & Young says, quote, higher marginal tax rates will result in a smaller U.S. economy, fewer jobs, less investment, and lower wages. [Fox News, Happening Now, 11/14/12]

FACT: Ernst & Young Report Prepared On Behalf Of Partisan Organizations And “Never Examined” Obama's Full Proposals

Ernst & Young: “Higher Marginal Tax Rates Result In A Smaller Economy, Fewer Jobs, Less Investment, And Lower Wages.” The study produced by the accounting firm Ernst & Young claimed to examine Obama's proposed higher marginal tax rates, and found that those rates “have significant adverse economic effects in the long-run”:

This report finds that these higher marginal tax rates result in a smaller economy, fewer jobs, less investment, and lower wages. Specifically, this report finds that the higher tax rates will have significant adverse economic effects in the long-run: lowering output, employment, investment, the capital stock, and real after-tax wages when the resulting revenue is used to finance additional government spending. [Ernst & Young, July 2012]

Wash. Post: Job Loss Claim Based On Ernst & Young Study Is “Simply Absurd.” Washington Post fact checker Glenn Kessler reviewed a claim made by Republican congressmen that tax increases proposed by Obama would “destroy nearly 700,000 jobs,” based on the analysis by Ernst & Young. Kessler gave the claim three Pinocchio's, calling it “simply absurd,” and explained the flaws with the Ernst & Young study, including that “the study never examined what Obama claims he will do with the revenue”:

First, the study was underwritten by the White House's opponents. Second, the study never examined what Obama claims he will do with the revenue -- dedicate it to deficit reduction. And finally, the figure is so “long term” -- more than 10 years away -- that it is absurd to suggest those jobs would be lost in the near term. [The Fact Checker, The Washington Post, 11/9/12]

National Economic Council's Jason Furman: Conclusions Of Ernst & Young Are "Dramatically Out-Of-Line With Estimates By Other Analysts." Jason Furman, the Principal Deputy Director of the National Economic Council, wrote that the Ernst & Young study “fallaciously assumes that the tax cuts are used to finance additional spending, ignoring the benefits of what the President actually proposed,” and is “dramatically out-of-line with estimates by other analysts”:

The study fallaciously assumes that the tax cuts are used to finance additional spending, ignoring the benefits of what the President actually proposed which was to use the revenue as part of a balanced plan to reduce the deficit and stabilize the debt.

[...]

Even setting aside the fact that the study ignores the effects of the President's tax proposals on short-term growth and long-term deficit reduction, the conclusions are still dramatically out-of-line with estimates by other analysts, including not only the Congressional Budget Office but also the Bush Administration Treasury Department. [The White House Blog, WhiteHouse.gov, 7/17/12]

Media Matters: Report Was Prepared On Behalf Of Partisan, Conservative-Leaning Industry Organizations. A Media Matters investigation of Ernst & Young found that the report was prepared on behalf of partisan, conservative-leaning industry organizations that have “opposed Obama administration policies, including the Independent Community Bankers of America, the National Federation of Independent Business, and the United States Chamber of Commerce.” [Media Matters, 7/18/12]

MYTH: Raising Taxes On The Rich Won't Help Fix Deficit Crisis

Brian Kilmeade: Raising Taxes On The Wealthy Will Not “Make Any Significant Difference To The Trillion Dollar Over Budget Situation.” Fox and Friends co-host Brian Kilmeade claimed that raising taxes on the wealthy is useless because “there's not a single person who knows how to add that believes that it will make any significant difference to the trillion dollar over budget situation we are in right now.” He concluded, “Why does [Obama] act like that means something?” [Fox News, Fox and Friends, 11/15/12]

Varney: Increasing Taxes Would Only Pay “The Interest On The National Debt For Ten Weeks.” On Fox and Friends, Varney argued that increasing taxes on higher income taxpayers was pointless because the “87 billion dollars per year” in revenues would only pay “the interest on the national debt for ten weeks.” He also claimed that Obama “thinks that if you tax the top two percent some more, you will pay for all the goodies, all the handouts that we've got going.” [Fox News, Fox and Friends, 11/15/12]

FACT: Letting Tax Cuts For Upper-Income Earners Expire Would Lower Deficit

NY Times: President Obama's Proposal To Allow The Bush Tax Cuts To Expire For Wealthier Americans Would Raise $850 Billion Dollars In A Decade. The New York Times reported that “economists estimate that letting the cuts expire for people above that threshold would generate $850 billion over 10 years”:

President Obama, drawing a contrast with what he called Republican trickle-down economics, called on Monday for temporarily extending the Bush-era tax cuts for people making less than $250,000 while letting the taxes of the wealthiest go up.

[...]

A one-year extension for people making under $250,000 would cost the government $150 billion in revenue, the administration estimates, an amount that would be added to the deficit. In a point of comparison, economists estimate that letting the cuts expire for people above that threshold would generate $850 billion over 10 years. [The New York Times, 7/9/12]

Robert Reich: "The Only Way America Can Reduce The Long-Term Budget Deficit ... Is By Raising Taxes On The Super Rich." In a Huffington Post blog post titled “Why We Must Raise Taxes On The Rich,” former Labor Secretary Robert Reich argued that "[t]he only way America can reduce the long-term budget deficit ... is by raising taxes on the super rich":

Here's the truth: The only way America can reduce the long-term budget deficit, maintain vital services, protect Social Security and Medicare, invest more in education and infrastructure, and not raise taxes on the working middle class is by raising taxes on the super rich. Even if we got rid of corporate welfare subsidies for big oil, big agriculture, and big Pharma -- even if we cut back on our bloated defense budget -- it wouldn't be nearly enough. [The Huffington Post, 4/4/11]

CBO: Extending The Bush Tax Cuts Would Increase Deficits By $2.6 Trillion Over 10 Years. In January 2010, the non-partisan Congressional Budget Office estimated that extending the tax cuts enacted in 2001 and 2003 would increase deficits by $2.6 trillion between 2011-2020. [Congressional Budget Office, January 2010]

For more on Fox's straw-man arguments dismissing benefits of higher tax rates for the wealthy, click here.