Study says Obama tax proposals could cost 700,000 jobs

After learning that a Study says Obama tax proposals could cost 700,000 jobs Republican Speaker of the House John Boehner is rightfully hammering President Barack Obama on Tuesday after the accounting firm Ernst and Young released the results of a study funded by pro-business groups hostile to the Democrat's agenda.

The firm's results proved that Obama's proposed tax hikes on the so called wealthy would needlessly cost an already sputtering economy another 700,000+ jobs.

"Our economy is still struggling under President Obama's policies, and his massive tax hike will only make things tougher," Boehner said in a statement. "It's one of the worst possible ideas at one of the worst possible times for families and small businesses." Said Boehner.

Obama has been relentlessly campaigning on the idea of extending the Bush-era tax cuts on income up to $250,000 level and let them expire for income above that level. He and his fellow Democrats accuse Republicans of holding middle-class tax relief hostage as a ploy to help the very rich (the so called wealthy would see the benefits of the tax cuts on the first $250,000 of income). Some polls have suggested that the public broadly supports the president’s ideas in principle, even though Republicans have pointed out that his proposal do not yet exist as legislation.  Democrats are expected to water down some of the president's recommendations none the less.

The Ernst and Young study focused the impact of the consequences increasing the top marginal tax rates. They also studied the potentially disastrous effects of the other proposals included in the president's budget and broader tax plans.

This report exposes the four sets of provisions that would increase the top tax rates:

• The proposed increase in the top two tax rates from 33 to 36 percent and the other from 35 to 39.6 percent.
• The reinstatement of a limitation on itemized deductions for high-income taxpayers (called the "Pease" provision).
• The taxation on dividends treated as ordinary income at a top income tax rate percentage of 39.6 and also increasing to 20 percent the top tax rate applied to capital gains.
• The increase in the Medicare tax from 2.9 percent to 3.8 percent for high-income taxpayers as well as the application of the new 3.8 percent tax on investment income including flow-through business income, interest, dividends and capital gains.

Here is what Ernst and Young concluded would happen:

• Overall output in the long-term would fall by 1.3 percent, or $200 billion, in today's economy.
• Long term Employment would fall by 0.5 percent, or roughly 710,000 fewer jobs.
• Long term Capital stock and investment would decrease by 1.4 percent and 2.4 percent, respectively.
• Real after-tax wages would decrease by 1.8 percent, resulting in a decline in workers' standard of living relative to what would have occurred otherwise.

The report was prepared by Ernst and Young on behalf of many pro-business groups that include the Independent Community Bankers of America, the National Federation of Independent Business, the S Corporation Association and the United States Chamber of Commerce. (Robert Carroll, one of its co-authors, served as deputy assistant secretary for tax analysis in George W. Bush's Treasury Department.)

When asked for a formal on the record response to the study, two White House officials declined to do so.

"This report shows the president's small business tax hike threatens hundreds of thousands of jobs, and will lead to even less economic growth, less investment and lower wages for American workers," Boehner said.

The speaker emphasized that the Republican-led House will vote this month to extend all of the Bush-era tax cuts setting the stage for a much broader debate on overhauling the entire tax code.