transcript below the fold.
On Tuesday, the Senate Finance committee held a hearing on tax reform during which Dr. Leonard E. Burman offered an interesting response to the oft-cited connection between hiring and tax rates. He argued that since labor costs are tax-deductible, employers benefit so long as a worker produces as much as the costs of hiring him or her. Demand, he added, is the far more significant factor in a business' hiring decisions and the more serious problem as of late.
This week, President Obama proposed paying for the American Jobs Act with tax increases on the very wealthy, or as the Heritage Foundation puts it: "tax hikes on job creators." This is typical of conservative messaging, dubiously framing all people who earn more than $200 thousand per year as "job creators," and repeating the unsubstantiated claim that moderate tax increases on the wealthy cause businesses to hire fewer workers. The Heritage Foundation cites themselves as the source to backup this claim.
As Dr. Burman argued, US businesses are far less responsive to tax rates than many would have us believe. The non-partisan Congressional Budget Office notes that "increasing the after-tax income of businesses typically does not create much incentive for them to hire more workers in order to produce more, because production depends principally on their ability to sell their products."
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