OKLAHOMA'S economy has fared better than most with a fairly low unemployment rate. According to the Oklahoma Employment Security Commission, 84,980 Oklahomans were unemployed in June. But thanks to looming tax increases supported by President Barack Obama, the state's unemployment rolls could swell by 8,400, according to a new report. And those job losses may be just the beginning.
A report by Ernst & Young (on behalf of the Independent Community Bankers of America, the National Federation of Independent Business, the S Corporation Association, and the U.S. Chamber of Commerce) examined the long-run macroeconomic impact of increasing tax rates on upper-income taxpayers in 2013. The report came to an obvious conclusion: Raising taxes harms economic growth.
Tax cuts enacted under former President George W. Bush are set to expire in January; Obama favors hiking taxes for those earning more than $250,000. The Ernst & Young report notes the looming tax changes would increase the top rate on ordinary income to 40.9 percent for high earners, increase capital gains taxes from 15 percent to 24.7 percent, and almost triple the tax on dividends, to 44.7 percent.
By reducing the reward for investment and work, the tax increases are expected to have a negative impact on the economy and job creation. In Oklahoma, the Ernst & Young report predicts the tax increases will reduce output by $2.1 billion. Nationally, the report estimates a loss of 710,000 jobs and $200.9 billion in output, predicting the tax increases will “result in a smaller economy, fewer jobs, less investment and lower wages.”
The report makes clear that Obama's plans to soak the rich may drown the poor, reducing job opportunities for people who hardly qualify as “rich.” At the same time, automatic defense budget cuts of $50 billion per year loom on the horizon if Obama fails to reach a deficit reduction agreement with Congress. You'd think national defense would be a bigger priority than “green investments” in failed companies, but apparently not. So far, the president hasn't shown he's willing to reduce wasteful spending instead of gutting defense.