Tax increases boost jobs?

Tax increases boost jobs?

Taxes-egyptian-peasants-wikimedia-300x163Do tax increases boost jobs? Or kill jobs? Here’s the take of David Cay Johnston in the Bee:

Dire predictions about jobs being destroyed spread across California in 2012 as voters debated whether to enact the sales and, for those near the top of the income ladder, stiff income tax increases in Proposition 30. Million-dollar-plus earners face a 3 percentage-point increase on each additional dollar.

“It hurts small business and kills jobs,” warned the Sacramento Taxpayers Association, the National Federation of Independent Business/California, and Joel Fox, president of the Small Business Action Committee.

So what happened after voters approved the tax increases, which took effect at the start of 2013?

Last year California added 410,418 jobs, an increase of 2.8 percent over 2012, significantly better than the 1.8 percent national increase in jobs.

California is home to 12 percent of Americans, but last year it accounted for 17.5 percent of new jobs, Bureau of Labor Statistics data shows.

According to the bio at the end of his piece:

David Cay Johnston, a California native who won a 2001 Pulitzer Prize for his coverage of tax policy, teaches the tax, property and regulatory law of the ancient world at Syracuse University College of Law.

In that case, he should look up what the ancient logicians called a “non sequitur“: “a statement that is not connected in a logical or clear way to anything said before it.”

Tax-increase critics, including yours truly, never said the Prop. 30 tax increase would prevent growth, only that during a recovery jobs growth would be less than it otherwise might be; and during a recession, jobs losses would be greater than under lower taxes.

See the difference?

Growth causes

There also are three major causes for the higher jobs growth:

First, taxes today actually are lower than than during the Great Recession. Remember Gov. Arnold Schwarzenegger’s record $13 billion tax increase of 2009, which “terminated” jobs? When it was expiring, in 2011, new Gov. Jerry Brown tried to extend it. He failed. Then in 2012, as Johnston notes, Prop. 13 passed — but it was $7 billion, just over half Arnold’s tax increase.

California is the only state that has enjoyed a $6 billion tax cut from 2010 to 2014.

Second, we have Silicon Valley, a unique place on earth. But unless you’re a >180 IQ computer entrepreneur billionaire, you can’t afford to live there.

Third, as the Chapman University Economic Forecast has pointed out, and I reported, the jobs upsurge depends to a great extent on construction, which was devastated during the Great Recession. People have to live and work somewhere. So any recovery would mean more construction at higher rates than in other states that never suffered a construction wipeout.

Johnston does concede:

California has a more volatile economy than most of the country. Aerospace, for example, took a big hit after the Berlin Wall came down, and the state has repeatedly experienced other ups and downs larger than the changes in the national economy.

Amazingly, he also writes:

Some research into tax rates indicates that high rates have the opposite effect: People may work harder, trying to make more money to achieve a desired after-tax income and may slough off if tax rates are lowered.

So if you’re already working 80-hour weeks to pay your $4,000 mortgage for a shotgun shack in Orange County, and taxes go up, you’ll be eager to work 100 hours.


He also disses my home state:

But as long as the California economy remains vibrant – as long as it does not fall into a pattern of fundamental decline the way Michigan has, for example – the temporary tax increases voters approved in 2012 are unlikely to damage economic growth even if they are made permanent.

Actually, Michigan has been cutting taxes and increasing its pro-business climate, with exemplary results. Outside the disaster of Detroit — which among other leftist follies is punished by a special 2.4 percent extra city income tax, something Johnston should applaud — the Great Lake State has been booming.

Stephen Moore reported:

The Motor City’s meltdown has overshadowed the muscular economic recovery in this region, whose success reflects a manufacturing and technology renaissance. Congress’s Joint Economic Committee reports that manufacturers created 600,000 new jobs in 2013, and western Michigan is one of the places where they’re sprouting the fastest.

The state overall is in the midst of a broad-based economic recovery. According to a 2013 study of Bureau of Labor Statistics data by the state’s Mackinac Center for Public Policy, Michigan has created more than a quarter-million jobs since the official start of the U.S. economic recovery in June 2009—a 7% increase that ranks fifth best in the nation.

Outsiders might attribute the state’s turnaround to the federal auto bailouts—President Obama does—but that’s a small part of the story. This is a healthy, diversified recovery. According to Mackinac’s study, only about 4% of Michigan’s four million jobs are auto-related. Even those jobs are at least as dependent on sales to Honda, Toyota and Mercedes as they are on the sales to GM and Chrysler. International trade is now a big net plus for Michigan. Light manufacturing, information technology and health care have all seen strong job growth.

I don’t know when the next recession will hit. But as with the last one, high-tax California will be ill prepared to weather the storm, like a ship that sails well during light winds but whose sails collapse during a gale.


Write a comment
  1. SeeSaw
    SeeSaw 23 July, 2014, 22:30

    I think you meant to say that Prop. 30 passed in 2012. Regardless of what number it was, it was great for CA and most people didn’t even notice it as far as making a difference in the size of their pocketbooks.

    Reply this comment
  2. cyrano
    cyrano 24 July, 2014, 07:31

    You are correct. We cut spending $150 a month to offset the tax increase.

    Reply this comment
    • NTHEOC
      NTHEOC 24 July, 2014, 07:41

      CRYano says
      You are correct. We cut spending $150 a month to offset the increase
      Sure you did doomer! You must be the only one because data shows spending is up big time.

      Reply this comment
    NTHEOC 24 July, 2014, 07:44

    What happened to all the doomer rants about California being Detroit????

    Reply this comment
  4. cyrano
    cyrano 24 July, 2014, 08:38

    I know our household budget to the dime. We reduced spending and could care less what others do, and even less about your emotionally immature tantrums.

    Reply this comment
    • Ted-- Manager
      Ted-- Manager 24 July, 2014, 10:08


      I pulled your household budget up on NSA database 402-C and I think you are incorrect. Your cut was only $50. PLEASE stop fudging out here.

      Reply this comment
    • NTHEOC
      NTHEOC 24 July, 2014, 10:46

      So basically you had to cut out a couple HBO movie channels from your cable, not a bad sacrifice to live in a wonderful state like California!

      Reply this comment
      • Donkey
        Donkey 24 July, 2014, 16:50

        Ntheoc, you are a pathetic RAGWUS mooch, no shame, no moral values, only sociopathic narcissistic greed. 🙂

        Reply this comment
  5. Ulysses Uhaul
    Ulysses Uhaul 24 July, 2014, 08:57

    Cranko’s flashbacks creeping him out?

    Why do these bad boys continue to use a fair and balanced forum to take out their life disappointments on really decent people….

    Keep your head down Cranko and lather corn on the cob on your summer carnival route!

    Reply this comment
  6. cyrano
    cyrano 24 July, 2014, 17:49

    There is a bit of vicious criticism directed at one who manages their family budget. I guess among some that is heresy. I don t need the childish outbursts, so signing off from this site. I am sure there will be some more immature comments. Oh well, not for my eyes to view.

    Reply this comment
    • S Moderation Douglas
      S Moderation Douglas 24 July, 2014, 20:00

      “Vicious criticism” is a response to illogical posts. The increased sales tax costs the average California family about $100 a year.

      $150 month spending reduction would be a gross overreaction.

      Reply this comment
    • bunkerqueen
      bunkerqueen 28 July, 2014, 13:05

      Nahh Cyrano….everyone you’re chatting with…they’re all Tardsly…err I mean Ted! If you just address him and not his finger puppets these conversations go so much smoother!

      Reply this comment
  7. Ulyssess Uhaul
    Ulyssess Uhaul 24 July, 2014, 18:59

    A shame. We need spirited debate and controlled levity. The fine balance is distorted by emotions…..come back Cranko…….you can beat on us.

    Reply this comment
  8. S Moderation Douglas
    S Moderation Douglas 24 July, 2014, 19:35

    John Seiler, July 23, 2014

    ” Tax-increase critics, including yours truly, never said the Prop. 30 tax increase would prevent growth, only that during a recovery jobs growth would be less than it otherwise might be; and during a recession, jobs losses would be greater than under lower taxes.”
    John Seiler, Jan. 3, 2013

    “Within the next few months we’ll see how hard the tax increases have sapped the economy. If history is any guide, it’s going to be bad. The reduced economic activity could end up reducing revenues to all levels of government, ironically making the fiscal and debt crises worse.

    California Political Review

    I never said it would “prevent growth”, I only said it would REDUCE ECONOMIC ACTIVITY!!!

    ” See the difference?”

    Reply this comment
    • John Seiler
      John Seiler Author 26 July, 2014, 17:08

      Thanks for quoting me. First, the state still has a “wall of debt,” as Gov. Brown acknowledges, of at least $340 billion.

      Second, today I do have a different perspective because 18 months have passed. Brown has turned out to be more reasonable on the budget than he seemed to be back in Jan. 2013, and much better than Schwarzenegger.

      Third, I will conceded that I was wrong on revenues going down. I didn’t see that taxes actually were going down in relation to the Schwarzenegger tax increases, something I realized only last week, which is a pro-business action.

      Reply this comment
      • S Moderation Douglas
        S Moderation Douglas 27 July, 2014, 07:56


        Old Republican wives tale:

        “If you reduce the tax *rate*, tax *revenue* will increase… happens every time.”

        So sayeth Limbaugh, Hannity,…….and Seiler.

        It never was true.

        And saying a tax increase is *actually* a decrease sounds like 1984 doublespeak.

        Reply this comment
  9. S Moderation Douglas
    S Moderation Douglas 24 July, 2014, 20:03

    “It’s going to be bad.”

    Reply this comment
  10. David Cay Johnston
    David Cay Johnston 27 July, 2014, 08:29

    You should compare your writing with what you quoted from my Bee op-ed. They don’t match.

    You wrote: “Tax-increase critics, including yours truly, never said the Prop. 30 tax increase would prevent growth, only that during a recovery jobs growth would be less than it otherwise might be; and during a recession, jobs losses would be greater than under lower taxes.”

    Not true. My Bee piece quotes the official ballot statement of Prop 30 opponents: ““It hurts small business and kills jobs.”
    See the difference?

    I compared the official “kills jobs” claim to the actual results, while you fabricated. Had jobs declined I would have reported that. I also reported that the reasons California enjoyed jobs growth in 2013 more than 50% better than the national average are complex, giving historical context. You neglected to take note of that.

    You also make an assertion that I did not. Read your first two sentences, which distort what I wrote. Since you suggest that you know rhetoric, can you see the huge difference?

    My Bee piece made clear that economic theory and actual evidence shows that income taxes increases on high earners do not affect decisions on hiring, yet you ignore this. Some types of tax increases would put a damper in hiring, as my Bee piece notes, but you fail to tell your readers that.

    You cite Silicon Valley as unique. Don’t tell that to other high tech centers. But what of the fact, contained in the graphic with my piece, that all nine Central Valley counties that are among the top 10% nationally in the size of their job markets enjoyed above-average growth?

    Comparing political claims to actual results is a cornerstone of journalism, though seldom practiced in this era of glitzmongering and covering what politicians say instead of what they do. Since I was a teenager reporting for two weeklies in Santa Cruz County in 1967 I have been looking out for the interests of taxpayers. Just two of my investigations — as officially measured by Congress’s tax experts — resulted in stopping more than a quarter trillion in tax dodges. Note that T – more than $250 billion.

    The tax system does not operate at all as most politicians and voters – and you – understand. Its actual workings are detailed in my bestselling and award-winning trilogy: PERFECTLY LEGAL, FREE LUNCH and THE FINE PRINT. For example, many big corporations turn a profit on their taxes, a story I broke 12 years ago that was later confirmed by a Congressional investigation that produced a four-volume, 1,800-page study. I have written numerous pieces explaining this, which stems from a 1986 change to Section 531.

    My Bee piece also addressed the crucial role taxes play in creating the commonwealth goods and services that form the foundation on which private wealth creation (and our liberties) rely. The Framers understood this. They created our Constitution specifically so government would have the power to tax and to regulate commerce, neither of which existed during the failed first American Republic.

    You also ignore the value of commonwealth amenities paid for with taxes. My Bee Op-Ed showed why star scientists who leave California prefer Washington State to Texas, both states that do not tax individual income. Where else are star scientists attracted? New Jersey, New York and Massachusetts, high tax states all.

    You express amazement at one line of my piece, revealing your certitude about well-studied issues you clearly do not understand. Worse, you do not even honestly cite what I wrote and come up with a silly analogy that ignores the differences in income versus gift and estate taxes. If you researched before you wrote you would not be amazed, but you would be informed.

    The men who founded this wonderful country believed in policies based on facts and reason. You start off misstating what I wrote, go on to rewrite history and to ignore inconvenient facts, all to justify your pre-conceived viewpoint, a simplistic one that fails to distinguish among different types of taxes. Neither economic theory or empirical evidence support you. And you compound this by not fairly describe what I wrote, but instead criticize my piece using stuff you just made up.

    Reply this comment
  11. Donkey
    Donkey 27 July, 2014, 11:56

    The last paragraph defines to the letter how the RAGWUS views any critical words written about their Quid Pro Quo scheme. 🙂

    Reply this comment

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Jerry BrownJohn SeilerTaxesDavid Cay Johnston

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