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Taxing rich not to hurt jobs: US Congress office

business Updated: Nov 10, 2012 02:13 IST
Taxing rich

Allowing income tax rates to rise for wealthy Americans and maintaining rates for the less affluent would not hurt US economic growth much in 2013, the Congressional Budget Office (CBO) said on Thursday, stepping into a dispute between Republicans and Democrats over how to resolve the so-called "fiscal cliff."

The report by the authoritative non-partisan arm of Congress is expected to fuel President Barack Obama's demand for higher taxes on the rich part of his proposal to avoid the full impact of the expiring tax cuts and across-the-board spending reductions set to begin in early 2013 unless Congress acts.

The CBO said the tax hikes for the wealthy would reduce job growth by around 200 000 jobs, much less than the 700,000 in job losses claimed by Republican Speaker of the House John A Boehner.

Obama has also stuck to his position with the White House reiterating on Thursday that the President sees his election victory on Tuesday as an endorsement by voters of his view on higher taxes for the affluent.

The Congress Office said extending all of the tax cuts would boost US gross domestic product growth next year by a little less than 1.5 percentage points.

If the tax rates were extended only for individuals earning less than $200 000 and couples earnings less than $250 000, CBO said growth would rise by 1.25%.

Wall Street estimates show third-quarter GDP (gross domestic product) growth was 2.8%. Unemployment is at 7.9%.

Eliminating the spending cuts would add back 0.75 percentage points of growth, the CBO pointed out.