Economics Magazine

185 Economists Warn Congress: 'Fiscal Cliff' Tax Hikes Risk Economic Damage

Posted on the 12 December 2012 by Susanduclos @SusanDuclos

By Susan Duclos
The non-partisan National Taxpayers Union has sent an open letter to Congress, signed by 185 economist, to date, urging them to vote against any tax hikes and warning that  "increasing taxes" as part of the fiscal cliff negotiations,  "would likely slow or reverse our nation's fragile economic recovery and undermine long-term growth."
Text of the letter and signatories will be posted below the post.
The NTU, who organized the letter, stresses that allowing tax rates to rise for anyone in a fiscal cliff deal “would have a significant, negative impact on the economy.”

“At this critical point for our nation’s financial future, the strong support from so many economists for a cautious approach to tax hikes and for meaningful spending restraint should serve as a clear warning to Congress,” said NTU Executive Vice President Pete Sepp. “Resorting to tax hikes, particularly without budget or entitlement reform, is not just a raw deal for taxpayers, it’s also a losing hand for the American economy.”
In their statement, the diverse group of 185 members of the economics community advised against allowing the 2001 and 2003 tax relief laws expire for “some or all taxpayers.” They further contended broad tax and budget reform offers a better route that would avoid the negative consequences, such as job losses, of short-term revenue grabs:
“Low taxes can have a constructive economic effect by keeping money in the private sector, where it is far more likely to be utilized for efficient purposes. By contrast, raising taxes would divert resources into the relatively inefficient public sector, thereby curbing potential job creation and economic growth. This effect would be even more pronounced during a persistent slump. “In particular, Congress should avoid raising marginal tax rates on income and taxes on investment, such as capital gains and dividends taxes. These types of taxes most directly and meaningfully affect job creation.”
The signers included former Congressional Budget Office Director (and current American Action Forum President) Douglas Holtz-Eakin; former Office of Management and Budget Director Jim Miller; as well as scholars from a variety of academic entities, including the University of Michigan, University of Chicago, UCLA, University of Virginia, Emory University, Georgetown, Pomona College, and the Wharton School at University of Pennsylvania (affiliations on the letter were listed for identification purposes only). Signatories with other institutions included Donald Luskin of Trend Macrolytics, Richard W. Rahn of the Institute of Global Economic Growth, David J. Theroux of the Independent Institute, and David G. Tuerck of the Beacon Hill Institute at Suffolk University.
Sepp concluded, “Economists are becoming increasingly concerned that unless Washington stops gambling with other people’s money and gets the federal government’s own finances in order, the odds for a more prosperous year ahead will get much slimmer. Taxpayers would agree.”


Letter and signatories below:

Fiscal Cliff Tax Hikes Risk Economic Damage. An open letter to Congress:
December 11, 2012
Dear Members of Congress:
As the nation approaches the so-called "fiscal cliff," we, the undersigned economists, urge Congress to carefully consider the relative merits of tax increases and spending restraint. Increasing taxes would likely slow or reverse our nation's fragile economic recovery and undermine long-term growth. Restraining the growth of expenditures, however, would help stabilize the government's fiscal imbalance and create a more conducive environment for robust expansion.
Some in Congress have advocated allowing the 2001 and 2003 taxpayer relief laws to expire for some or all taxpayers. Such an action would have a significant, negative impact on the economy. Low taxes can have a constructive economic effect by keeping money in the private sector, where it is far more likely to be utilized for efficient purposes. By contrast, raising taxes would divert resources into the relatively inefficient public sector, thereby curbing potential job creation and economic growth. This effect would be even more pronounced during a persistent slump.
In particular, Congress should avoid raising marginal tax rates on income and taxes on investment, such as capital gains and dividends taxes. These types of taxes most directly and meaningfully affect job creation.
Additionally, lawmakers must resist other destructive proposals that would boost effective tax burdens, such as curtailing itemized deductions for higher earners or imposing discriminatory taxes on energy or other industries. Such policies are merely revenue-raising ploys when executed outside the context of comprehensive tax reform that includes correspondingly lower marginal rates. And like other tax increases, they would serve as inadequate substitutes to much-needed spending restraint.
While some Members of Congress are concerned about the short-term impacts of slowing the growth of federal expenditures, they must uphold their commitment to the American people to address the alarming trajectory of U.S. spending and borrowing. There are more tangible benefits to consider as well: research has shown that spending restraint is superior to tax increases for both deficit reduction and long-term economic vitality. This has proven true in many other developed nations that have implemented fiscal adjustments.
To best foster a strong economy, Congress should ultimately create a simpler system of taxation with a broader base and low rates on income and investment. Simultaneously, it should prioritize government programs and pursue entitlement reforms that bring the budget to sustainable balance. Individuals and businesses are depending on -- and deserve -- greater certainty in policy making that affects their everyday financial decisions.
Sincerely, The Undersigned (affiliations listed for identification purposes only): James C.W. Ahiakpor
California State University, East Bay
Donald L. Alexander
Western Michigan University
Howard Baetjer
Towson University
Charles W. Baird
California State University, East Bay
Stacie Beck
University of Delaware
James P. Beckwith
North Carolina Central University
Daniel K. Benjamin
Clemson University
Michael Bennett
Curry College
James T. Bennett
George Mason University
William Beranek
University of Georgia
M. Douglas Berg
Sam Houston State University
Richard E. Bernstein
Temple University
Sanjai Bhagat
University of Colorado at Boulder
Cecil Bohanon
Ball State University
Michael Bond
University of Arizona
Scott C. Bradford
Brigham Young University
Charles H. Breeden
Marquette University
David P. Brown
University of Wisconsin – Madison
Lawrence Brunner
Central Michigan University
Phillip J. Bryson
Brigham Young University
James L. Butkiewicz
University of Delaware
William N. Butos
Trinity College
Victor Canto
La Jolla Economics
Richard Cebula
Armstrong Atlantic State University
Dustin Chambers
Salisbury University
Don Chance
Louisiana State University
Kenneth W. Chilton
Lindenwood University
Lawrence R. Cima
John Carroll University
Kenneth W. Clarkson
University of Miami
John P. Cochran
Metropolitan State College of Denver
Michelle Connolly
Duke University
Michael Connolly
University of Miami
Mike Cosgrove
University of Dallas
Eleanor D. Craig
University of Delaware
Wayne Crews
Competitive Enterprise Institute
Ward S. Curran
Trinity College
Lawrence S. Davidson
Indiana University
Anthony Davies
Duquesne University
Ronnie H. Davis
Florida Institute of Technology
Clarence R. Deitsch
Ball State University
Stephen J. Dempsey
University of Vermont
Joseph S. DeSalvo
University of South Florida
Floyd H. Duncan
Virginia Military Institute
Frank Egan
Trinity College
John B. Egger
Towson University
Richard E. Ericson
East Carolina University
Paul Evans
Ohio State University
Frank Falero
California State University, Bakersfield
Eugene F. Fama
University of Chicago
Dorsey D. Farr
French, Wolf & Farr
W. Ken Farr
Georgia College & State University
Price V. Fishback
University of Arizona
John A. Flanders
Central Methodist University
Garry A. Fleming
Roanoke College
Harold D. Flint
Montclair State University
James Forcier
University of San Francisco
Bill Ford
Middle Tennessee State University
Michele Fratianni
Indiana University
B. Delworth Gardner
Brigham Young University
David E.R. Gay
University of Arkansas
Gregory Gelles
Missouri University of Science and Technology
Robert Genetski
Paul J. Gessing
Rio Grande Foundation President
Joseph A. Giacalone
St. John’s University
Adam Gifford, Jr.
California State University, Northridge
Otis W. Gilley
Louisiana Tech University
Micha Gisser
University of New Mexico
Stephan F. Gohmann
University of Louisville
Rodolfo A. Gonzalez
San Jose State University
Linda Gorman
Independence Institute
Richard Grant
Lipscomb University
Anthony J. Greco
Louisiana University
William B. Green
Sam Houston State University
Kenneth V. Greene
Binghamton University
John G. Greenhut
Texas A&M University – Commerce
Paul Gregory
University of Houston
Earl Grinols, III
Baylor University
Dennis Halcoussis
California State University, Northridge
David L. Hammes
University of Hawaii – Hilo
Stephen Happel
Arizona State University
Scott Harrington
Wharton School, University of Pennsylvania
Scott Hein
Texas Tech University
David R. Henderson
Hoover Institution, Stanford University
Douglas Holtz-Eakin
American Action Forum President
Charles L. Hooper
Hoover Institution, Stanford University
James L. Huffman
Lewis & Clark Law School
Austin Jaffe
Pennsylvania State University
D. Bruce Johnsen
George Mason University School of Law
Richard E. Just
University of Maryland
Alexander Katkov
Johnson & Wales University
Peter Kerr
Southeast Missouri State University
E. Han Kim
University of Michigan
Robert Krol
California State University, Northridge
Kishore G. Kulkarni
Metropolitan State College of Denver
Ben Kyer
Francis Marion University
Nicholas A. Lash
Loyola University Chicago
Don R. Leet
California State University, Fresno
Norman Lefton
Southern Illinois University, Edwardsville
Tom Lehman
Indiana Wesleyan University
Tony Lima
California State University
Jody W. Lipford
Presbyterian College
Hong Liu
Washington University, St. Louis
Edward J. Lopez
San Jose State University
Donald L. Luskin
Trend Macrolytics, LLC
R. Ashley Lyman
University of Idaho
Glenn MacDonald
Washington University, St. Louis
Keith Malone
University of North Alabama
Yuri N. Maltsev
Carthage College
Henry G. Manne
George Mason University
Richard D. Marcus
University of Wisconsin – Milwaukee
Michael L. Marlow
California Polytechnic State University
Deryl W. Martin
Tennessee Technological University
Timothy Mathews
Kennesaw State University
Roger E. Meiners
University of Texas – Arlington
Stephen Mennemeyer
University of Alabama, Birmingham
Harry Messenheimer
Rio Grande Foundation
Thomas Miller
University of Connecticut
Jim Miller
Former Office of Management and Budget (OMB) Director
David M. Mitchell
Missouri State University
James E. T. Moncur
University of Hawaii
Wilbur Monroe
U.S. Treasury Department, International Affairs (Ret.)
Adrian Moore
Reason Foundation
Michael Morrisey
University of Alabama
Andrew P. Morriss
University of Alabama Law School
Ronald M. Nate
Brigham Young University – Idaho
James F. Nieberding
Cleveland State University & North Coast Economics, LLC
James. B. O’Neill
University of Delaware
Lee E. Ohanian
University of California, Los Angeles
Lydia Ortega
San Jose State University
Donald J. Oswald
California State University, Bakersfield
H. Edwin Overcast
Black & Veatch
Richard A. Palfin
Economic Analysis
Penn R. Pfiffner
Construction Economics, LLC
G. Michael Phillips
California State University, Northridge
Ivan Pongracic
Hillsdale College
Barry W. Poulson
University of Colorado at Boulder (Ret.)
Richard W. Rahn
Institute of Global Economic Growth
R. David Ranson
H.C. Wainwright & Co. Economics Inc.
Farhad Rassekh
University of Hartford
Mark William Rider
Georgia State University
Christine P. Ries
Georgia Institute of Technology
Philip Romero
University of Oregon
Larry L. Ross
University of Alaska, Anchorage
Timothy P. Roth
University of Texas, El Paso
Charles K. Rowley
George Mason University
Paul H. Rubin
Emory University
John Ruggiero
University of Dayton
John Rutledge
Rutledge Capital, LLC
Robert Sauer
Royal Holloway, University of London
Robert Haney Scott
California State University, Chico
John J. Seater
North Carolina State University
Richard T. Selden
University of Virginia
Ann Sherman
DePaul University
Vlad Signorelli
Bretton Woods Research
Daniel Smith
Troy University
Chester Spatt
Carnegie Mellon University
Frank Spreng
McKendree College
Dean Stansel
Florida Gulf Coast University
Craig A. Stephenson
Babson College
Derek Stimel
Menlo College
Avanidhar Subrahmanyam
University of California, Los Angeles
John A. Tatom
Indiana State University
Jason E. Taylor
Central Michigan University
Rebecca Thacker
Ohio University
David J. Theroux
The Independent Institute
Wade L. Thomas
State University of New York at Oneota
Richard Timberlake
University of Chicago
Stephen A. Tolbert
Montgomery County Community College
David G. Tuerck
Suffolk University
Grace-Marie Turner
Galen Institute President
A. Sinan Unur
Cornell University Program on Freedom and Free Societies
Kamal P. Upadhyaya
University of New Haven
T. Norman Van Cott
Ball State University
Richard K. Vedder
Ohio University
George J. Viksnins
Georgetown University
John Volpe
Catholic University of America
Ralph Walkling
LeBow College, Drexel University
Alan Rufus Waters
California State University, Fresno
Paul W. Wilson
Clemson University
Michael K. Wohlgenant
North Carolina State University
Gary Wolfram
Hillsdale College
Frank Wykoff
Pomona College
Thomas L. Wyrick
Missouri State University
Joseph Zoric
Franciscan University of Steubenville
Robert Niehaus President, Robert Niehaus, Inc.  (signature consent received after date of letter's release)

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