At a recent Congressional candidates’ debate in Thornton, Colo., sponsored by the Metro North Chamber of Commerce, Joe Coors, Republican candidate for the 7th Congressional District, described how a tax-the-rich plan proposed by incumbent U.S. Rep. Ed Perlmutter, D-Colo., could lead to major job losses.
The issue arose amid a discussion of potentially hiking the federal gas tax to fund infrastructure improvements.
The per-gallon federal tax of 18.4 cents hasn’t been increased in 19 years. Between increased vehicle fuel efficiency and more recently, decreasing miles driven, revenues of about $38 billion have plateaued in recent years, raising the question of “federal investment in highways and mass transit.”
As seen in the video above from the Oct. 1 debate, Perlmutter pivoted from the gas-tax issue to talk about the Bush-era income tax rates, set to expire at the end of the year as part of the multi-faceted Fiscal Cliff the country faces Jan. 1.
“Now, with respect with how do we pay for this [transportation] infrastructure…my opponent…wants to first start with the gas tax,” said Perlmutter. “I think that’s the wrong place to start. We start with [ending] tax cuts that the George [W.] Bush Administration put into place, that really benefit millionaires and billionaires. That’s the first place we should start with, in enhancing revenues so that we can build out our infrastructure and investment over a long period of time. So instead of focusing just on the ordinary person and raising their gas tax, we ought to focus on [ending] tax cuts for the wealthiest in this country.”
Coors, to his credit, responded in a later segment of the debate by describing the real-world effects of Perlmutter’s proposal.
“…His idea of taxing the rich, even according to Obama’s plan, only adds eight days of revenue to the coffers,” said Coors. “Hardly a significant amount. And what’s he going to do with the money? They’re just going to spend it.”
“But probably more importantly, folks, Ernst & Young issued a study that said if these tax rates are allowed to expire, it’s going to effect 1 million small businesses in the United States negatively, and probably cost anywhere from 700,000 jobs..”
“Employment in the long-run would fall by 0.5% or, roughly 710,000 fewer jobs, in today economy” and “real after-tax wages would fall by 1.8%, reflecting a decline in workers living standards relative to what would have occurred otherwise.”
That’s if changing the tax rates starts with income levels above $250,000 (not just billionaires and millionaires), an issue detailed by economist Thomas Sowell in a recent article, ‘Bait and Switch’ Taxes.
Coors also alludes to two other flaws in Perlmutter’s reasoning. Extending current tax rates to include upper incomes would cost $80 billion in 2013, according to CBO estimates.
Assuming that’s true, the money would go into the general fund, and would be indistinguishable from other income tax revenue, so allocating it specifically to infrastructure would be all but impossible. Add to that the fact that at current spending rates of nearly $4,000,000,000,000 (trillion) a year, the additional $80,000,000,000 (billion) would fund the federal government for about 8 days.
Coors makes a serious, practical case for why letting the Bush tax rates expire would not only not solve the problem Perlmutter claims to address, but also implicitly rebuts Perlmutter’s claims of fairness, given the substantial job losses among those whom Perlmutter is ostensibly trying to protect.