Ryan Justifies Romney’s Low Tax Rate: It’s Ok, Because He Created Jobs

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"Ryan Justifies Romney’s Low Tax Rate: It’s Ok, Because He Created Jobs"

In recent years, Republicans have taken to calling uber-wealthy Americans “job creators” to justify holding the government hostage to protect their low tax rates. Less than a week after GOP presidential nominee Mitt Romney released his tax returns and revealed his 14.1 percent rate — far lower than any president’s since Richard Nixon — Ryan used a local interview to revive the job creator myth.

Romney saved $1.2 million in taxes thanks to a preference that allows investment income, known as capital gains, to be taxed at a lower rate than wage income. Ryan told Cincinnati’s WLWT that paying such a low rate was justified because low capital gains rates boost job creation:

RYAN: Point number two is this money creates jobs. When people invest in riskier propositions, meaning invest in businesses, they don’t know if they’re going to succeed or not. So you want to have more capital that goes to more businesses, especially small businesses like this one, so more people can go back to work. That creates economic growth. You know what we learned about Mitt Romney in his tax returns? He’s a successful businessman. That’s a good thing.

Watch it:

The problem with Ryan’s logic is that there is little evidence that the capital gains preference increases job creation. As the Center for American Progress’ Seth Hanlon notes, the capital gains rate was higher during sustained periods of economic growth in the 1990s, while the 2003 cut to the capital gains rate was followed by weak investment and growth. After the rate dropped in 1997, growth rates hardly changed.

As this chart from professor Leonard Burman, a former economist at Treasury and the Congressional Budget Office, shows, there is no provable correlation between changes in the capital gains tax rate and economic growth:

That chart, Burman told Congress, “should dispel the notion that capital gains taxes are a very important factor in the health of the economy. Cutting capital gains taxes will not turbocharge the economy and raising them would not usher in a depression.” Other economists came to similar findings. The Tax Policy Center found no correlation between the rate and economic growth over the last 50 years, and the University of Michigan’s Joel Slemrod found that “there is no evidence that links aggregate economic performance to capital gains tax rates.”

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