Ralph Hiesey commenting on a DeLong re-post of an Alan Blinder argument contra the touching Republican custom of calling all things Keynesian "Job-Killing":
I'm a bit upset that you " professional economists" don't seem to understand the most important--and what I think should be a blindingly obvious reason why the Republican claim of "job killing tax increases" is completely wrong. As I will explain, the opposite is likely the case.
I'm a small business person, so the reason is obvious to me. If my marginal tax rate is increased at a sufficiently high income level (i.e. so it affects only "the moderately rich") such a tax increase will INCREASE job creation, not decrease it. Here's why--
If you increase my tax rate, say above $200K/year, and my income is more than that--then this gives me MORE incentive to hire someone in my business, which will give me the opportunity to either increase the business efficiency or reduce my effort in the business, provided the additional wage still keeps my income above the higher tax rate threshold.
With a higher marginal tax rate on higher income, the marginal cost of hiring an additional person will be LESS than before under these circumstances, because their wages will be be a business expense, which will cause the government to pay a higher percentage of their wages than if the tax rate were as it was before. That's just the benefit to me. Incidentally the economy will also benefit: The hired person's income would then likely increase consumption close to the amount of wages assuming their pay was not high--since being in a lower wage bracket they would likely spend most of their income, further increasing demand, thus generally increasing GDP and employment, then if the money constituted a a larger portion of my income. If this happened generally, among other businesses as well it could even increase demand for my products, and eventually indirectly help my business in this way.
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