Economics 101: Raising Taxes on Wealthy Doesn’t Kill Jobs

In the run-up to the 2012 general election, the anti-Prop 30 fear mongering was reaching a fevered pitch. The sky would fall, said groups like the Howard Jarvis Taxpayers Association (HJTA) and the corporate-backed National Federation of Independent Business (NFIB) if Prop 30 passed. According to these groups, demanding the ultra-rich pay their fair share to protect California schools from devastating cuts would lead to economic catastrophe.

In a San Jose Mercury News op-ed published on Oct. 12, 2012, HJTA boss Jon Coupal and NFIB California President John Katabek wrote that Prop 30 would result in jobs fleeing California at a record pace.

Without jobs, private sector spending plummets. Without private sector spending, tax revenue plummets. This isn't rocket science, it's Economics 101.

Perhaps Coupal and Katabek might want to think about repeating Economics 101. Prop 30 did exactly what Gov. Brown, labor unions, education advocates and economists said it would. It saved schools from the chopping block, stabilized California’s budget and strengthened our economy. And jobs? We actually added them in California. A lot of them.

Pulitzer-Prize winning economics and tax writer David Cay Johnston breaks down what’s happened since Prop 30 passed in Sunday’s Sacramento Bee

So what happened after voters approved the tax increases, which took effect at the start of 2013?

Last year California added 410,418 jobs, an increase of 2.8 percent over 2012, significantly better than the 1.8 percent national increase in jobs.

California is home to 12 percent of Americans, but last year it accounted for 17.5 percent of new jobs, Bureau of Labor Statistics data shows.

So how could the fear mongers have been so wrong? Truth is, they’re always wrong when it comes to dire predictions about jobs leaving California due to taxes and regulation. Study after study show that very few businesses move from state to state and those that do often have other reasons for doing so. 

Yet the Prop 30 fear mongers, and the wealthy corporations and individuals that back them, are likely to continue to play Chicken Little. But the facts tell a different story. In order to protect our economy for future generations, we need to invest in California.


Spending more money on university-based research and making it easier for star students to get college and graduate degrees by lowering or eliminating tuition could spur the California economy by attracting and retaining more smart and ambitious young people whose success is likely to generate future growth. Creating barriers for them, such as tuition hikes, would create a long-term drag on the economy.

So next time someone tries to tell you that raising income taxes will destroy jobs, tell them the evidence just does not support that claim.