South By North Strategies, Ltd.

Economist Robert Frank isn’t buying arguments about the relationship between top marginal tax rates and job creation.

That realization appears to have led some Republicans to resurrect their time-honored claim that because many top earners own small businesses, higher top tax rates would severely compromise job creation. But that argument flies in the face of the basic cost-benefit test that governs rational hiring decisions. As every economics textbook on the subject makes clear, a business will hire additional workers whenever, and only whenever, their contribution to the bottom line promises to exceed their pay. If that criterion is satisfied, hiring makes economic sense, no matter how poor the business owner might be. And if it isn’t, no hiring will occur, even if the owner is a billionaire.