December 17, 2009
-- by Dave Johnson
This post originally appeared at Speak Out California.
A letter in the San Jose Mercury News the other day expresses the misguided but oft-repeated Republican "spin" that tax cuts and deregulation "create jobs". As usual it bears little resemblance to the truth.
Create jobs by helping business
The two ways government can affect the job market are by spending on projects through borrowing or by reducing the tax burden on families and businesses. If it borrows, it causes another tax through inflation and interest expenses that will go on forever. If it reduces taxes and regulations, the loss in revenue will be far less than the amount the Democrats are planning to spend, and without any interest.
You create jobs by making it easier for businesses to hire people through reductions in taxes and regulations, such as a tax break for every person they hire and retain. You don't make it harder for them by raising their expenses. Let's do what worked in the past.
- Businesses hire the employees they need to hire to meet demand. If demand is low no amount of tax cuts can induce a business to hire people. Why hire and pay people to have them just sit around?
- The way to get more customers into the businesses - i.e. to create demand - is to get more money circulating in the pockets of regular people. Cutting taxes for the already well-to-do doesn't accomplish this. The way to do this is with government policies that increase wages and reduce working hours, like how raising the minimum wage and mandating 40-hour weeks and weekends off helped create America's middle class. Helping regular people is good for business.
- The writer says we should do what has worked in the past. The fact is that the economy has always done better when the tax rates on the wealthy and corporations were highest. Just look it up. The reason for this is that our economic system when left to itself always becomes a low-age, everything-to-the-top system, because the wealthiest always game the system to get the most for themselves. The way to fix that is to apply regulations to prevent this, and high taxes at the top so the government can implement policies that raise the wages of the rest of the public. This is how we got out of the depression after the huge concentration of wealth that built up until 1929.
- Taxes are not an "expense." Businesses pay taxes on the profits (revenue minus expenses) -- so the businesses that need help don't need tax cuts, they need customers. It doesn't make sense to try to help businesses that are not doing well by giving even more money to their profitable competitors. We should be using that money to instead help the businesses that need the help. Helping the already well-to-do is bad for business.
Click through to Speak Out California.
Posted by Dave Johnson at December 17, 2009 6:27 PM
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