Those Job-Killing Taxes

Those job-killing tax increases, they are a problem. Just listen to any member of the GOP talk about the economy, budget, or government, and you will hear the refrain; “Tax increases kill jobs!” As an advertising slogan, it is only slightly less ubiquitous than “This Bud’s For You” or “Always Low Prices”. To be clear, I understand that conservatives do not like taxation, that they believe taxes support functions that shouldn’t be handled by the democracy, that any taxes should be flat taxes. These are all respectable, perfectly understandable ideological concepts. I disagree with them, but accept them as viable arguments.

Constantly labeling taxes as “job-killers” is another matter entirely. Constantly labeling taxes as job-killers is at best an unsupported assertion, and at worst an outright lie. There is nothing wrong with arguing the concept of taxes, or about what they support, but you need to show proof to make the affirmative statement that they kill jobs, and the proof just isn’t there. We covered this topic here before, but it bears repeating; no matter how you slice it, no one has ever been able to point to a period where tax cuts, by themselves, generated GDP growth or accelerated job creation. In fact, the opposite is true. We the people have two shining, large scale examples in the recent past to look at; the Clinton tax increases that came with the Deficit Reduction Act of 1993, and the Bush tax cuts of 2001 and 2003.

The U.S. economy, after the Clinton tax increases, grew at nearly twice the rate as it did after the Bush tax cuts. One can look at five year periods after implementation (to exclude recessionary effects on the data) or 10 year periods to account for everything. One can leave the GDP data in its raw form, or one can adjust the data to reflect the effects of the asset bubbles that featured in both time periods (a stock bubble during the 90’s and the housing bubble after the turn of the century). This information can be found in easy to handle formats, for free, and instantaneously through the Saint Louis Fed. Look it up, and if you can make a mathematical argument that tax increases hurt the economy, or even limited the economy, let The Rational Middle know.

And let Mitch McConnell know as well; he is committed to repeating his “job-killing tax increases and spending” mantra as often as possible. That he is absolutely wrong on the facts doesn’t seem to matter. That his vision for legislation is, literally, a job-killing vision doesn’t seem to matter. Conservatives like McConnell live to argue that taxes and government spending kill jobs through circuitous economic realities, when the very act of cutting government spending directly kills jobs by forcing program terminations, layoffs, and limiting consumer demand. The simple reality is that the overwhelming majority of tax revenues get spent in the U.S. economy. Take a quick look at Yahoo Finance or CNN Money and see how much of the savings U.S. companies have received from tax cuts, tax shelters, and tax credits those firms have spent in the U.S. economy.

U.S. corporations don’t see current demand rising, and they aren’t asking current workers to work more hours; there is no need for companies to invest in current spending like payroll expansion. Uncertainty over the direction of the economy further raises the bar for what companies must return on any given capital investment. The only way to change this paradigm is to push consumer spending; if the private sector won’t do it, the government of the people can. Going a little further, small marginal increases in the tax rate make it more appealing for firms to invest profits in capital projects and hiring. These concepts aren’t new or revolutionary, and they are built on a solid, lengthy, and supportable foundation of economic data from both public and private sources.

What is revolutionary is the grand conservative idea that tax cuts are the miracle drug that works miracles. They have been pushing this mantra for decades know, and we the people have given the notion every chance to succeed. Taxes on the most successful businesses and individuals are less than half of what they were at any time between WWII and 1981. Taxes are less than they were in the period between 1985 and 2000. Is the economy now in better shape than during the aforementioned periods of time? With all of that data pointing away from more tax cuts as a solution, why do these folks continue to demand tax cuts as the only solution?

There is no data that suggests tax cuts are helpful to the economy, so why would conservatives demand them (and refuse to consider raising taxes) in a discussion about deficit reduction. The argument is ridiculous…

Our budget deficit is out of control, it is the greatest problem we face, and we have to close it…without addressing revenue.

I can assure you that the previous statement would get you fired from any Fortune 500 company, but for the fake pro-business stooges in Republican Party politics, it is perfectly logical. The math doesn’t work, but rather than accepting that they are playing a weak hand, conservative political types change the argument by falling back on the libertarians who seem to be the only thinkers left on the right side of the aisle. The libertarians don’t want the taxes, and have no problem cutting the spending to match. While I disagree with the concept, there is at least honesty in the notion. Mitch McConnell, Eric Cantor, John Boehner and the rest are pretenders to the libertarian mantle, and long ago abandoned the path of intellectual honesty….

But they are world-class carnival barkers and snake oil salesman. The conservative leadership in our nation may be very good at staying on message, they may be fabulous at sloganeering, but we the people need adults with calculators at the helm of our great enterprise.

The Rational Middle is listening…

27 thoughts on “Those Job-Killing Taxes

  1. Michael – The two economic camps are quickly clarifying, and are finally being openly discussed by average Americans.

    Economic Conservatives and Libertarians believe that the economy starts with production, and ends with consumption.

    Liberals believe the economy starts with consumption, and ends with production.

    I believe that the Liberals need a public excuse to secretly redistribute wealth, which is why they teach Keynesian Economic Theory, which says that government spending can jump start an economy. The back story is that heavily taxing the people who create industries, puts them under increased government control, and redistributing those taxes to “consumers”, makes them increasingly dependent on government. The net result is a lessening of individual free choice.

    Now, if human free will is a problem for you, and your goal is to use government to balance the economic pie, than all of your proposals are sound.

    I believe that government’s purpose is to protect our right to express free choice. Keynesian Economics is a farce to anyone who believes in free choice.

  2. Government spending has a multiplier effect that provides a large economic boost during recessions. For example, the government spends money on infrastructure like building schools, bridges and roads. Construction companies need to hire more workers. They have to invest in more equipment, supplies and parts to meet the demands as they ramp up. Their employees have income to buy products. In turn companies supplying those materials and goods, retail and wholesale, hire more employees and invest in their own business. Increased employment and greater demands on companies help increase revenue the government receives enabling them to invest even more in America and create more jobs. As commerce at all levels expands, along with incomes, government revenue increase (without raising taxes) and more demand is created as they finance other projects. Call it a snowball to prosperity. Round and round we go creating jobs, climbing out of recession and reducing debt. Am I wrong, Is this not a correct scenario?

  3. “A simple explanation of a complex problem is necessarily false.” –Aleksandr Zinoviev

    If low taxes create booms in job growth, then the years of George W. Bush should have created amazing jobs growth.

  4. The Reagan idea of trickle down economics has been proven false and archaic by this point. Your tax cut is not going to give you a job; you might have a few extra dollars in your pocket but you’re not getting hired because of it. Republicans are using the phrase “job killing” for any policy that Obama introduces or supports. It’s lost its real meaning.

  5. Jack, Reagan’s actions only led to limited prosperity. Almost any analysis of the period shows increased wealth for the wealthy alone, with relative stagnation of middle and lower income groups relative to inflation. Those numerous economists are looking at stock prices and markers of country-wide wealth, not markers of individual prosperity. What good is a rich country to a hungry man without dinner on his plate?

    What the author neglected to add in (likely because of space/time constraints) was the history of the entire 20th century. It was government spending after the Great Depression that lifted us up. When FDR tried to cut taxes, that recovery was halted drastically, only to improve when taxes were raised again (and more so when government spending increased during WWII). Although upper echelon taxes declined thereafter, they were still at remarkably high levels for decades in which the US enjoyed significant prosperity and a rapid acceleration of quality of living for all.

    Unfortunately, extra money in the pockets of people who are good at holding onto money doesn’t result in more money being put into the economy. What does help the economy is incentivizing businesses to invest in growth as a means of tax sheltering and giving the masses the money to be able to buy the products, create demand, and thereby encourage new jobs to continue the cycle.

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  7. The only problem is that the deficit under Reagan almost tripled from 997 billion dollars to 2.85 trillion. Can someone explain to me how it’s fiscally responsible not to collect the money that you use to pay your bills? Didn’t the Cold War end in 1989? Why are we running a deficit economy? Did the wars we fought over the last ten years with borrowed money help or hurt the economy you think? More importantly did the Bush tax cuts help or hurt unemployment? Do you think that corporations want to invest in a debtor nation or a nation that pays their bills? I’m sure we can trim the fat in the military spending sector. Do you think that’s going to happen? Do you think we are attracting foreign or domestic job growth by owing 14.4 trillion dollars? So let me get this straight. The Reagan ideology is that its okay to borrow money and increase the national debt, but it’s not okay to increase taxes marginally to help pay for that job growth. So we’re going to cut everyones taxes and hopefully those jobs that I helped create will fill in the gap? Did that work you think? Check this link out and tell me what you think. http://money.cnn.com/2010/09/08/news/economy/reagan_years_taxes/index.htm Wasn’t this the same guy who confused his movie role with actual military service? No wonder the Republican party is screwed.

  8. The Reagan tax cuts, at least for corporations, were a compromise cut package. They lowered the top rate in exchange for removing loopholes. While the top rate was indeed cut, the actual effective rate that corporations paid actually went up.

    There had been a great uproar at the time over loopholes. They were tied off. It’s similar to now actually, however there’s no spirit of Reagan to be found.

    Joe Kraska
    San Diego CA
    USA

  9. I agree that the wealthy have been given far too many tax breaks and are giving their jobs to those who will provide the cheapest labor anyway. They should be taxed more, but to say that taxes are the answer to our country’s deficit is ridiculous. The revenue the U.S. receives from taxes is a drop in the bucket when matched with our enormous spending problem.

  10. Your point about massive spending under Reagan is somewhat disingenuous. No one can point to ANY period where just tax cuts or tax increases is the only thing the government does, so using your logic, you can conclude anything. Example: Since Clinton raised taxes during his term, by the end of his term, that led to destroying that period of prosperity. Therefore, tax increases led to the Clinton recession of 2000. Of course, we also know that there was a huge Internet bubble that burst in 2000, but I could scream and yell that Clinton’s tax increases killed the economy.

    Your analysis is too simplistic, like the Clinton recession logic above, and dismissing Reagan’s tax cuts (and the following huge economic expansion) as not even worth mentioning is not reasonable. Even if you disagree, numerous economists point to Reagan’s tax policy as one of the reasons for the economic expansion.

  11. Jack…welcome to the RM; Reagan’s tax cuts were paired with both tax increases and massive spending. Thus “No one has ever been able to point to a period where tax cuts, by themselves, generated GDP growth or accelerated job creation.”

    Noiselull…Thanks for visiting, but I am going on faith that the very sweetly produced conservative video you posted was meant to illustrate a point, and not just spam. Government spending, by the by, doesn’t lead to higher interest rates, and the U.S.’s ability to raise cash outside of taxes gives us an economic advantage over nations like Greece and Portugal. Why should we be in a rush to give away our strength?

    • My point was not that government spending raises interest rates but rather that the borrowing does. Rather simple:more government demand for credit in addition to the already existing demand for credit leades to a raise in the price of credit OR a higher interst rate. As for the point about our ability to raise cash, this is only an argument agianst default. Why would we want to run deficit just because we can?

  12. One good way to see the benefits of a free economy is to use Indices of Economic Freedom. One example of this is shown here:
    http://www.youtube.com/watch?v=v1U1Jzdghjk
    We can compare different countries with different policies and see what the results are.
    Or perhaps we can look at who has the highest taxes in the Northern Hemisphere – Cuba.
    As to the point about the taxes and the national debt, one has to consider exactly WHY government borrowing is harmful. The reasons I believe it is harmful are
    1. crowding out (leading to raising of interest rates)
    2. government having the ability to obtain money without the political consequences of raising taxes.
    Thus taxes are not much better.

    • Cuba does have tax rate of about 50% but Cuba also has a public health system and free public universities. And one might argue that the weakness of the current economy might be the embargoes enacted by the United States for the last 50 years. With that public health system Cuba has one of the highest life expectancy rates in the region, with the average citizen living to 77.64 years old[1] (just under the United States’ 78.11 years[1]). It’s school system, completely free on all levels and provides:
      -Irrespective of your class, your income or where you live, education at EVERY level is free.[2]
      -School meals and uniforms are free.[2]
      -There is a strict maximum of 25 children per primary-school class, many of which have as few as 20. As of 2010, secondary schools are striving towards only 15 pupils per class.[2]
      -The primary-school curriculum includes dance and gardening, lessons on health and hygiene, and Cuban revolutionary history.[2]
      -Many schools open at 6.30 am and close 12 hours later, providing free morning and after-school care for working parents with no extended family.[2]
      -“Mobile teachers” are deployed to homes if children are unable to come to school.[2]
      -Over half of Cuba’s 150,000 teachers have a master’s degree.[2]
      -There are now 23 medical schools in Cuba, up from only 3 in 1959 before the Cuban Revolution.[2]

      They actually spend 10% of their central budget on education, while the U.S. only spend 2%. [1]

      What will really blow your mind is that the unemployment rate is 2% to our 9.5% – [1]

      Now, they don’t make a ton of money the total GDP is only 111.1 billion, but the cost of living is comparative to the low wages. Now you have to remember Castro is all but gone but It makes me wonder if the United States might be able to learn a few things about using their money a little bit more wisely. If a country like Cuba who has been hammered by the United States in trade embargoes can provide provide a health care system that facilitates almost the same life expectancy as a U.S. citizen, And more importantly provide universal education on all levels, even master’s degrees. Why can’t the U.S. with it’s seemingly infinite resources and majority wealth balance a budget? Maybe they teach a different kind of math than we do?

      [1]https://www.cia.gov/library/publications/the-world factbook/geos/cu.html
      [2Latin lessons: What can we Learn from the World’s most Ambitious Literacy Campaign? by The Independent, November 7, 2010

  13. The people Obama wants to “pay their fair share” are the CEO’s, millionaires & billionaires that run U.S. industries. They were given a tax break (the Bush tax cuts) back in 2000.

    Who are these people?

    They own factories & manufacturing plants.

    What did they do after they got the tax cuts?

    They closed down those factories and manufacturing plants and moved the jobs to Mexico, China, India, etc.

    Then they frittered away their billions on shady financial dealings like credit default swaps and other schemes, which almost brought down the U.S. economy and almost brought down the economy of the entire planet as well. We all know how that turned out. These financial institutions were “too big to fail”, etc, so we, the middle income taxpayers, bailed them out.

    And now the Republicans are saying we don’t dare raise ANY of these same people’s taxes one cent because they are the “job creators” of the economy???? I’m sorry, I am NOT buying this argument at all, based on their past performance.

    • Glenn, the people Obama wants to “pay their fair share” are already paying a disproportionate amount in taxes. Here’s an analogy…

      The wealthy pay most of the taxes, so it should be no surprised that they get a larger percentage of the tax cut total back! It is only fair.

      ——

      Suppose that every day, ten men go out for beer and the bill for all ten comes to $100. If they paid their bill the way we pay our taxes, it would go something like this:

      The first four men (the poorest) would pay nothing.
      The fifth would pay $1.
      The sixth would pay $3.
      The seventh would pay $7.
      The eighth would pay $12.
      The ninth would pay $18.
      The tenth man (the richest) would pay $59.
      So, that’s what they decided to do. The ten men drank in the bar every day and seemed quite happy with the arrangement, until one day, the owner threw them a curve. ‘Since you are all such good customers, he said, ‘I’m going to reduce the cost of your daily beer by $20. Drinks for the ten now cost just $80.

      The group still wanted to pay their bill the way we pay our taxes so the first four men were unaffected. They would still drink for free. But what about the other six men – the paying customers? How could they divide the $20 windfall so that everyone would get his ‘fair share?’ They realized that $20 divided by six is $3.33. But if they subtracted that from everybody’s share, then the fifth man and the sixth man would each end up being paid to drink his beer. So, the bar owner suggested that it would be fair to reduce each man’s bill by roughly the same amount, and he proceeded to work out the amounts each should pay.

      And so:

      The fifth man, like the first four, now paid nothing (100% savings).
      The sixth now paid $2 instead of $3 (33%savings).
      The seventh now pay $5 instead of $7 (28%savings).
      The eighth now paid $9 instead of $12 (25% savings).
      The ninth now paid $14 instead of $18 (22% savings).
      The tenth now paid $49 instead of $59 (16% savings).
      Each of the six was better off than before. And the first four continued to drink for free. But once outside the restaurant, the men began to compare their savings.

      ‘I only got a dollar out of the $20,’declared the sixth man. He pointed to the tenth man,’ but he got $10!’

      ‘Yeah, that’s right,’ exclaimed the fifth man. ‘I only saved a dollar, too. It’s unfair that he got ten times more than I!’

      ‘That’s true!!’ shouted the seventh man. ‘Why should he get $10 back when I got only two? The wealthy get all the breaks!’

      ‘Wait a minute,’ yelled the first four men in unison. ‘We didn’t get anything at all. The system exploits the poor!’

      The nine men surrounded the tenth and beat him up.

      The next night the tenth man didn’t show up for drinks, so the nine sat down and had beers without him. But when it came time to pay the bill, they discovered something important. They didn’t have enough money between all of them for even half of the bill!

      And that, boys and girls, journalists and college professors, is how our tax system works. The people who pay the highest taxes get the most benefit from a tax reduction. Tax them too much, attack them for being wealthy, and they just may not show up anymore. In fact, they might start drinking overseas where the atmosphere is somewhat friendlier.

      • You left out the part where the bar owner has to pay the light bill, his staff, liquor, beer, wine, and finally the rent on his building. He gave out too much money, a few people stiffed him and the guys went to happy hour one day and the door was padlocked with a notice of eviction on it. It doesn’t really matter cause the rich guy is drinking overseas with the money the bar owner gave him to pay his bills. And that, boys and girls and college professors, is how you run a business in the ground.

      • Greg, paying a bar bill is not like paying taxes. If you and I go to a bar and we each have a beer, we both derive the same benefit from that beer in absolute terms. And the cost to bar owner is the same for each beer. In a country like the US, the wealthiest corporations and individuals derive the most benefits from the social infrastructure that taxes pay for. Therefore, these corporations and individuals should pay more to support that infrastructure.

        Even if dont agree with this argument, you have not made a case for proportional taxation as the “fairest” approach. In fact, your analogy would favor a regressive “fixed amount” tax if we payed them the way we pay a bar bill. Good luck finding support for that.

    • Not only do taxes kill job growth but also the ton’s of regulations that this Administration are piling on businesses in general. This President and his legion of socialists are chocking the breath that this country greatly needs cut back on the taxes and get rid of constraints on businesses and you’ll see growth. Entrepreneurs will be free to start businesses here in the states rather than go elsewhere because of all the red-tape and hurdles they have to go through just to start a business.

      • Uh oh, the S word. Rolled my eyes there when I read that. You make a valid point, don’t need to namecall.

        I don’t disagree with you, do you have examples of more regulations passed by the Obama administration or people starting businesses in other countries? I may be a bit out of the loop.
        Also, you have to admit, the climate is pretty ripe for more regulation. We’ve had some pretty good cases for it….oil spill, derivative market/housing. Entrepreneurs start businesses all the time in the Tech sector as far as I see. They don’t all succeed, but that is business.

  14. And I should mention that Clinton had the benefit of the Internet bubble, which collapsed at the end of his Presidency. Bush inherited the Clinton Recession, cut taxes, and while the country didn’t see spectacular growth, growth was much better than the end of Clinton. Obviously, economies are complicated and you can’t just mindlessly point to tax levels. But to say that we can just tax ourselves to prosperity is the height of absurdity.

    • bush had the benefit of the housing bubble, and Obama inherited the biggest market crash of our life time. Obama had to deal with the housing market crash, banks and auto industry. think about that before you make anymore pointless references.

  15. “No one has ever been able to point to a period where tax cuts, by themselves, generated GDP growth or accelerated job creation.”

    Uh, Reagan tax cuts in the 80s? You don’t think those are worth mentioning in your essay? Or you just have never heard of them? And don’t talk to me about deficits. Government revenues almost doubled during Reagan.

    • The thing people miss about this is that income taxes went down for top and bottom brackets. It went up in other areas.

    • That’s because Reagan raised taxes. You don’t know what you are talking about. Look at the congressional record for the eighties. Reagan raised taxes with the help of congress multiple times.

    • Reagan gave a great big tax cut.
      Then he raised taxes 11 times.
      he also had 10% unemployment. I know this because
      i lived through it. i also lived through Bush Jr.
      8ys. bush tax cuts created 3 million jobs.
      Clinton created 23 million jobs. check out the facts.

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