Category Archives: Jobs

It is a fact that Americans do not like to pay taxes, never have and never will, which makes it easy for a politician to say that they are going to or actually did lower taxes in an election year. You speak to to the poor, middle, and rich in the country and no one thinks twice about it because it is what everyone wants to hear. I have argued in the past about why rich people should pay more taxes, but with President Obama and Mitt Romney (who I believe will be the GOP’s nominee for President) coming out with job plans, it is worth taking a look to see if further reductions in taxes would actually help create jobs.

The theory (put simply) is that by reducing taxes more people will spend money, which will grow the economy and thus create more jobs. At times it makes sense. Most American’s did not save a lot of money and tended to spend more than they earned. When spending is high businesses do well, owners are confident, and are willing to take more people on. But this scenario is not what we are currently dealing with.

According to data from the Bureau of Labor Statistics, the average Household Income has decreased to under 50 thousand dollars, which is very hard for a family of three or four to live on.

Household Income

When you have to pay for gas, food, and health insurance, it all adds up which takes up a big part of a families salary making it hard for them to spend money on items they don’t necessarily need. Of course the prices of the items they do need have risen in the past decade as well. Keep in mind that because these people are earning money the tax breaks are targeted toward them so they would spend more money. But history shows when taxes were lowered have not resulted in increased spending.

The Consumer Price Index looks at how much prices have risen or fallen on a quarterly basis. The chart below shows the percent change in the past decade, and you can see they have fallen sharply. A large part of this is because American’s stopped spending as much money, especially when there was a disaster such as in 2001 and the financial crisis of 2008. But levels still have not returned to where they were before the crisis and there is no reason to believe they will any time soon.

Percent in CPI Change

President Bush reduced taxes in 2003 and Obama extended those cuts in 2009 when they were set to expire. Any economist would be hard pressed to argue that those cuts had a great stimulative effect on the economy. While I’m probably beating a dead horse saying this, President Ronald Reagan did raise taxes as a compromise with Democrats when they reformed the system. For the reasons stated earlier it would not be a good idea to raise taxes on everyone right now, but it would be a good idea to raise taxes on those who have earned millions. The money could be used to either reduce the deficit or create jobs for infrastructure projects that need to be completed.

But instead of advocating for policies that would have a strong impact on the economy Obama and Romney are taking the easy route. Both are in favor of passing the trade agreements Obama recently signed into law with South Korea, Colombia, and Panama; Obama looks to be in favor of creating a oil pipeline with Canada while Romney’s job plan proposes more domestic drilling; and both jobs plans seeks to reduce taxes on small businesses and corporations.

While thousands of teachers are being let go around the country, and with states running out of unemployment benefits, it is not hard to see why American’s are doubtful of the country’s future. Obama has called for a millionaire’s tax before and Congressional Democrats have tried to push it through the Senate even though it has no chance of passing the House. But it was left out of Obama’s job plan and Romney has said he will not raise taxes on the wealthy. Both of them are putting out popular ideas that are not controversial in a time when the country needs bold action. The stimulus was bold, health care reform was bold, but neither went far enough to help the millions of Americans that need it.

The lack of action by political leaders has cumulated in the protests that started in New York and are starting to spread around the country. In 2008 people voted for change but have not felt or seen the effects of the programs Obama has put in place, mainly because there is still so much more to do. But playing it safe during an election year while the economy is still tittering will not create jobs or help the economy, which both candidates say they want to do.

Our new Constitution is now established, and has an appearance that promises permanency; but in this world nothing can be said to be certain, except death and taxes.

– Benjamin Franklin

It’s not a news alert that American’s have never liked to pay taxes. We started a war over them, and have never voted for a politician who says he/she will raise them. But in light of the recent debt debate and angst to lower the national debt, it’s important to remember raising taxes on millionaires and corporations could help protect social programs, and create jobs.

In March, the New York Times reported that major companies in the United States paid absolutely nothing in taxes for their record profits in 2010. It wasn’t long after that 60 Minutes took a trip to Eastern Europe discovering American corporations hiding their money where it can’t be taxed. This should have been a moment for the Obama administration and his allies in Congress to call for a major tax reform. Despite vast new financial instruments and companies easily being able to conduct business worldwide, tax reform hasn’t taken place since 1986.

If you took a look at the stock market these past couple of days, you quickly realize the debt ceiling debate was only a artificially problem created by Congress. While today’s employment numbers weren’t the worst we have seen, it still wasn’t good enough. There’s no doubt more revenue is needed, and with corporations still reporting strong profits at the same time American’s are struggling, it is time to seriously look at ways that can bring in more money.

Most taxes collected in this country come from sales taxes or people’s pay checks. But with people out of the job and not spending money we’re not able to use those revenues to pay for the things that we need like roads and teachers.

The balance act being conducted is trying to figure out a way for American corporations to bring the money back to the states and invest it. One idea being floated around is a tax holiday where there will be a set amount of time where corporations can bring back the money from abroad without being taxed. The trick is to figure out a way to make sure the money that is brought back is used to hire people. Versions of this scheme have been endorsed by Obama’s former Chief of Staff Rham Emanuel and former President Bill Clinton, but so far haven’t been endorsed by the President Obama.

Instead, Obama has sought to increase taxes on hedge fund managers, millionaires, and “corporate jet owners.” He has also called for closing certain tax loopholes that can bring in an additional two billion dollars.

Corporations argue that they have to send their profits abroad because their stock holders want to see a profit. Cisco has had to pay back some of those holders because they lost confidence in the company. But corporations should want to pay taxes. If done right it could become a lot cheaper to pay for a employee’s medical bills which would lower their long term costs.

On the political front, there is always some disconnection between people wanting or liking items in a bill and but then still not wanting to pay taxes. We saw in the polls regarding the healthcare debate, that while people liked what was in the bill they still didn’t like what was in the overall package. One of the main reasons a major overhaul of the tax system is needed is so Social Security and Medicare, programs that no one wants to see go away, stay solvent. Price controls for Medicare is only half the battle, it’s never going to be free and new ways need to be implemented to make sure money is going into the system that would keep overall costs low for the majority of Americans.

Certain members of Congress argue they want to reduce the deficit so it won’t burden their children or grandchildren, but paying for items we need now rather than later will be cheaper and create a better economy for them. The reason why we need more revenue is so more money can be flowing through the economy which will help create jobs. With the economy continuing to fluster what is really needed is another, more specific, stimulus package. But unfortunately it’s not politically possible. Americans don’t want their bridges falling or schools lacking the supplies it needs to teach their children. People are needed to fill these positions and the taxes collected from them will help stabilize our social programs. Thus the world keeps turning.

Benjamin Franklin, businessman, inventor, and founding father, was right when he said the only thing certain was death and taxes. It is part of the way the world works that help create jobs that supports families and their livelihoods. Deficits are a long term problem but it will be better to raise revenues now to pay for the future.