Posted by: The Last Liberal Gwinnettian | September 28, 2010

The Relationship Between Taxes and Jobs

The GOP recently released it’s “Pledge to America.” If most Americans are anything like me, their top concern is the economy — specifically, jobs. In the current economic climate, most people fall into one of two categories: Either you have a job and are worried about losing it, or you don’t have a job and can’t find one anywhere. And so when the GOP released their Pledge, I expected to read something about their plans for job creation — they have certainly berated the Democrats apparent inability to spur job creation, so one would assume that they have some sort of alternative plan.

I was sadly disappointed. The GOP’s big plan for job creation is the same big plan they’ve touted for years: Trickle down economics.

The argument goes something like this: The richest Americans — those in the top 1% — own the companies that hire people. If we cut the taxes on those people, then they will invest this money in their businesses and hire more people. More people with jobs leads to increased consumer spending, leading to increased demand, leading to more jobs, and so on.

The problem with this theory is very simple: Rich people are rich because they save their money in times of trouble. Rich people aren’t rich because they selflessly invest money into their companies in order to create jobs for the little people. Rich people are smart: they save. What is the benefit of investing your money in your company when no one is buying what you’re selling?

These rich people are quite crafty. They have perpetuated the failed idea of trickle down economics by donating quite a bit of their tax cuts to politicians who will continue to shout the benefits of giving them more tax cuts. It’s a never ending cycle, and not one that creates jobs.

So why do Americans keep falling for it?

Part of it is the simple fact that a lot of middle class Americans still believe in the elusive American Dream: That you, too, could one day be in that top tax bracket if only you work hard. Because so many middle class voters hope to one day benefit from the trickle down theory of economics, they don’t have a problem voting for it. Unfortunately, by supporting trickle down economics, those same middle class voters are helping to create a situation in which the rich get richer and the middle class gets fired.

Part of it is the fact that the Dems have allowed the GOP to control the message for far too long. Nature abhors a vacuum, right? In the absence of good common sense and logic, the GOP has filled the vacuum with simple sound bites that mislead Americans into believing that only the GOP really knows what it’s like to be an American.

But more than anything else, it’s the fact that the Dems simply haven’t connected with voters. The average voter buys into the whole “Democrats are a bunch of intellectual elitists who don’t know what it’s like to do an honest day’s work” message. Rather than getting down in the trenches and really working to connect with the middle class, the Dems just sit there and shout “But we didn’t make things worse!” That isn’t how you win hearts, and it certainly isn’t how you win elections.

So what should the Dems do?

For one thing, they need to expose the logical fallicies behind the trickle down theory. As a rule, Americans may not be very well informed voters, but they aren’t stupid. The voters who are willing to vote for the GOP because they trust the GOP more than the Dems on the economy can certainly be swayed with simple logic. (The ones who will vote for the GOP for social reasons are a lost cause — there’s not much you can do to convince a staunch pro-life voter to vote for a party that is pro-choice.)

Next, the Dems need to lay out a simple plan for exactly how they plan to better the lives of average middle class Americans. The GOP likes to shout about the harm the Dems have done to small businesses. A vast number of jobs in this company come from small businesses, and the GOP claims that raising taxes on the higher tax brackets will harm small business owners leading to fewer jobs. Obama just recently signed into law a bill that gives plenty of tax and loan benefits to small businesses.

Just in case that isn’t enough, here’s a wild idea: Offer tax cuts to those companies that create new jobs or hire back people for positions they’ve already eliminated. Tie tax incentives to job growth. Tell business owners: You hire more people, we’ll cut you a break on your taxes. This kind of carrot-stick policy is actually badly needed in this country. Many larger corporations are showing profits that are on par or better than they were at the beginning of the recession — and yet they aren’t hiring back all the workers they laid off. In fact, that’s part of why they are showing such large profits: they are paying fewer people to produce the same amount of work. And the workers who managed to hang on to their jobs aren’t complaining about the increased work loads because, hey, why rock the boat when you’re one of the lucky ones with a job?

Along those same lines, let’s tax businesses that send jobs overseas. In an economic environment in which unemployment is hovering at positively startling levels, shouldn’t we be punishing American businesses that contribute to the problem?

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