Monday, April 18, 2011

Where Are the Jobs? (Updated)

For a generation, the GOP (and a bunch of Democrats) has been telling us that the way to stimulate economic growth is to cut taxes. And people love to pay less and get more - our entire consumer economy is based on that idea - so it is usually a political winner to talk about tax cuts. These low taxes would put money in the hands of the taxpayers, which they would in turn spend, increasing demand for goods, increasing the economy, and generating more revenue through sales tax.

Just like a perpetual motion machine!

So, for the last generation, the nation and the states have cut taxes, and cut taxes, and cut taxes, and cut taxes. The last President to nominally raise taxes was George H. W. Bush, and he lost his reelection bid because of it.

Based on the bill of goods we've been sold, where are the jobs? Where is the economic growth and dynamism that is supposed to come with low, low taxes? Why does it feel like we are closer to 1929 than 1999?

And you can't tell me "it's because we're spending too much money." Even if our government has to borrow money to pay for programs that were already put in place through the process of lawmaking, how does that affect the low taxes that are supposed to be putting more money in the hands and increasing the buying power and economic participation of the consumer?

It doesn't. And it wasn't supposed to.

The plan was that the low taxes would lead to a hot economy that would produce more revenues through other taxes to pay for our levels of spending. Has that happened?

No.

When it comes down to it, only one - one - conservative I know has been able to explain what is going on with taxes and jobs in a way that makes sense. That's Dante. He has brought up in the past (I can't find the link) that people are being taxed somewhere else and this is affecting their buying power & participation in the economy.

I absolutely agree. They are being taxed somewhere else, especially at the state and local levels. I don't even want to get into the feudal ways property taxes are used in a certain southern city to subsidize blighted properties and land speculation.

Lagniappe "taxes" can be found elsewhere, too, as private industry colludes with government to take advantage of the extra buying power tax cuts "provide." Insurance premiums keep going up and up for home ownership, auto-ownership, and medical coverage. Working families have to pay for child care. If you live in a city without a functioning public school system (that you already pay for), you have to pay for your kids to go to private school or get extra tutoring to make up for the shortfall. Your city can pay contractors to provide public services that you can also recieve a bill for. Best of all, cities and states can offer subsidies to businesses and sports franchises to welcome or keep them in certain places, while the "jobs they create" will be taxed higher to make up for the subsidy.

And that's where your "taxes" come from. And why no jobs are created by keeping tax rates low.

Update: Weigel at Slate investigates where the "Washington doesn't have a revenue problem, it has a spending problem" narrative comes from.

Update: As if on cue, the Georgia GOP Delegation ties together their constant work towards keeping taxes low while repeating the "spending problem" meme.

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4 comments:

Dante said...

Well, I don't think my view on federal taxation is exactly what you remember, but here's a go:

There's no such thing as a federal income tax. The federal government prints the money. That's like Dell doing mail-in rebates. Dells sells the hardware directly. What's the point of a mail-in rebate? Why not just give the rebate at purchase?

If the federal government wants to pay for something they could just print the money to pay for it. So why income tax then? Inflation control. The government pulls in from everyone's income instead of printing or borrowing. That increases the value of the dollar at the expense of decreasing the amount available to our taxpayers.

There is also an element of implicit income redistribution afoot. If there's a progressive tax bracket then inflation is being controlled more by the top earners than the bottom earners. This reduces the buying power of the upper income earners proportionally more than the lower income earners.

The reason you'll see me harping on spending while ignoring topics like deficit reduction and paygo is by borrowing we're merely delaying printing the money or further inflation control (in the guise of income tax). So one way or another, you're paying for the services the government provides by giving up a portion of your buying power. We pay for everything we spend no matter what.

I'll do another post on something more central to your topic.

Cousin Pat from Georgia said...

I wasn't attempting to describe your whole view on Federal taxation, just your one point that addressed an issue most other folks gloss over.

Dante said...

So here's a taxation anecdote for you:

I recently moved to Ft Worth from Commerce, GA. Texas doesn't have a state income tax. Everyone there acts like the lack of income tax is some kind of holy grail.

Before I left I checked home prices and they're pretty similar but slightly lower in Ft Worth than they are in Atlanta. But I noticed rent prices are significantly higher. I thought that may have been a factor of how much harder it is to buy a home in Texas... until I looked at the Tarrant County tax assessor's website. Property tax in Texas is 3x - 4x higher than it is in Georgia. When I figured up what I was paying on income tax + property tax in Georgia vs. property tax in Texas, what was the difference? About $600. The tax write-offs are also somewhat better for the no-income-tax scenario, but Texas also collects more on sales tax for everything but groceries. Over the course of the year, that difference will surely disappear in sales tax increases. The government will get their money.

Now don't get me wrong. I prefer the no-income-tax but higher property and sales tax scenario. I feel like I have a better view to what my tax money is being spent on, especially since there are line item expenses on my property tax. I also feel I'm getting closer to my money's worth since for the most part the property tax money is being spent locally instead of statewide. I see a lot more parks, libraries, etc than I ever saw in Georgia. But it's no holy grail.

Cousin Pat from Georgia said...

Yeah, here in New Orleans, we pay state income tax, some of the highest sales taxes in the nation, and rents are high because property tax assessment appears to be based on unicorns and gnomes.

I sure wish I could say I see more parks, libraries, and paved roads that I did in Georgia...

...and functioning schools, drainage, a first-world police force and criminal justice system...