Taxes and Job Creators

It’s not true. Higher taxes on job creators don’t mean fewer jobs are created. Lower taxes on job creators don’t mean more jobs are created. It’s just not true and it’s never been true.

It’s not true in every possible way: historically, intellectually and psychologically. After the 2001 Bush Tax Cuts job growth only increased by 1/2%, and through all eight years of Bush’s term the number of jobs shrank. Clinton raised taxes and the job growth during his two terms was higher than during Ronald Reagan’s. Our country experienced its highest job growth during Truman’s administration, when the top tax rate was 82%. Time and again our history has proven that the tax rate paid by the wealthiest people in our country, those people Republicans refer to as “job creators”, has no correlation with the number of jobs created.

It’s not true intellectually. People pushing the idea that higher taxes on job creators leads to less investment seem to be suggesting that if an entrepreneur decides to pass on a project, decides not to invest, that somehow the money is taken out of our economy. They seem to be suggesting that the entrepreneur will take the cash and bury it in his or her back yard. But that’s not true. If an entrepreneur decides not to invest in a project he or she puts the money in the stock market or puts it in the bank. The bank then lends it out to other entrepreneurs for their business activities. The money stays in the economy and has the same potential to be invested to create jobs.

And last, it’s not true psychologically. The Low Taxes for Job Creators crowd suggest that tax rate on profits is a deciding factor for whether or not an entrepreneur moves forward with an expansion or new business. But this isn’t true. Entrepreneurs make their decisions based on the likelihood of being able to sell their product or service at a profit – this is the key question for any economic decision. Tax rate barely makes it to the bottom of the list, because, again, the money doesn’t go into the entrepreneur’s mattress, it goes somewhere else in the economy, the stock market, bond market or savings account. The entrepreneur pays taxes on gains from any of these other activities as well. The comparative difference between the tax rates on dividends or interest and the gain on investment is so minimal as to not matter. If you find an entrepreneur that tells you they passed on a project because taxes are too high they are fibbing to you – they passed because they didn’t think they could sell their product, and just don’t want to admit it.

Again, in every possible way, it’s just not true – the tax rate on job creators has nothing to do with the number of jobs our country creates. This one issue makes me frustrated yet again with both of the political parties. The Republicans are deceitful for continuing to push an idea that clearly has no basis in reality. The Democrats are incompetent because they can’t seem to figure out that it is not true.

I understand why the Republicans push the idea – they want to reduce taxes or at the least protect against tax increases. Nobody likes paying taxes, and everybody wants their own individual tax burden to be as low as possible. But we do damage to our country when we use a mistruth to push for even a good outcome – the end does not justify the means. Instead, we eventually reach a situation where the debate is so disconnected from reality that it keeps us from having honest, needed, conversations about the size of government and how to foster economic growth.

We have reached that situation. Our economy has stalled, job creators already pay about half of the effective tax rate of job workers, and the debate goes in circles. We need to move beyond this false conversation about the link between taxes and job creation. Let’s hope Democrats figure this out and can force the Republicans to stop pushing this mistruth.

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