Tax Cuts Do Not Create Jobs

“Tax cuts create jobs.”

Sure they do.

If Americans learn only one thing during the current economic downturn, it should be that this tired old theme is completely false. With a total job yield of only 1.8 million over the past eight years, coupled with the lowest top marginal rate and capital gains rate in decades, it is clear that tax cuts do not create jobs.

Yet, business leaders and their compliant media personalities still parrot this party line as if it has never been proven wrong, and many people are still willing to believe it. We saw them in the streets on Tax Day — protesters who had not marched for a decade. Not for wrongful invasions, torture, domestic spying. For these people, push came to shove only when the new president raised the budget (mainly by including the two wars) and detailed his plan to raise taxes on the wealthiest citizens.

Have they noticed that the highest tax rates are lower than they have been in years? At only 35% for incomes greater than $350,000, and a capital gains rate of only 15%, our wealthiest citizens cannot be blamed for loving every minute of the Bush administration. Yet, with all that extra money, they failed to deliver jobs. Despite this breakdown of the social contract, President Obama will dare only a modest tax hike, to 39.6% for the highest income bracket and 20% for capital gains.

If that makes Obama a socialist, then Reagan must have been Chairman Mao. His top marginal rate was 50%. Late in his administration, it dropped to 28%, lower than today, but it was coupled with a capital gains rate of 28%.

This means, at 39.6% above $350,000, a lot of movie stars, ballplayers, and CEOs will pay more than they would while Reagan was president, but the real money will still be made by the people they work for. The owners and major shareholders, at 20%, will only pay half the rate of the executives they employ, and two-thirds of what they would have paid during Reagan.

Sixteen million jobs were created during the Reagan administration. The Clinton tax rates, still among the lowest of the 20th century, led to 23 million jobs, many of them raising people out of poverty into the middle class. Even Carter, long maligned for high taxes, inflation, and a sluggish economy, presided over the creation of 10 million jobs.

Tax cut hawks George W. Bush and his father, together, saw the creation of fewer than 5 million jobs. The middle class lost 12 years of progress to their failed ideology. It is time to throw the old chestnut about tax cuts in the trash. Nobody who utters this nonsense should be allowed to get away without a short history lesson.

They have always been wrong. The only question left is, did they know it?

Tags: capital gains tax, tax cuts, tax rates

This entry was posted on Wednesday, April 29th, 2009 at 9:49 am and is filed under blog, home. You can follow any responses to this entry through the RSS 2.0 feed. You can leave a response, or trackback from your own site.