Good Jobs Create Tax Cuts

What does a job-creating government program look like?

We are in a time of higher unemployment, 8%-10% for the general population, and double that or more in the impoverished demographics of the urban core and rural outbacks.

We are also in a time of political aggression against direct government employment. Public workers — teachers, janitors, office workers, administrators, policy-makers and public safety workers, construction inspectors and road crews — are all under fire as examples of government waste.

What does a job-creating government program look like?

For 30 years, there has been an insistence that government taxes — local, state and federal — have been too high and that they are stifling business expansion. The obvious conclusion from this is that taxes should be lowered on employers. These tax cuts are cast as “job creating” tax cuts.

But are they?

Examining the relationship between individual tax rates and unemployment rates over the last 20 years (from 1991-2011) reveals nothing. Tax rates climbed in 1993 followed by a sustained drop in unemployment. Tax rates dropped in 2001 and 2003 followed by a sustained (and rapid) climb in unemployment. The bare facts are that tax rates have neither created jobs nor killed jobs. Nothing is that simple. There are no job-creating or job-killing taxes.

What does a job creating government program look like?

Perhaps we have it backwards.

We have been trying to produce a government program that offers a reward (a tax cut) in return for a hope (job creation). Such a program of course results in many businesses taking the reward without delivering on the hope.

What if we turn that around? What if we produce a government program that offers a reward (a tax cut) in return for performance (job creation)?

What if good jobs create tax cuts?

A reward in return for actual performance is a well-known concept in business. A CEO gets a bonus AFTER the stock price has reached record levels. A Division VP gets a bonus AFTER his division meets its P/L goals. A salesman gets a bonus AFTER she sells 150% of quota for the quarter.

We have tried government rewards for a promise of performance. But that is contrary to all common business behavior. We should turn that around.

Good Jobs Create Tax Cuts.

This is no longer a “job-creating” or “job-killing” government program. This is a “tax-killing” jobs program. Businesses can participate — and reap the reward — or not, at their choice. The performance metric is straight foward:

  • Over the last tax year, did you increase or decrease your US work force?
  • Over the last tax year, did you increase or decrease your US compensation?
  • Over the last tax year, did you increase or decrease benefits to your US work force?

In short, if a business improved the condition of the working class in the US, then they are rewarded with a tax cut. If not, they get no reward.

There are hundreds of ways to detail out this program. Tax benefits may increase based on the degree of improvements in the working class. Tax penalties may be applied to those who degrade their workers, through layoff, wage reductions or benefit reductions. The work force may be segmented into minimum wage, middle class wages, and executive wages, and measured separately (for example, no credits for increases to the executives).

But those are details. The driving principle behind them is the reversal of the discredited belief that tax cuts create jobs. They do not. That principle must be discarded and replaced with:

“Good Jobs Create Tax Cuts”

We’ve been on the wrong road long enough. It’s time to turn around.

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