bureaucracybusters

TAX CUTS WON’T CREATE JOBS: PART ONE (OF THREE)

In Bureaucracy, History, Law, Law Enforcement, Politics, Social commentary on October 30, 2017 at 12:41 am

President Donald Trump wants huge tax cuts for corporations.  He wants to cut the corporate income tax rate from its current 35% to 20%.

He claims that, with this extra income, CEOs will invest in their businesses and create tens of thousands of new jobs.

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Donald Trump

But that’s not what some of the biggest S&P 500 companies are saying they’ll do. The people they are seeking to please are investors, not workers.  And, least of all, those seeking work but unable to find employers willing to hire.

Darius Adamczyk, CEO of Honeywell International Inc., said “tax reform” would “offer greater flexibility for Honeywell.”  He added that the corporation would invest more cash in the United States to pay for mergers and acquisitions, share buybacks and paying down debt. 

He didn’t say anything about hiring more workers.

According to Moody’s Investors Service, American corporations have stockpiled nearly $1.8 trillion in cash overseas. 

Apple has more than $240 billion of that total.

Apple’s CEO Tim Cook says the company wants to bring back offshore cash if tax rates for doing so were lower: “What we would do with it, let’s wait and see exactly what it is, but as I’ve said before we are always looking at acquisitions.”

Apple expects a tax windfall if Trump’s tax-cutting plan passes Congress. And analysts openly expect Apple to use those monies to boost its capital return program via buybacks, dividends and perhaps making a big acquisition.

What analysts don’t expect Apple to do with its tax cut monies is create new American jobs.

Most of the offshore cash brought home by U.S. companies in past tax holidays was used to buy back shares or make acquisitions, not to fund investments in production capacity or jobs.

Corporations were not legally required to use those tax cut savings to hire more workers.  And Trump’s tax cut proposal has no such requirement, either.

According to John Divine, staff writer for U.S. News & World Report‘s Money section: “As long as there are no strings attached on how or where companies spend these savings, taxpayers get a raw deal.”

Tax cuts for the wealthy have been a favorite—perhaps the favorite—Republican mantra since 1980, when former California Governor Ronald Reagan ran for and became President.

Ronald Reagan

Reagan, like every major Republican Presidential candidate since, promised that giving tax cuts to the wealthy would prove highly beneficial to ordinary workers.

The official name for this policy was “supply side economics.”  In reality, it was known—and functioned—as “trickle down economics.” 

“A rising tide lifts all boats,” claimed Reagan. A more realistic slogan for the results of his economics policies would have been: “A rising tide lifts some yachts.”

Among those charting Reagan’s economics legacy as President was former CBS Correspondent David Schoenbrun. In his bestselling autobiography, America Inside Out: At Home and Abroad from Roosevelt to Reagan, he noted:

  • On January 28, 1981, keeping a pledge to his financial backers in the oil industry, Reagan abolished Federal controls on the price of oil.
  • Within a week, Exxon, Texaco and Shell raised gasoline prices and prices of home heating oil.
  • Reagan saw it as his duty to put a floor under prices, not a ceiling above them.
  • Reagan believed that when government helped business it wasn’t interfering. Loaning money to bail out a financially incompetent Chrysler was “supporting the free enterprise system.”
  • But putting a high-profits tax on price-gouging corporations or filing anti-trust suits against them was “Communistic” and therefore intolerable.
  • Tax-breaks for wealthy businesses meant helping America become stronger.
  • But welfare for the poor or the victims of a predatory marketplace economy weakened America by sapping its morale.

“In short,” wrote Schoenbrun, “welfare for the rich is good for America. But welfare for the poor is bad for America, even for the poor themselves, for it encourages them to be shiftless and lazy.

“Somehow, loans to the inefficient management of American corporations would not similarly encourage them in their inefficient methods.”

To be unemployed in America is considered by most Americans—including the unemployed—the same as being a bum.  

And Republicans are quick to point accusing fingers at those willing-to-work Americans who can’t find willing-to-hire employers.

According to Republicans such as Mitt Romney and Herman Cain: If you can’t find a job, it’s entirely your fault.

And when Republicans are forced—by public pressure or Democratic majorities—to provide benefits to the unemployed, these nearly always come at a price.

Those receiving subsistence monies are, in many states, required to undergo drug-testing, even though there is no evidence of widespread drug-abuse among the unemployed.

But America can put an end to this “I’ve-got-mine-and-the-hell-with-you” job-killing arrogance of people like Kenneth Fisher.

The answer lies in three words: Employers Responsibility Act (ERA).

If passed by Congress and vigorously enforced by the U.S. Departments of Justice and Labor, an ERA would ensure full-time, permanent and productive employment for millions of capable, job-seeking Americans.

And it would achieve this without raising taxes or creating controversial government “make work” programs.

Such legislation would legally require employers to demonstrate as much initiative for hiring as job-seekers are now expected to show in searching for work. 

How it would work will be outlined in the next two columns.

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