Memo to the politicians - cutting corporate taxes won't create jobs
Fri Oct 29, 2010 at 03:00:51 PM PST
To listen to the rhetoric that has stained so much of the 2010 campaign season, you’d think the biggest problems facing our nation are excessive government spending, workers’ pensions, and inadequate tax breaks for corporations and wealthy Americans.
But countering this conventional wisdom, seldom questioned by most of the press, is made much harder by the reticence of even many liberal s to challenge these assumptions.
In his great 2004 book "What’s the Matter with Kansas," Thomas Frank made the compelling argument that the right was able to persuade workers to vote against their class interests by manipulating social issues, and described the failure of liberals to present an effective progressive alternative.
It’s déjà vu all over again. By failing to respond to the mythology perpetrated by the right, far too many Democrats have largely ceded the populist ground, a point made even most astonishing by the continuing economic crisis, the alarming erosion of living standards, and the shocking growth in income disparity that has undermined the promise of the American dream for so many.
Consider two stats from the November, 2010 Harper’s Index, published by Harper’s Magazine.
Net domestic profits earned by U.S. corporations since the fourth quarter of 2008 -- $609 billion. Net decrease in the amount these companies spent on wages and benefits – minus $171 billion.
Or as David Cay Johnson reported in a column on tax.com, average wages, median wages, and total wages all declined in 2009 – except for those at the very top of the income bracket whose income increased five fold in that time.
Over the past quarter century, the richest 1 percent more than doubled their share of total U.S. income from 10 percent to 23 percent, and the average CEO who was paid $27 for every dollar earned by an employer now gets a ratio of about $275 to $1.
What’s been the effect of this income chasm?
Nearly 50 million Americans are in households where they depend on food stamps or soup kitchens to eat. Pregnancy-related mortality risks are higher in for U.S. women than for women in 40 other countries. And the U.S. has the greatest income inequality among all Western industrialized nations. (Data reported on Truthout this week)
MSNBC’s Rachel Maddow last week noted that Bank of America, CitiBank, and General Electric were three major corporations, among many, that paid exactly nothing in corporate taxes last year. The reason, she said, was the abundance of loopholes that big corporations have exploited that result in regular Americans commonly paying far more in taxes than do a number of multi-billion dollar corporations,
"And you can tell from our politics, that politicians are counting on us not understanding that," Maddow continued, citing the campaign talking points of, among others, Republican Senate candidates Linda McMahon, Carly Fiorina, and Sharron Angle all complaining about the "excessive" corporate tax rate.
The facts tell a very different story. In California, for example, 45.6 percent of corporations doing business in the state claimed to have "no net income" and "thus paid little or no California income taxes" in 2008, according to a July 2010 briefing paper by the widely respected Sacramento-based California Budget Project.
"The historical record," the brief states, "confirms that even large tax cuts – both at the state and national level – failed to generate the substantial level of economic growth necessary to produce a net gain in tax revenues."
To emphasize that point, the California Budget Project also produced an analysis using Moody’s business data to illustrate what creates economic growth and what doesn’t.
Guess what they found?
The federal spending that has the least impact on economic growth, and by implication jobs, is corporate tax cuts, eliminating capital gains taxes, and extending the Bush administration tax cuts for the wealthy.
What does promote economic growth, according to the data? Increased infrastructure spending, and funding for unemployment benefits and food stamps -- putting money in the pockets of people who will actually spend it, instead of those with enormous wealth who are unlikely to buy their 45th pair of shoes.
Yet the airwaves are filled with candidates like billionaire Meg Whitman, the billionaire ex-CEO running for governor of California who continues to assert that "jobs are on the way" through her prescription of eliminating the capital gains tax in the state and making deeper cuts in the kind of safety net programs that even Moody’s says actually encourage consumer spending.
Californians don’t appear to be buying Whitman’s false promises. But, when the next Congress convenes, the "solutions" to the continuing economic crisis we are likely to hear are not expanding real economic opportunity for working people through real, direct job programs, or expanded health security, which would produce a healthier nation and create jobs.
As CNA/NNU documented in the landmark study done by our research arm the Institute for Health and Socio Economic Policy last year, guaranteed healthcare for everyone, by expanding Medicare to cover all Americans, which would create 2.6 million new jobs, and a healthier nation.
Instead expect the class of newly elected legislators to push proposals to privatize or sharply reduce Social Security protections, and deeply erode Medicare. As Kaiser Health News noted October 26, the Republicans, likely to have a majority in the next House, are promoting a plan by their economic guru Rep. Paul Ryan to raise the eligibility age for Medicare and reduce coverage.
All while demanding the Bush tax cuts for the wealthy be made permanent and other "economic recovery" solutions that transfer even more wealth to those who need it least of all.