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Lower Tax Rates Do Not Mean More Jobs

By The Reverend Published: May 25, 2012

Lately, I've been hammering Mitt Romney over his Bain Capital experience, the experience Mitt tells us qualifies him to "run the national economy" as president. Almost before Mitt announced his run for the presidency, defenders of the rich paying ever lower tax rates told us that Mitt was a mighty man of the economy.....a real CEO in the Oval Office, he would be. Knows the economy, by god.....knows how it works, he does.

What Romney knows.....and is experienced I have been pointing out, is how to enrich already-rich investors. Nothing wrong with that kind of seasoned experience. Investor/customers of Bain during Mitt's tenure benefited greatly from Romney's ability to make them even richer than they were. Yes, the customers of Bain represent the tiniest slice of the U.S. population....maybe the top 1 1/2%.....but hey, obscenely-rich Americans are Americans too.

Anyway, I will be continuing to challenge Romney's assertion that he "knows the economy" "knows how it works".....right up to November. The Reverend believes that Mitt Romney is simply another conservative supply sider intending on rewarding the top 1% with lower tax rates and fewer regulations...while striving to balance the budget on the backs of tens of millions of average Americans.

Mitt Romney sat down with Time's Mark Halperin for an interview recently. It's worth a read. Romney says some things I actually agree with.....and Halperin's questions were better than a progressive might expect from him. The following exchange, however, needs unpacked and aired out....

Halperin: "So understand tax reform generally we talk about winners and losers, somebody would pay less, somebody would pay more. Who would the winners and losers be under your tax reform?"

Romney: "I’m not looking for any winners or losers. What I’m looking to do is to provide a lower marginally tax rate across the board for Americans so that we can encourage small business that pays taxes at the individual rate to hire more people. This for me is about getting growth in our economy, putting people back to work, having competition between employers for employees and therefore driving up wages. It’s all about getting growth for the American family in their incomes with better jobs, with kids coming out of high school and college being able to get a job. Now, simplifying the tax code will probably be a good thing as well and reduce the burden for a lot of Americans, high income and low income and middle income."

What is Romney "looking to do" should he be elected president? "lower tax rates across the board." The U.S. Treasury is starving for tax revenues in our recessionary and low-tax-rate environment....and a President Romney would "lower tax rates across the board." Current tax rates in the U.S. are at 60 year lows, but a president Romney would lower them even more.

But WHY would Mitt "lower tax rates across the board?" "so that we can encourage small business that pays taxes at the individual rate to hire more people."

Herein lies the problem with a Romney well as one of the huge errors contained within supply-side economics. How does lowering the tax rate on a small business owner translate to that small business owner being " hire more people?" Seriously, how does that work?

Why do small business owners hire more employees? I mean, the 97% of small business owners who file adjusted gross incomes of less than $250,000? Wouldn't small business owners only be incentivized to hire more employees if the product or service they were selling was in bigger demand? Isn't it true that only increased sales encourages small business owners to hire more people?

If that's so....and it is....then how would a tax cut for small business owners increase demand for the product or service the small business owner sells? How does a business person paying less tax translate into masses of customers having more money to increase demand? Answer: it doesn't...and it won't.

Now some may argue that Romney's inclusion of "across the board for Americans" in his tax-cut answer is why "small business...will hire more people." All Americans under the Romney plan would have a bit more money to spend with "across the board" tax cuts and those Americans would take those tax savings and spend them at small businesses...thus "encouraging small hire more people."

Well...tell did that same plan work out for "Americans across the board" from 2001 forward? Did the massive "across the board" tax cuts passed in 2001 and 2003....historic tax cuts....wind up "encouraging small hire more people?" Did they? And if it is true that those two massive tax cuts during the Bush presidency resulted in the absolute worst job creation record of any modern president....and they did....then why would additional Romney-inspired tax cuts work any differently?

I know it gets old...but there is really no direct correlation between tax cuts and hiring or economic growth. The Bush legacy should forever brand that reality into our consciences.

Finally's Mitt again...."This for me is about getting growth in our economy, putting people back to work, having competition between employers for employees and therefore driving up wages."

Still today, for every available job.....there are 4 Americans trying to land it. Romney would have us believe that lowering tax rates "across the board" would, somehow, change that ratio to such an extent that employers would find themselves bidding for workers...thus, increasing worker salaries.

Is there anyone who believes that? Anyone?

Isn't it true that tax rates are lower now than they were 60 years ago? Isn't it true that tax rates in America have been declining for the past 30-40 years....and yet, earnings for average workers have basically flatlined during that entire period? Why would another round of tax cutting change that dynamic?

Answer: it won't.





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