Lowering taxes is the way to generate jobs

“Raise taxes now!” Thom has a rumble w/ JD Foster of the Heritage Foundation

The flat tax is the way to get the job creators in our nations geared up. Is there any better way to get job creation started?

Curtis Dubay

May 10, 2012 at 2:30 pm

There he goes again. It seems that President Obama just can’t help himself. He keeps pushing Congress to pass policies it has rejected in the past or has foolishly passed to little beneficial effect.

The latest recycling of policies comes from the President’s Post-It note to-do list for Congress. If only Congress’s actual to-do list was so small.

Besides leaving out the most pressing issues facing the country—reforming entitlement programs and full-scale tax reform—the President’s to-do list for Congress curiously leaves off the most urgent issue it needs to tackle right now. That would be Taxmageddon and the $494 billion tax hike that will slam the economy on January 1, 2013, unless Congress and President Obama act soon to stop it.

In addition to calling for an extension of the Wind Production Tax Credit and an expansion of the 30 percent tax credit for investments in clean energy manufacturing, the tax polices the to-do list contains are a credit for small businesses that hire new workers and the President’s misguided “insourcing” agenda.

Really? Again with this hiring tax credit stuff? We’ve been there, done that, and have no jobs to show for it. In 2010, Congress passed and President Obama signed into law a tax credit for businesses that added new workers. It failed to create jobs then, and repeating it will fail to create jobs now.

Hiring tax credits do not work, because businesses add new workers when those additional employees will increase profitability over the duration of their tenure. A temporary one-year credit does little to tip this basic calculation in favor of adding new positions, because most businesses expect to retain workers for longer than a year.

The President first proposed his insourcing plan earlier this year. It would take away tax deductions for businesses that supposedly move jobs overseas and reward businesses that move jobs here. The whole premise of the idea is fatally flawed, and his pushing this plan shows that President Obama fundamentally misunderstands how the global economy works.

U.S. businesses rarely pack up their operations here and move them overseas. Instead, they open new operations in other countries as a way to chase growing demand for their goods or services in new, emerging markets. This is nothing but good news for the U.S. An American business finding a new market for its product means more jobs created at the business’s U.S. headquarters and more income flowing back to America. Why would President Obama want to discourage this?

By punishing companies that seek opportunity abroad and rewarding those that happen to bring jobs back, Obama assumes that those businesses doing the latter are better for the economy and are creating more jobs. But he cannot possibly know which businesses are better or which create more jobs.

The government can never know which businesses are better at creating jobs, because it does not have access to the broad range of information available to the diffuse network of individuals and businesses that comprise the free market.

It is time for President Obama to stop rehashing and recycling old, failed tax policies for perceived narrow political benefit and focus on the tax policies that would be broadly beneficial to the economy. First, stop Taxmageddon right now. Second, implement fundamental tax reform along the lines of the New Flat Tax.

Now that fits neatly on a Post-It note.

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