Tag Archives: jobs

Social Engineering with Taxes

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Dr Alan Blinder, Princeton University Professor of Economics and Public Affairs, is at it again.

First, some side issues which he raises:

Since the economy as a whole created 5.41 million net new jobs over the past three years, you might expect that about 4.51 million of them were in the private sector and about 900,000 were in the public sector.  In fact, the private sector created 6.56 million net new jobs over the past three years while about 1.14 million net government jobs were eliminated via layoffs and spending cutbacks.

Never before in postwar history has government employment declined during a recovery. Compared with historic norms, we’re down over two million government jobs.

Never mind that the private sector’s performance is about 2/3 of what President Barack Obama promised with his 2009 stimulus and less than that compared to other recoveries, held back by his interfering policies.

Separately, the reduction in government employment is a good start.  Government remains far too big, and it’s not a jobs welfare program: further cuts in Federal employment are warranted.

Then,

Real GDP growth has averaged a paltry 2% per annum over the past three years.  But growth of GDP excluding government purchases—the things governments buy, including hiring workers—has averaged 3%.

But this just confirms how much government interference is inhibiting recovery.

Next, he offers a partial solution:

So Congress could make a good start on faster job creation simply by ending what it’s doing—destroying government jobs.

There’s that employment security welfare claptrap made explicit.  Government actually has a few very specific tasks, named by the Constitution, and no other thing to do at all.  It doesn’t need to employ lots of workers, outside of soldiers, sailors, marines, and airmen, in order to do those few tasks.

Now, he comes to his tax policy as social engineering tool:

Virtually since the Great Recession began, many economists have suggested offering businesses a tax credit for creating new jobs.  While details matter, the basic idea is straightforward: Offer tax breaks to firms that boost their payrolls.

For example, companies might be offered a tax credit equal to 10% of the increase in their wage bills over the previous year.  No increase, no reward.

You might imagine that Republicans would embrace an idea like that.  After all, it’s a business tax cut….

Here’s that foolishness of using taxes to drive our economy to a government goal.  No.  The ways to help our businesses and spur hiring include reducing—or even eliminating—taxes on businesses, canceling the additive costs and outright taxes Obamacare imposes on businesses for hiring, and stopping paying the unemployed for not working.

And no, the “tax credit” isn’t at tax cut at all.  It’s an increase in spending.

Blinder also had this idea:

Suppose Congress enacted a partial tax holiday that allowed companies to repatriate profits held abroad at some bargain-basement tax rate like 10%.  The catch: the maximum amount each company could bring home at that low tax rate would equal the increase in its wage payments as measured by Social Security records.

Again, no.  Eliding the social engineering claptrap of the suggestion, temporary tax moves have no effect.  We’d be better off moving to a territorial tax scheme at the new reduced overall business tax rate.  Or eliminating the business tax altogether.

Blinder concludes with this:

My general point is that the fiscal cupboard is not bare.  There are things we could be doing to boost employment right now.  That we are not doing anything constitutes malign neglect of the nation’s worst economic problem.

Indeed.  Let’s reduce/eliminate business taxes, get Obamacare off the backs of businesses, and restore unemployment payments to the status quo Harding right now.

In Which I Agree with Obama

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…to a point.

Currently, many companies that do business with the Federal government can get Uncle Sugar to pick up as much as $763,000 of their executives’ pay—a cap that, in today’s world of the Evil Sequester, is going to go up to $950,000 at the start of the new fiscal year this October.  And it will be retroactive for all of the current fiscal year of 2012.  That’s your and my money going into a paycheck that companies in the private world cover entirely out of their own revenue flows.  President Barack Obama wants the cap lowered to $400,000.

I agree.  Cord Sterling, Vice President of the Aerospace Industries Association, does, too:

Arbitrary caps are not the best approach and do not account for competition among all hi-tech industries in the market for talent.

Indeed, and to that point: why are we taxpayers subsidizing any part of these guys’ pay?  This is a subsidy that needs to be eliminated altogether.

Yet Another Thought on Taxes

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The Wall Street Journal has reported that

Apple, Inc paid no corporate income tax to any national government on tens of billions of dollars in overseas income over the past four years, Senate investigators found, a revelation that fuels the debate over whether the US tax code needs an overhaul.

The Senate thinks this is a bad thing, even as they acknowledge that Apple actually paid all the taxes it legally owed.  Senator John McCain (R, AZ), ranking Republican on the Senate Permanent Subcommittee on Investigations that hectored Apple’s CEO, Tim Cook, on that dastardly legal behavior earlier this week, gripes that

What they often leave out is the second part of the story, that Apple is one of the largest tax avoiders…Apple [is] the most egregious offender [among US corporations trying to avoid tax bills].

This despite the Subcommittee’s already completed investigations finding that Apple has, indeed, behaved entirely legally.  (Which makes me wonder, as an aside, whether McCain has outlived his usefulness and become just another RINO who needs to be terminated in his next primary.)  Regardless of any findings, though, in the finest Federal government tradition (can you say, “IRS,” boys and girls?), we’re going to hector and harass, anyway.  That was the point of haling Cook before the subcommittee to answer their inquisition.

This comes as part of a debate that the

US is undergoing…about the earnings that US companies are keeping overseas.  The profit at foreign subsidiaries are out of the reach of the IRS, and largely unusable to their US operations.

The sums amount to an estimated $1.9 trillion, according to an analysis by Audit Analytics….

However, instead of thinking about how to get their grubby mitts on all that money—which they then can dole out to select groups in return for votes and political power—these politicians should think about how much good that money would do in terms of jobs and innovation (and so more jobs) and lower product costs (and so more demand and so more jobs) were that money allowed to come home by an intelligent tax régime that would contain rates that encouraged rather than prevented repatriation of the money.

But thinking about that would require these politicians to “ask not what they can do for themselves, ask what they can do for their country.”

Obamacare Fail

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…again.

Employers are increasingly recognizing they may be able to avoid certain penalties under the federal health law by offering very limited plans that can lack key benefits such as hospital coverage.

Benefits advisers and insurance brokers—bucking a commonly held expectation that the law would broadly enrich benefits—are pitching these low-benefit plans around the country.

This, of course, is backwards.  The coverages here should be paid out of pocket.  The better policy would cover only catastrophic events—like hospitalization.

Then there’s this:

[E]mployers and benefits experts have understood the rules to require robust insurance, covering a list of “essential” benefits such as mental-health services and a high percentage of workers’ overall costs….

But a close reading of the rules makes it clear that those mandates affect only plans sponsored by insurers that are sold to small businesses and individuals, federal officials confirm.

The money-saving bare bones policies are only available to large companies.  The jobs producers remain stuck with the expensive, overwrought mandated policies that they cannot afford.  Nor can they afford the penalties Obamacare exacts for not affording them.

And this from Kansas Insurance Department Special Counsel Linda Sheppard:

The whole idea is to get healthy people in and not-so-healthy people in.

Never mind that healthy people don’t need to be in, since they don’t need the coverage, and so they shouldn’t be being forced in.

Business Factoid

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Matthew Payne, writing in The Wall Street Journal this weekend on a related subject, had this little tidbit.  Quoting a Chief Executive Magazine poll of business-worthy states, he wrote,

CEOs are well disposed to Texas, and it’s not hard to understand why.  52 Fortune 500 companies now call Texas home.

That’s 10% of the Fortune 500 that live here.

If those 500 companies were spread evenly across the 50 states, there would be 10 of them here.  If the 500 were spread proportional to each state’s population relative the nation’s population, Texas would have 4 of them.

Hmm….