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More on the tax compromise

December 20, 2010 - Mike Maneval
Debate continues over a compromise to renew earned income tax rates cut during the administration of George W. Bush. The compromise has the potential to aid our economy's revival - not so much the 20 percent shaved off of the estate tax, or the renewal of earned income tax rates for the top brackets of earners - even though I support this specific measure for a variety of other reasons - but the payroll tax relief and the renewal of the brackets for households earning $200,000 or less. Whether this assistance will be enough to withstand the pressures on our economy remains to be seen.

We've all read that wealthy investors create the jobs in this nation. And yet, despite the U.S. having its lowest tax rates in 60 years for the past eight or nine years, the unemployment rate has crept up to nearly 10 percent and hovers there.

That's because the rich do not create jobs - they never have, they likely never will.

As the past decade has demonstrated, the investors behind, say, Harley-Davidson, can have their taxes cut to historic lows. But those cuts do not translate to an expansion in hiring. What prompts an employer to hire is increased demand for their product or service - it's the middle- and working-classes who, as consumers, create jobs. Harley-Davidson will employ more Americans on assembly lines when they can sell a greater number of motorcycles to the Americans working on Chrysler's assembly lines and fighting fires and teaching our children and investigating the rapes and murders that plague our streets. People with contempt for these assembly-line workers and firefighters and police officers can try and deny that they are the ones who create jobs, but the record of the past eight or nine years is crystal-clear.

And so, as our economy tries to rebound, the greatest threat to a lower unemployment rate is not tax increases - it is, in all likelihood, the assault on workforce earnings underway - efforts today to drive down compensation for hard-working Americans, often by forcing them to pay more "out of pocket" for health care and retirement planning.

But every dollar redistributed to previously promised health or retirement benefits from a firefighter or teacher or unionized assembly-line worker is one less dollar they can spend in our stores, on the goods and services that keep their neighboring Americans employed. Whether the tax cuts - particularly the Social Security payroll tax cut - under the compromise can put enough money in consumers' hands to alleviate the impact from this contempt for work remains to be seen - and for many reasons is doubtful. But new economic policies that wed tax relief with respect for workforce earnings together would put the American economy back on the right track.


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