BY OLIVIA SANDBOTHE | DECEMBER 18, 2013
There’s no correlation between low taxes and job creation.
That’s the finding in a new report from the Center for Effective Government that refutes corporate CEOs, bankers and tea party members of Congress who engage in some serious magical thinking when it comes to taxes and job creation.
We’ve heard these voodoo economics before: cut taxes and jobs will appear. Right now,corporate tax rates are at their lowest point in 40 years even as profits soar. Meanwhile, our economy is still struggling. It’s about time we questioned why these policies have yet to result in the job growth that their proponents predicted.
In the new study, The Center for Effective Government, a nonprofit group that studies the economic impact of public policy, analyzed the Fortune 500 companies that posted profits between 2008 and 2012. Then it compared the job numbers of the companies that paid the highest tax rates to those of the companies that paid the fewest taxes.
Of the 30 companies that paid more than a third of their profits in taxes, all but eight added jobs between 2008 and 2010. As a group, these companies reported a net gain of more than 200,000 US jobs.
Compare that to the 30 corporations that paid the lowest rates. Many of these firms are paying no federal income taxes at all. Even as this group raked in $159 billion in profits, only half of them added any jobs. In total, they cut more jobs than they added, for a net result of 51,000 jobs lost.
These numbers tell a story that many of us already knew. Corporations don’t seek out lower tax rates because they’re eager to start hiring. They do it to boost profits, and they don’t intend to share those profits with the rest of us.
What it all means is that billions of dollars that could be spent on education and infrastructure that benefits everyone are instead being hoarded by corporate CEOs. The Center for Effective Government estimates that we could raise $220 billion simply by closing tax loopholes that allow corporations to hide money overseas. Raising the federal corporate tax rate by only a few percentage points would be even more effective.
Public opinion is starting to turn against trickle-down economics. Even Pope Francis has come out against the idea. It’s time to use that momentum to push for a tax system that benefits everyone instead of one that chases after imaginary job growth at the expense of our public programs.