Another Republican Hoax: Corporate Tax Cuts Stimulate Employment

trickle down brainsThe whole furor over corporate tax cuts as a policy in stimulating business investments and thus creating jobs has been proven false. Like a Potemkin village, it is purely an imaginary cardboard likeness, but has nothing to do with reality. Republicans and their Tea Party cohorts – the anti -tax zealots — may shout their convoluted rhetoric, but it is empty wind.

We now have one of the most definitive and comprehensive studies of the impact on tax reductions on business investment and job creation that has ever been completed.

This study, done by Jim Stanford, an economist with the Canadian Auto Workers and a research associate at the Canadian Center for Policy Alternatives, is entitled, “Having Their Cake and Eating It Too – Business, Profits, Taxes and Investments in Canada 1961 Through 1010.”

Stanford has done one of the most thorough and detailed studies of the economic experience in Canada, with respect to tax cuts on business investment and its impact on Canadian employment. His study also contains an exhaustive examination of the work done by other economists across a broad spectrum of ideological beliefs on the same subject.

His most significant findings are as follows:

“Since the first of several rounds of business tax reforms and reductions was implemented in 1988, business investment has declined one full percentage point of GDP – even though after tax business cash flow has increased (in part as a direct result of tax reforms) by 3 – 4 percentage points of GDP.

Since 2001 Canadian corporations have received a cumulative total of $745 billion in after tax cash flow, which they have not reinvested in Canadian fixed non-residential projects.”

Nor has it increased employment opportunities for Canadians.

Even after this series of major tax cuts to Canadian corporations, the amount of new investments was slight. “The study showed that a 3 point reduction in corporate tax rates would at best stimulate about 600 million in new investments.”  A comparable investment in these tax dollars in infrastructure development would generate 6 billion and a concurrent increase in employment.

“Stanford shows that business investment decisions are more dependent on GDP performance, interest rates, exchange rates and oil prices than to cash flow.”

sy slavinThis Canadian study shows that as far as creating new jobs and generally decreasing unemployment, the way to go is increasing governmental infrastructure expenditures. In addition, these expenditures would spur an added increment of private investment. As employment and wages increase, there is greater likelihood for increased consumer expenditures for services, food, homes and products.

Sy Slavin, Ph.D.
Director, Kentucky Labor Institute

Comments

  1. Ray Bishop says

    The only way to stimulate the economy is by priming the pump and in the right way. We base our Capitalist Economy on Consumption and this means spending. With a cutback in credit and a loss of equity in homes and savings we will not recover by continuing to attempt to spend less.
    Our economy is based on this system. Look at the past. The New Deal and Wars have stimulated growth in the economy. The Republicans have one goal to take control of the Presidency and Congress so that they will be able to continue to control the world economy for the benefit of the very few.

  2. Marie says

    Giving money and privileges on account of promises, rarely works.
    Rewarding with money and privileges after companies , corporations etc. have put in their own capital to create more jobs and better circumstances for the well being of the 99%, has a better chance for positive results.

  3. TRS LaBennett says

    President Obama was not the mastermind of those tricky low cost housing loans. Nope, that was Bush. But what President Obama did do is save a failing auto business and he’s currently offering jobs that the Republicans can’t bring themselves to agree that there is a “demand” for said jobs, in order for the economy to continue to recover!

  4. Jay Levenberg, Esq. says

    If spending a trillion dollars on such programs didn’t work, why would more such spending work? The American people are not stupid and insanity is doing the same thing over and over and expecting a different result. Both parties are missing the point-something has to be done to increase demand. Without demand for products, people won’t buy- and now people are saving more because the value of their homes have decreased. Obama did absolutely nothing about the housing crisis created by all those easy loans that were designed to increase home ownership. Until the housing market recovers, demand will remain low and the economy will remain in bad shape.

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