IGNITING THE ECONOMY
America’s economy is lying idle and today’s job numbers only underscore that. Just 227,000 jobs were added in February 2012, which pundits will certainly celebrate as positive growth. However, when you consider that more than half of those jobs must be added simply to maintain the status quo, the true gain hardly moves our nation in the right direction when more than 12 million Americans are out of work.
Moreover, the reality of today’s economy is even bleaker than February’s stagnant unemployment rate of 8.3 percent implies. America’s unemployment rate – which includes those individuals who have simply given up looking for work – is real at 9.9 percent and underemployment has hit almost 20 percent. Moreover, since Obama’s stimulus passed three years ago, 2.6 million Americans have slipped into poverty – the highest number in the 52 years that the census bureau has published such information.
Washington has tried to treat the symptoms of a down economy with bailouts and handouts, but to no avail – the unemployment rate has failed to wane, the national debt has skyrocketed, and America’s competitiveness has collapsed. We can’t put another Band-Aid on our economy. Instead, we must work to fix the elements of our business environment that are broken, beginning with the corporate tax structure.
The last comprehensive corporate tax reform package was developed before the iPad, smart phones, debit cards, and even DVD’s. At 35 percent, America’s federal tax rate will – in a matter of weeks – become the highest in the world. Moreover, the average rate for OECD nations is 25.5 percent – 10 points below the U.S. rate.
While America’s tax rates were among the lowest and most competitive in the industrialized world when they were set 25 years ago, the landscape has significantly evolved. With globalization and new technologies, our corporate tax structure has become outdated and uncompetitive.
Companies don’t do business the way they did 25 years ago, and they shouldn’t be taxed under a structure that was created a quarter-century ago.
The high corporate tax rate impairs America’s ability to attract foreign investment, distorts financial and economic decision making by U.S. firms and spawns inefficient government programs and policies.
Most importantly, the high corporate tax rate puts a significant weight on America’s workforce. Studies have shown that workers bear up to 75 percent of the burden on the corporate income tax. When the tax rate rises, consumers pay more for products, wages are frozen or reduced, and employers can’t create jobs.
Studies by the Heritage Foundation and the Milken Institute have found that a significant reduction in the corporate tax rate could create up to 2.2 million jobs in the U.S. Another study found that if the U.S. rate was reduced to 25 percent, the average family of four would realize an additional income of $2,484 annually.
Rather than reforming the tax code, Washington decision makers have thrown recycled taxpayer dollars back at companies whose bottom lines have weakened and created loopholes to win political points. In order to free our job creators to start hiring again, however, loopholes must be closed, the tax code simplified, and rates reduced.
Today’s jobs numbers will likely spark conversation that we are headed toward an unemployment rate that is below 8 percent. However, even if the rate hits 7.5 percent next year, we have just attained a lower historically high unemployment rate than before. Our jobs market is lying idle and we can’t afford it any longer.
Unless we grow our economy and GDP, our unemployment crisis will continue, our national debt will grow, and our children will inherit an America that is worse off than the previous generation.
Stephen DeMaura is the President of Americans for Job Security.