Through the stimulus package, President Obama promised to get the unemployment rate under 8 percent. While we’re heading closer to that “magic number,” the reduced rate is not a result of economic growth, but rather because thousands of Americans have simply given up when it comes to finding a job.
When tallying the unemployment rate, the federal government only counts those individuals who are actively looking for a job, but are unable to find employment, which helps to create an illusion of progress even when our economy continues to shrink.
A better measure of progress may be to review how many jobs were added per month. According to the U.S. Bureau of Labor Statistics’ latest report which was unveiled yesterday morning, just 115,000 jobs were added to the U.S. economy in March 2012 – hardly enough to even sustain the number of individuals entering the workforce every day, let alone putting unemployed Americans back to work.
Government spending will not produce economic growth. Increased taxes will not produce economic growth. Regulations will not produce economic growth. The single best proposal to empower businesses of all sizes to reinvest in the economy would be to lower and simplify our tax code- especially the corporate tax rate.
Today’s code was designed 25 years ago – before the Berlin Wall came down, before the technological revolution, and before America’s economy collapsed. While competitive when it was enacted, America’s corporate tax rate is now the globe’s highest at 39.2 percent when you combine state and federal rates. Reducing the corporate tax rate would allow the United States to better compete with other countries in attracting foreign investment.
Moreover, the corporate tax code has grown increasingly complex over the last quarter century. In an effort to gain favor with voters, politicians have offered loopholes to constituent businesses, cluttering the tax code, increasing its complexity and making it extremely unfair for companies that can’t afford large lobbying operations.
According to a 2012 Harvard Business School survey on economic competitiveness, the tax code’s complexity – and the uncertainty that it brings – was a primary factor that deterred companies from investing in the United States.
The archaic tax code impacts individuals as much as it does corporations. In fact, studies have shown workers bear up to 75 percent of the burden of the corporate income tax. Moreover, if the corporate tax rate were reduced to 25 percent – which is on par with the global average – an estimated 580,000 jobs would be created in the U.S. annually for the next decade and the average family of four could realize an additional income of $2,484 annually.
Today’s 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. Additionally, it hurts job creation and reduces wages.