Monday, May 7, 2012

Jobs

The republicans have continually asserted that lowering tax rates is necessary to create jobs. Contrary to this assertion, history will show that the higher the tax rates, the more likely someone will be hired. Consider a department manager with a 20% tax rate. This individual gets to “keep” 80 cents of every dollar in pay and in doing so, has no incentive to hire anyone else in his or her department. On the other hand, raise the individual’s tax rate to 50% or 70% (as during the Eisenhower years) and instead of keeping only 30 cents out of each marginal dollar, he or she is more likely to hire additional employees and reduce his or her labor. Rather then do the work themselves for little increased income, hire more assistance. It worked in the 50s and would work today.