Tax cuts need to be bigger

The Associated Press today reported that even the Obama administration believes that proposed tax breaks designed to spur job growth will only work on the margin. A mere tax break will not be enough for some businesses to hire an additional worker.

Basic economics 101. Businesses provide more services and goods when there is increased demand. Demand refers to an ability and willingness to pay for some item. Neither the Obama proposal, which sought to provide a $5,000 tax credit to a business for each person hired, or the Senate bipartisan bill, which exempts businesses from paying the 6.2% social security tax for a hired worker, targets the ability and willingness to pay aspect of demand.

If government wants to juice up job growth, it should repeal NAFTA, thus removing the incentive to send jobs and investment overseas, and equate the wages paid to domestic workers with that paid to workers overseas but reducing income and payroll taxes but the difference in wages.

Why wouldn’t this be a good start?

About Alton Drew

Alton Drew brings a straight forward and insightful brand of political market intelligence. Alton Drew graduated from the Florida State University with a Bachelor of Science in economics and political science (1984); a Master of Public Administration (1993); and a Juris Doctor (1999). You can also follow Alton Drew on Twitter @altondrew.
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