By Dylan Ratigan
We continue our special, three part series “Jobs Wanted.” Yesterday we explained the trade component. Today, taxes.
I want to get into how they can be used as leverage to influence spending and investments, and foster prosperity and jobs.
First, Washington needs to stop viewing the tax code as simply a way to raise money, and instead use taxes to create results. The U.S. tax code should spur American investment and job creation, not prevent it like it currently does. It is simple economics — if you lower taxes on something, you see more of it. The principle also works in reverse, and I have a great example of how taxes influence behavior — the cigarette tax. Remember back in 2008, New York raised its cigarette tax by more than a dollar to $2.75. The result – consumption fell and the state’s smoking rate dropped by 12%. If the tax code can reduce smoking by 12%, by altering it we can also make investing in America grow by 12, 15, even 20%… who knows! That would add jobs by the millions! We can reverse this flow of money by using the tax code to make investing in our own country more profitable than sending that cash and jobs overseas, or using it for financial speculation.
Of course, another issue with the tax code is corporate loopholes. Every year you and I send a check to Washington to pay our taxes, while large corporations, like GE, don’t pay a dime! Now, I’m not here to demonize big business — they’re simply taking advantage of tax loopholes set up by their friends in Congress. And it’s all legal! But we need to close the loopholes and shatter the practice of large corporations using money and power to gain favorable tax treatment.
Follow me on this one — the system can either inject capital and spread it around through lending, which when done right creates jobs… Or it can suck all the money out.
Right now we’re stuck in that reverse position where banks are taking the money out of play. We gave away the farm and got no changes in the way banks do business.
President Bush did whatever he needed to pass the problem on to Barack Obama…and President Obama doubled down on the Bush plan, leaving banking and Wall Street to go on as if nothing happened. The President, Treasury Secretary Geithner and Fed Reserve Chairman Bernanke threw more of our cash at the big banks to keep them afloat by printing money they didn’t have.
But that’s like pouring water into a bucket with a hole in it! Because current banking, and for that matter, trade law, makes it more profitable for banks to engage in financial speculation, loan the money right back to our own government, or take it overseas than it does to focus on domestic lending.
In order to reverse the blower, we need to debate laws that encourage banks to lend, as opposed to speculate and extract…so that money is spread around to job creators who actually produce ideas and hire workers.