Tax cuts don’t create more jobs

Conservatives love it when corporations make money. They love it even more when it’s a result of lower taxes.

They rationalize lower corporate taxes by claiming that it will lead to more jobs and indirectly to more government revenue.

Except that’s just a myth.

For example, a 2017 study looked at the payroll changes at 92 publicly held U.S. corporations that posted profits every year from 2008 through 2015 and paid less than 20% of these earnings in federal income tax, which is less than the top 35% tax rate which is typically the target of tax cut supporters. What they found was that more than half of these companies actually shed jobs during the period, despite the overall economy boosting payrolls by 6%. Of the 92 companies studied, the median change in payrolls was -1%. Many of these companies used their increased profit to buy back stock, helping to boost the price of their company’s shares. Of those who cut jobs, the top 10 each spent $45 billion in stock buybacks over the 2008–2015 period, 6 times that of the S&P 500 corporate average. As well, CEO pay among these companies rose 18% during the period, compared with a 13% increase among S&P 500 CEOs.

Likewise, a 2012 study looked at the impact of changes in US tax policy since World War II, including both personal and corporate tax rates. They discovered that cuts to personal income taxes boosted employment, investment, and consumer spending; however, while cuts to corporate taxes boosted production, they didn’t lead to much new hiring, presumably, they’re reinvesting their new money into initiatives that boost production (perhaps automation or other efficiencies).

Finally, a 2011 study found that from 2000 to 2009, 198 Canadian companies on the S&P/TSC composite increased their profits by 50% during that period and were paying 20% less in taxes. However, the number of jobs these corporations created was lower than the average employment growth in the economy as a whole. As well, despite corporate taxes dropping from 28% to 19% during that period, government revenue during that period fell: cutting corporate taxes did not increase government revenue.

And these are only 3 studies I had time to look up this morning. There are plenty of others.

If you want to increase jobs, then give workers more money. Reduce their taxes. Increase their wages. When consumers have more money, they spend it. Spending increases demand for products and services. And increased demand creates more jobs.