Conservative politicians cut taxes so they can give their rich donors more money. After all, taxes are applied to profits, not revenue, and lower taxes means more profits.
But that doesn’t sell well with the public, so they tell us that low taxes creates jobs.
Except tax cuts don’t create jobs. Let me explain.
Companies hire more workers because the demand for the products or services they sell is greater than what the current number of workers can produce. Hiring more workers means they can produce more.
However, if the number of consumers won’t increase, then there’s no point in increasing the number of workers producing those products.
And while reducing the corporate tax rate may increase the amount of profits companies get to hold on to, that extra money isn’t going to increase the number of customers they have demanding their products.
I mean, why would it? Why would company owners having more money lead to customers buying more?
You know what would lead to more customers though? If customers had more money.
Because if customers have more money, they can buy more products and services, and if they buy more products and services, it drives up demand, and of course if demand increases, production has to increase, which leads to more jobs.
The idea that a company is just going to hire more workers to meet the demand they’re already meeting with their current workforce simply because they happen to have more profit is nonsensical.
Companies don’t pay corporate profit tax on worker wages; they pay taxes on what’s leftover after worker wages (well, and all other expenses). When it comes down to it, actually, the more that companies pay out in wages, the less they have leftover to have to pay in taxes, in absolute dollars.
Which means that if you really want to cut down on how much companies pay in taxes, encourage them to raise worker wages. Those workers will then spend that money (on groceries, clothes, gas, homes, cars, hunting trips, hockey games, dance classes, and so on). That extra spending will drive up demand, which will further increase production, leading to more jobs.
After all, the vast majority of customers are workers, not owners.
Companies pay less in taxes, workers improve their standard of living, more jobs are created. Win, win.
Tax cuts don’t create jobs. Higher wages for workers creates jobs.