March 28, 2004
Kerry’s Job Creation Plan
More and more jobs are going out of the country. For the millions of people who worry their job might be next, this is a grave concern. John Kerry has announced his plan for bringing an estimated 600,000 jobs, already lost, back home. He says companies exploit tax loopholes to out source labor needs. He wants to eliminate those loopholes.
What do his words literally mean? What would the physical implementation of his program look like? What specific set of actions is he proposing? To answer that, we must first examine the phrase "tax loophole".
Politicians don’t have enough time in the day to list all the things they want to tax. That’s why they have multiple sessions of Congress. They just can’t get everything taxed in one shot. It’s too massive of a task. Otherwise they’d just meet once every four years like the Olympics. And it just frustrates the hell out of federal revenuers there are some things they haven’t thought of, or haven’t had the time to tax yet. That’s why they invented the phrase "tax loophole".
It’s a brilliant piece of political phraseology and you’ve got to take your hat off to whoever came up with it. Its success is attributable to the inclination of most people to assume finding a tax loophole is cheating on your taxes but getting off on a technicality. The phrase just reeks of dishonest or unethical behavior. And since voters are taught all business everywhere is dishonest and unethical they’re naturally going to get mad when they think businesses are avoiding getting soaked like the rest of us.
The truth is the law says what you owe taxes for and how much you have to pay. It’s perfectly legal to not pay taxes you don’t owe. A tax loophole is simply something politicians haven’t taxed yet.
So, understanding "eliminating tax loopholes" translates to "additional taxes" the nature of Mr. Kerry’s proposal becomes clear. He intends to make it more expensive for companies to out source jobs overseas, thus keeping more of them in America. Will it work?
Let’s look at the mechanics. Why do jobs go overseas? Lower costs right? Why are the costs lower? Three things:
Cheap labor: Why are foreigners willing to work for such low wages? One obvious reason is the wages must be better than their other alternatives. If you’re working for 2 cents an hour and Nike offers you 4 you think you might take it? The other reason people can work for low wages is their country will allow it. They don’t have a minimum wage. Some here call it oppression but the low skilled workers there call it getting a better job. In any case, love it or hate it, there is absolutely no question if we had no minimum wage some of those jobs would remain in the United States.
Lower Taxes: Revenue minus cost equals profit. As taxes on business increase here it becomes more attractive to do business there. And it’s not just greedy corporations wanting to maximize obscene profits. The average company in America makes between a five and ten percent profit. When high taxes eat into that, some businesses can no longer make a profit and all of those jobs go away. Some businesses relocate, taking jobs with them. Some businesses will stay and continue profitability, but do it by making do with less employees. If we lowered taxes it would help keep jobs here at home.
Regulations: The number of regulations businesses must comply with is mind boggling. And those regulations not only cost billions but expose companies to increased risk of litigation. When companies are strapped for cash and/or exposed to high financial risk some of them are going to go elsewhere. Many of these regulations result in a cleaner and safer environment to live and work in. But many accomplish nothing and at great cost. Reducing regulations and getting more in line with the rest of the world would help keep jobs in America.
If we want to keep more jobs here we should do less of the things that drive them elsewhere. Kerry’s solution? Do more of them. Think it’s gonna work?
Ed Powell