The Real "Job Creators"

The President has said that he wants to allow the Bush tax cuts to expire for those making over $250,000 per year.  He argues that it is only fair that those who have benefited the most from our free society can afford to pay a little more.

Mitt Romney disagrees.  He says that the President’s plan is in essence a tax increase on the “job creators.”  And he states that increasing taxes on the “job creators”, particularly in the middle of a failing economy, will stunt economic growth and drive the country into a recession.

We would suggest that the correlation between tax rates and job creation is the biggest hoax played upon the American people in the history of our electoral process. 

Republicans in particular like to refer to the major corporations and small business owners that make up the top 2% wage earners as the “job creators.”  These are the people that hire folks to build the products they sell and the services they provide.  So raising taxes on “job creators” will affect their bottom line and discourage them from making new hires.  That makes sense…right?

Wrong!

The real “job creators” in this country are not the major corporations and small business owners.  The real job creators are the middle class Americans who buy the products and services marketed by these corporations and small businesses.  Corporations and small business owners don’t expand their business and hire new employees based on their marginal tax rates.  They expand and hire based on the demand for their goods and services.  If there is no demand there is no incentive to expand and hire.  It doesn’t matter if the “job creators” are paying taxes at a 15% rate or a 35% rate if there isn't any income coming in to tax.

The key to job creation is a strong middle class.  The middle class is the engine that drives the economy…not the marginal tax rate.  If the middle class isn’t working then they don’t have money to spend on goods and services.  If the middle class isn’t buying goods and services then there is no reason for corporations and small businesses to invest expand and hire.  By getting more money into the hands of the middle class you enable them buy goods and services.  The resulting demand incentivizes corporations and small business owners to invest expand and…hire.  More jobs mean more people who have money to spend on goods and services.  And so the circle continues…and the economy grows.

Today our middle class is disappearing.  High unemployment, reduced wages, deflated home values, skyrocketing health care costs, rising gas and food prices have all played a part in shrinking the size and purchasing power of our middle class. Until we find a way to rebuild the engine that really runs our economy the marginal tax rate at which corporations and small businesses pay their taxes will remain irrelevant in terms of economic growth.

The President has it right on this one.  Anything that puts more money into the hands of the middle class will help spur our economy.  All this talk about corporations and small businesses being “job creators” is nonsense.