Why do business lobbyists and Republican politicians constantly claim that tax breaks for the rich create jobs when no evidence exists that this is true?
They do it because some people believe this myth, and the corporate welfare kings benefitting from the myth give a lot of money to Republican politicians.
Recent news reports reveal that Gov. Scott Walker’s massive income tax cut to wealthy Wisconsinites has not created more manufacturing jobs.
The Manufacturing and Agricultural Credit was established by Walker and the GOP-controlled legislature in 2013 with grand claims that it would result in more jobs. That tax break cost the state more than $200 million last year, 93% of which went to tax filers making more than $250,000 annually. Yet, in 2016, Wisconsin actually lost 3,776 manufacturing jobs while metro Milwaukee led the nation is job losses.
Drilling down further, tax filers making $5 million or more annually will receive 39% or $88 million of the tax credit this year, according to the Legislative Fiscal Bureau. That’s an average tax break of $425,494.
What is the benefit to the rest of us? Absolutely zilch.
Business owners and corporations don’t need to create any new jobs to claim the credit. Outrageously, they can close factories, lay off employees, send jobs off-shore and still pocket the tax giveaway before, presumably, forwarding a cut of it to Walker’s re-election campaign. And here’s the kicker: Because tax documents are not public record, the rest of us tax-paying suckers can’t even discover the names of the millionaires receiving Walker’s gifts.
Walker loves to harp to educators, students and the unemployed about accountability, but when it comes to his rich business pals, it’s all trust — no verification.
The state’s chief business lobbyist, Wisconsin Manufacturers and Commerce, predicted this tax credit would be “a powerful incentive (that) will encourage manufacturers to expand in Wisconsin.” The same old mantra.
But here’s how it has worked out in fact, not myth.
Wisconsin’s manufacturing sector has not grown any faster since the law was enacted. The number of manufacturing jobs in Wisconsin, moreover, grew slower than the national average, by only 1.4% between September 2013 and September 2016, compared to the national rate of 2.1%. As noted above, Wisconsin actually lost manufacturing jobs last year.
This “supply side” economic theory that claims tax cuts for the very wealthy will create jobs and increase wages was labeled “voodoo economics” 37 years ago by none other than George Herbert Walker Bush, no liberal.
His analysis is supported by history. U.S. income tax rates have fallen precipitously over the past 50 years with no corresponding increase in economic growth or job creation. In fact, America experienced rapid job growth during two administrations that raised marginal tax rates: The Clinton administration (1992-2000) with 21.5 million jobs and the Obama administration, (2008-2016) with 11.3 million jobs.
By contrast, the largest tax cut in U.S. history ($1.3 trillion) was enacted under George W. Bush. Job creation was anemic despite low interest rates and expansive monetary policy.
The same trends are true at the state level. The National Tax Journal (December, 2015) reports that there is no consistent relationship between state tax rates and employment or economic growth. Kansas’s fiscal mess, a direct result of radical tax cuts, is living proof that tax cuts do not stimulate growth and job creation.
This tax break for the rich has contributed to the state’s growing inequality. It has not, however, delivered on its promise of job creation.
By 2019, the Manufacturers and Agricultural credit will have cost the state $1.4 billion in revenue. This money could be used to improve roads and highways without tolls or debt. It could help our public schools reduce class size or restore programs in art, music, physical education and career and technical education. It could train skilled workers at our tech colleges, retain faculty and reduce tuition in the University of Wisconsin system or help reduce soaring student debt.
These and other public investments are the building blocks of a competitive economy, and they create jobs. But none of these would fatten the wallets of Governor Walker’s benefactors or result in Walker raking in millions of campaign contributions from his wealthy welfare recipients.
What’s your priority?
Michael Rosen is a retired professor at Milwaukee Area Technical College.