The line we've been hearing from conservative pundits and the Tea Party Republicans is pretty consistent: cut or eliminate taxes and the economy will boom. Well, that might be interesting if it were true. Since 1980, we've cut taxes and they have remained below pre-1980 historical levels since then. Yet, we now have an economy that can only be propped up by bubbles every few years in order to function.
By nearly all accounts that I have read, federal income taxes are the lowest in decades, so where are the jobs? Investors have a 15% capital gains tax, are they investing? If you look at the indexes, they are still higher than before the bubble burst in 2008. Seems like they are investing. But we're still down by 8 million jobs since the bubble burst.
Even the top marginal rates for income taxes are far below their zenith prior to 1980. I can recall the anticipation of the tax cuts when they were proposed by Reagan. So many people were rubbing their hands with glee over that victory. Since then, there has been no steady economic growth without a bubble to prop it up. We had the stock bubble, then the housing bubble and they were great, but they were unsustainable. Interest rates are still at historic lows, too. The Fed can't make the rates go any lower than zero. Yet, there are still no jobs for the 8 million or so who want one.
The tax free zone that few are talking about is the trading floors of our security exchanges. It is estimated that $5 quadrillion changes hands on Wall Street every year. Seems like that kind of money movement would juice the economy very well, but it hasn't. It's just changing hands between the small clan that circulates the vast majority of money between themselves - on Wall Street. With each exchange, they make money, don't they? They must or they wouldn't persist in the high-frequency trading that is all the rage on Wall Street. So tell me, do these high frequency trades create jobs? Not as far as I know.
Some people have taken notice of this high frequency trading business and have suggested that we ought to place a small tax on the traders on Wall Street. 1% seems reasonable and I doubt that would be missed by anyone trading on Wall Street. Well, someone might notice, and they'd howl at Congress to remind them of who it is exactly that they work for and then such a bill would die in committee for their sins. I find it strange that so few are even willing to consider taxing the financial sector this way when the same people who promote low taxes are more than happy to cut food stamps, unemployment insurance and Social Security just to balance the budget.
If the argument that low or zero taxes would create jobs were to hold any water, all that fussing and trading in Wall Street with zero tax burden should be creating jobs. I don't see that happening, do you?