Letter to the editor: Business tax reductions do not create jobs

A common false narrative, pushed by Republican politicians, is that reducing an employer’s income tax will lead to job creation. Not true.

The theory is that employers, upon learning that their tax liabilities are being reduced, will be so overjoyed that they will rush right out and hire a bunch of additional people.

Ain’t gonna happen.

Employers, altruistic as they might be, do not hire more people just because they can afford to. They hire more people when they need them to meet an increased demand for their products or services.

This erroneous theory, called “supply-side economics” or “trickle-down economics,” has been around for a long time, at least since the Reagan administration (hence the alternative term “Reaganomics,” which George H.W. Bush called “voodoo economics”). It was repeated twice by the Bush 43 administration and again by the Trump administration. The historical data shows that the promised jobs creation never occurred in any of those four cases.

And there is no reason to expect it should have.

Of course the tax reductions left more after-tax profits in the business coffers. What did they do with the extra money? They increased dividends to shareholders and retired treasury stock, both of which enriched the investor class. They also, quite likely, returned some of it to the very politicians who provided them with the tax reduction in the first place, in the form of campaign contributions. (Could this have been the intent all along?)

But they did not create jobs.

Ed Satalia

State College