Wednesday, January 25, 2012

Tax cuts to corporations (and saying "pretty please") won't create jobs

Growing jobs in Wisconsin will require reinvigorating demand for goods and services within the state

Gov. Scott Walker made an ambitious request tonight in his State of the State address, asking small businesses across the state to add one new job each to their payrolls this year.

Walker, who is facing mounting pressure due to a recall campaign against him, made the plea amid six straight months of job losses for Wisconsin, a slide that began the month following passage of his budget bill late June of last year.

The governor's plan to grow jobs at that time involved billions of dollars in tax breaks to corporations in order to, in theory at least, give businesses the capital they needed to hire again.

But as I've noted before, capital alone won't create jobs in the state -- rather, capital must be coupled with demand as well, which creates a need for expansion of services or goods that a company produces, in turn creating an incentive for that company to grow its worker-base in order to meet that need.

Tax breaks won't fix that problem -- remember, capital is the end-product of demand, a goal to reach after an investment has been made by the business's proprietor. By handing out that "goal" without a proper incentive, it makes virtually no sense for a business to even consider hiring anyone, especially when doing so would cut into the newly-found capital that they've just gained.

Think about it: what good is it to grow your business when you're already getting money back for doing nothing? The answer is none: if you're getting "money for nothing" (in the form of a tax break, that is), you're unlikely to do anything in return.

Walker's plea to businesses to add one new job each in 2012 is a noble goal for the state -- but without proper demand, it will end up a goal that will become unrealized. To increase demand, Walker can't simply hand cash to corporations and hope for the best; instead, he needs to empower the middle class, to grow their purchasing power, which in turn will allow them to make purchases for goods and services within the state, thus growing demand -- the good, ol' fashioned way that capitalism intended.

Six months of this experiment were enough: it's time to part ways with the "tax cuts will create jobs" mantra that has failed our state, has failed to produce viable jobs growth within Wisconsin.


  1. Going back to those January cuts. One of those bills was signed at EVCO a plastics company in DeForest. In a channel 3 interview by Jessica Arp (I believe) one of the Evans brothers said exactly what Chris outlined above. I'm paraphrashing but it was something like this Q: Will these tax cuts cause you to begin hiring? A: No. I'll start hiring when I see demand picking up.

    I was shocked he wasn't more positive given that this was the owner of business that had enough of a relationship with Walker to have a bill signing at his plant.