Will reducing taxes create more jobs?

Will reducing taxes create more jobs?  You hear politicians continuously making the promise that cutting taxes will increase jobs and diminish unemployment.  However, neither is happening.  The debt and unemployment just continue to rise.

If that is the ONLY thing the Federal government does, then the answer has a three main answers.

1)       If the budget is to be balanced, the government will have to cut jobs to balance the budget with less revenue coming in.  Currently more jobs would have to be cut than would be created.

2)      In prior years if the government borrowed money to pay for the budget over run then jobs would have been created.  There was an effect known as the ‘multiplier effect’.  The salaries paid to the original people for whom jobs were created would buy American products which would result in people being hired in other industries.   It was a mathematical series.  The creation of one job would create others.  Eventually the increased national income would lead to increased tax revenue and that would pay the deficit.

3)      Today if the government borrows money to pay for their budget over runs then some jobs will be created.  However, the multiplier effect doesn’t work as well today.  The salaries paid to the original people for whom jobs were created will buy some products made in other countries.  Jobs will be created not in America, but in other countries.  There still a mathematical series.  However it is probable that the created jobs will NOT equal the money borrowed to create those jobs let alone to create sufficient government revenues to pay for the deficit.

The way taxes are collected and distributed could create jobs.  This will be discussed next.

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