The Other American Jobs Act

President Obama’s jobs plan (Senate Bill S.1459 “The American Jobs Act”) appears to have met with the fate that most predicted. Even before its release, the bill was widely believed to be nothing more than “Stimulus Jr.”, a smaller, yet strikingly similar version of the American Recovery and Reinvestment Act of 2009. As it turns out, that notion was correct and after the Senate played around with it for almost a month, the revised version put forth by Senate Majority Leader Harry Reid (S.1660), was voted down yesterday.

After failing to gain even enough Democratic votes to pass a Democratic bill, apparently the plan is now to break the legislation up into multiple pieces and attempt to pass them one at a time. In the mean time, I suppose Americans will just have to wait around for another month or two before we see what Congress and the Administration plan to do to help improve our economic situation. But while all the focus is on this, let’s not forget there is more than one bill in Congress to help boost the economy. The other one is, you guessed it, the other American Jobs Act.

The other American Jobs Act was introduced in the House of Representatives by Congressman Louie Gohmert (TX-01) on September 15, 2011. It was done so in anticipation of the delays that were expected in the Senate while they attempted to pass the President’s proposal. As it turns out, those expected delays have come to fruition.

So, what’s the “other” bill you ask? It’s quite simply, a dramatically different approach that can be implemented immediately. No more trying to jumpstart “shovel-ready” infrastructure projects, which is good because there is no such thing (as we all learned the last time), no more government subsidized and micro-managed loan programs and likely the best part is that while the President’s jobs bill comes in at around 155 pages, Congressman Gohmert’s bill is just a scant two pages long.

Now that the anticipation has reached a sufficient level, I must warn those of you that may lean to the left. This is the part that will make your head explode, so I respectfully ask that you keep an open mind and consider the merits of the proposal before lambasting it. Here it is:

The other bill is H.R.2911, which repeals the corporate income tax.

I know that many will regard this proposal as some “extremist”, “anti-government” plan that rewards “millionaires and billionaires” and helps them pay for their “private jets” instead of making them “pay their fair share”, and does so at the expense of the “99%” (let me know if I missed any talking points or protest slogans). The fact is, however, that if one can put aside their ideology for a moment, they will see that there is a lot of merit to the proposal. Here’s why:

First, anyone with an IQ above room temperature can see that the President’s plan isn’t going to be any more effective than the first stimulus bill was. It may have “saved” or “created” some jobs (although the jury’s still out on that), but even if we assume that it did the truth is that it failed miserably in its stated purpose of getting the economy moving. (Read here if you want to know why.)

Second, people have to understand that it’s Consumers that pay corporate income taxes, not businesses. Every time you purchase a good or service, the price you pay includes the company’s expense for income tax liability. That is already factored in, just as their cost to produce the product and their administration expenses are. It’s foolish to think that corporate income taxes don’t impact the price paid by Consumers.

Many have called for corporate rates to be raised, yet this only shows that they don’t understand this most basic premise of business. Raising corporate rates would accomplish nothing except to make consumer prices increase. Who does that affect again? Oh yeah, the “99%”. In essence, what they’re saying is that they want to raise taxes on themselves. Brilliant.

Lowering, or in this case, eliminating, corporate income taxes will result in lower consumer prices. Will it happen overnight? No, of course not. Many businesses will lower their prices quickly, but many will wait to see how everything “shakes out” first. In the end though, prices will go down, companies will be more profitable, will have more capital to expand and will have more need to hire more workers, thus creating jobs.

There are two main reasons why businesses hire more workers. The first is when they need more manpower to meet their current demand. The second is when they need more manpower because they’re expanding to meet anticipated future demand. Eliminating the corporate income tax will be viewed by almost all in the business community as something that will generate significant growth. As such, businesses will get off the sidelines and start ramping up to meet that expected demand.

But what about the cost? That’s another nice thing about this bill. President Obama’s bill came in at a cost of around $450 billion dollars. In 2009, corporate income taxes brought in $231 billion to the Federal Government. That’s almost half of what the President’s plan will cost, and the beauty is that it’s not an expense so much as it’s putting money directly back into the business community where jobs are created. No roundabout sidetrips through a multitude of government departments with this bill. The money goes (or more accurately, “stays”) directly where it will do the most good.

The truth is that it won’t cost us that much (and over the course of a few years, will actually raise income tax revenues by more individuals being employed and paying taxes on their income). The conventional logic used by the Congressional Budget Office and all the political hacks in Washington is based on the “zero sum” premise. This premise is that if you raise or lower tax rates by a given percentage, then the revenues will be impacted proportionally. This is one of the most flawed premises in the history of mankind because it does not account for changes in economic behavior. Increasing the cost of something generally results in less of that activity and vice versa. Did Walmart become the largest retailer in the world by raising their prices?

President Bush’s tax cuts are a perfect example. Many still claim to this day that the cuts “cost us” about $1 trillion. People that make that claim only display how sadly uninformed they are (no offense if you’re one of those people). The tax cuts were implemented in 2001 and 2003. By 2007, federal income tax revenues had increased by about 44%, and at a faster rate that GDP, I might add. The only way to support the claim of a $1 trillion cost is to assume that tax revenues would have otherwise increased by roughly two and a half times, which is obviously an absurd contention.

So, while in the short term, eliminating the corporate tax will cost us some revenue, it will be less than the cost of the President’s bill. It will be short term, simply because those “lost” revenues will be more than made up for with taxes paid by workers that have re-entered the workforce, to say nothing of the money saved by not having to pay out unemployment benefits for those workers as well.

Many will disagree with and oppose this bill on nothing more than ideological grounds. Many may agree with it, yet still oppose it for the same reason. Some will actually consider the arguments for the bill, will challenge their pre-conceived notions and try to look at it objectively. Hopefully, there will be enough that are willing to look past their ideology to see, and consider, the bill on it’s merits.


+Kevin A. Nye

Statement by Congressman Gohmert:

September 14, 2011 – WASHINGTON, D.C.
“We have heard a lot of rhetoric about job creation from President Obama over the last several days. After waiting to see what the President would actually put into legislative language, and then waiting to see if anybody would actually introduce the President’s bill in the House, today I took the initiative and introduced the ‘American Jobs Act of 2011.’ It is a very simple bill, which will eliminate the corporate tax which serves as a tariff that our American companies pay on goods they produce here in America.

This bill will actually create jobs in America. Right now, American manufacturing jobs are shipped overseas. What is really insidious about this tax is that corporate taxes are paid by the consumer – built in to the cost of the good or service. Corporate taxes are paid for by people in the form of lower wages to American workers and less money paid out in dividends in everything from 401K retirement accounts and to those who would risk their capital in business ventures. This type of capital investment is where jobs come from.

Unlike President Obama’s bill, which clocks in at 155 pages, the ‘American Jobs Act’ is only two pages. The American people want to see jobs and economic growth and this bill guarantees that outcome. America would instantly become a safe haven for businesses resulting in an explosion in revenue increases. If we really want to create jobs and grow the economy, we must pass ‘The American Jobs Act’ now.”

To view a copy of the bill, click here.


Photo credit: skeeze

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