<HTML> <HEAD> <TITLE>End payroll tax, create more jobs </TITLE> </HEAD> <HEAD><TITLE>Cleveland Live News</TITLE> <META name="description" content="Get Cleveland local news, national, international and breaking stories with Cleveland Live's constantly updated news coverage"> <META name="keywords" content="news, Cleveland area, special reports, national news, Cleveland news, Cuyahoga County, Summit County, Portage County, Medina County, Youngstown, Akron, Plain Dealer news"> </HEAD> <BODY BGCOLOR="#FFFFFF" LINK="#003D84" ALINK="#6F9059" VLINK="#003D84"> <TABLE BORDER=0 CELLSPACING=0 CELLPADDING=0 WIDTH=600> <TR> <TD VALIGN=top ROWSPAN=3 WIDTH=94> <center> <IMG SRC="/graphics/bob/head/logo.gif" WIDTH=89 HEIGHT=121> <a href="/pd"><IMG SRC="/graphics/bob/head/pdlogo.gif" WIDTH=94 HEIGHT=35 BORDER=0></A> <IMG SRC="/graphics/rotologos/newspro.gif" BORDER=0> <TABLE BORDER=0 CELLSPACING=0 CELLPADDING=6 WIDTH=80> <TR><TD bgcolor=#CCD0C0>  <a href="/">Home</a> <a href="/news">News</a> <a href="/news/pdnews/metro/">Local News</a> <a href="/cltalk/">Cleveland Talks</a> <a href="/sports/">Sports</a> <a href="/business/">Business</a> <a href="/traffic/">Traffic</a> <A HREF="/netnews">NetNews</A> <a href="/obit/">Obituaries</a> <a href="http://forums.cleveland.com/forums/get/watercooler.html">Watercooler</a> <a href="http://www.rainorshine.com/weather/index/sites/cleveland">Weather</a> <a href="http://flash.cleveland.com/">NewsFlash</a> <a href="http://sports.cleveland.com/">SportsFlash</a> <a href="http://wire.ap.org/">AP Wire</a> <a href="/community/publicsq/">Public Square</a> <a href="/news/lotto">Lottery</a> <A HREF="/comics/">Comics</A> <A HREF="http://www2.uclick.com/client/cll/cx/">Crossword</A> <A HREF="/mapquest/find.html">Maps</A> <a href="/">C/L Sections</a> <a href="/whatsnew">What's New</a> <a href="/news">News</a> <a href="http://www.rainorshine.com/weather/index/sites/cleveland">Weather</a> <a href="/business">Business</a> <a href="/community">Community</a> <a href="/events">Calendars</a> <a href="/ultrafolder">Ultra Guide</a> <a href="/living">Living</a> <a href="/sports">Sports</a> <a href="http://forums.cleveland.com">Forums</a> <a href="/ultrafolder/altclev">Alt.Cleve</a> <a href="/education">Education</a> <a href="/wallppr">Wallpaper</a> <a href="/classi">Classifieds</a> <a href="/contact/">Contact Us</a> <a href="/search/">Search</a>   </td></tr></table> </TD> <TR> <TD COLSPAN=2 WIDTH=500 valign=top height=113> <CENTER><IMG SRC="/business/graphics/trans.gif" WIDTH=468 HEIGHT=3 ALIGN=bottom></CENTER> <CENTER><A HREF=http://ad.doubleclick.net/jump/www.cleveland.com/news/news;ord=901204698 target=_blank><IMG SRC=http://ad.doubleclick.net/ad/www.cleveland.com/news/news;ord=901204698 ALT=AD WIDTH=468 HEIGHT=60 BORDER=0></A> <img src="graphics/pdopinion.gif" border=0 width=420 height=75 vspace=10> </TD> </TR> <TR valign=top> <TD VALIGN=top bgcolor="#003D84" WIDTH=5 valign=top> <IMG SRC="/news/graphics/head/spacer.gif" WIDTH=5 HEIGHT=10 valign=top> <img src=/news/graphics/trans.gif width=5 height=620> </TD> <TD VALIGN=top width=495> <IMG SRC="/news/graphics/trans.gif" WIDTH=495 HEIGHT=1> <blockquote> <table align="right" valign="top" width="100" bgcolor="#FFA500" cellpadding="5" cellspacing="0" border=4 bordercolor="#003D84"><tr><td align="center" valign="middle"> <a href=/cgi-bin/sendpage.cgi><img src=/sendthis/graphics/spfinal.gif border=0></a> <a href="/news/pdnews/opinion/index.html">Opinion & Ideas</a> <a href="/news/pdnews/column/index.html">Columnists</a> Join the discussion at the <a href="http://forums.cleveland.com/forums/get/watercooler.html">Water Cooler</a> Send a letter to <a href="mailto:letters@plaind.com">The Plain Dealer</a> </td></tr></table>  End payroll tax, create more jobs Thursday, July 23, 1998By William Drayton The Bureau of Labor Statistics recently announced that the nation's unemployment rate was 4.5 percent, bouncing along at the lowest rates in almost 30 years. Heartwarming if true, but the figures mislead. BLS unemployment data is based on monthly interviewing in 50,000 households with occupants over the age of 16. Those occupants are asked if they were looking for work in a certain week in the previous month. If they say yes, they are considered unemployed. If they say no, they are not considered unemployed, even if they have no job. As a result, the nation's unemployment rate routinely excludes millions of Americans who would love to have a job. People who are working part time who believe they cannot get a full-time job are not counted. Seasonal workers are not counted during the seasons when they are out of work. Discouraged workers - people who have stopped looking for work because they believe they cannot find a job or find transportation a barrier - are not counted. Tens of millions of "the retired" are not counted even though they are healthy and typically eager to work. The government tells them they aren't supposed to work and punishes them if they do by raising their taxes and reducing their Social Security. Much the same is true for millions of the disabled, women and minorities. If one counts all the over-18 adults who are healthy and not in any school, medical institution or jail and who thus could be working, but are not, one finds that almost half the country's human capacity is not being used. Life doesn't have to be this way. There are practical ways to give these hidden unemployed the opportunity to work if they wish. The most obvious is to stop taxing jobs. Start by eliminating the worst offender - the payroll tax. The payroll tax is an immense burden on U.S. workers. It was only 2 percent when introduced in 1936, and it was applied only to the first $3,000 of a worker's wages. Today, the chief payroll taxes are 15.3 percent, and are applied to the first $65,000 that anyone earns. It is an extraordinarily regressive tax. Not only do the poor pay a higher percentage of their income than the rich, but economists agree that employers in many mature, slow-growth industries ultimately make workers pay the employers' share too. When an item is expensive, we use it sparingly. When it is cheap, we use more of it. As a result, we are slow to hire but quick to consume nature. Replace this tax on work. Instead, tax consumption of natural resources (such as use tax that exempts labor, or pollution emission auctions). Do this, and magical things will happen. Cutting the cost of labor 15 percent and increasing the cost of natural resources 10 to 15 percent will change their relative prices 25 to 30 percent. Employers will hire more people and at the same time conserve natural resources. University of Texas professor Dan Hamermesh, an expert on labor market supply and demand, estimates that for every 1 percent reduction in payroll tax and 1 percent increase in natural resource tax, in the long run we would create about 2 percent more employment. With more people employed, our social costs would decline. Prison and welfare budgets would shrink. Crime, drugs and violence would diminish. Health would improve and health-care costs would nose-dive. A 1996 study found that a 1 percent increase in the employment of older people in North Carolina led to a 7.29 percent decrease in days of hospitalization. Classic economic theory holds that there are three elements to an economy - natural resources, capital and labor. We cannot achieve faster growth safely through a more aggressive use of our natural resources. We already are leading the world in the efficient use of capital. That leaves labor: The big opportunity for sustainable high growth lies in giving more people jobs. Fortunately, America has labor in abundance. Replace the payroll tax with a consumption tax, and the economy will prosper. Drayton is a MacArthur Fellow, chairman of Get America Working and president of Ashoka: Innovators for the Public, a global program that launches social innovators. ©1998 THE PLAIN DEALER. Used with permission.     <center> © 1998 <a href=/privacy/copyright.html>Cleveland Live</a>. All rights reserved. Please read and understand our <a href=/forum/rules.html>Online User Agreement</a> and <a href=/privacy/policy.html>Privacy Policy</a>. </center>  </blockquote> </TD></TR></TABLE> </BODY> </HTML>