Tom,
This piece is OK as far as it goes, but has some major problems. Here
are my observations:
1) The article accepts the current system as is, that all we need to
reach some golden future is more jobs and more growth. I'm not
convinced, as I've alluded to in earlier posts, that a "job" is a good
thing from the perspective of human happiness, contentment and freedom.
The fact that 50% of Americans don't work may be cause for celebration,
not alarm.
Do any of you remember a report by a liberal think tank a couple of years
ago which claimed to measure the "quality of life" GNP? Their argument
went something like this - higher spending on things that are bad should
not be counted toward GNP because they don't enhance quality of life.
For example, if cancer rates have gone up due to increasing use of
chemicals in agriculture, does this mean that the extra health care
spending should be included in the GNP? This is really an extra cost on
society, not a net gain, yet it is counted just like the construction of
houses or food, etc.
2) Limiting the scope to our present publicly subsidized market economy,
then granted, this idleness is a problem which leads to high levels of
stress and economic hardship. And I think adding progressivity to the
tax code is also a good thing to try to do.
3) As far as payroll taxes go, the article doesn't mention what happens
to the beneficiaries of the revenue the gov't collects through payroll
taxes. How will social security benefits be paid? Even if this can be
worked out, how do we minimize the dislocations associated with a
transition from what we have now to a no (or seriously reduced) payroll
tax scheme? These issues are ignored.
4) I'm very skeptical of the claims at the end of the article that
reducing payroll taxes will have a host of other benefits including
reduced crime, less drug use, shrinking welfare rolls, etc. How does
this at all follow? Even the claims that there would be more employment
are dubious - as Doug pointed out in a recent post, the Fed is likely to
raise interest rates if unemployment falls too low, which could offset
any potential gains due to a reduction in payroll taxes.
I did however find the stat on reduced health problems among the active
elderly population interesting, and would like to know more about work
done on that topic.
5) Finally, I find their prescription for a consumption tax, which would
probably be regressive, a little ironic after reading that one of thier
criticisms of the payroll tax is regressivity.
Brett
At 10:29 AM 7/23/98 -0700, you wrote:
>Dear Doug and the Left Business Observers, Any comments on this Plain
>Deale
>r opd would be appreciated. Sincerely&Fraternally, Tom
>Lehman
>http://www.cleveland.com/news/pdnews/opinion/ybill23.htm
>>
End >>payroll tax, create more jobs
Thursday, July 23, >>1998
By 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. © 1998 Cleveland
Live. >>All rights reserved. >> Please read and understand our Online
User Agreement and Privacy Policy. >> >