When you think about creating jobs what do you think about? What’s the one lever you can manipulate to create jobs? And let their creation drive us out of this recession?
- Taxes?
- Stimulus Dollars?
- Infrastructure Investments?
- Education?
- Universal Healthcare?
It’s taxes, right? Everyone will say taxes. Lower taxes on small business and you will create jobs.
And, it makes sense. More money left in the business owner's pocket = more money to create jobs.
Maybe. I wrote earlier this year that a cursory glance of state tax rates and their unemployment rates does not show a causal relationship between the former and the latter. States with the lowest tax rates are not always, in fact, rarely, the states with the lowest unemployment rates. Is there a recipe for creating jobs?
I asked if the difference-maker was innovation or infrastructure? The connections between these two were weaker. Anecdotal, at best. More like faith-based, really.
What if it was affordable or universal healthcare? What if the number of entrepreneurs, startups and small businesses were driven by the availability of affordable or even universal healthcare. Hold on to the rants for just a minute. Rant if you will. But wait.
A recent study sponsored by The Center for Economic and Policy Research showed the percentage of citizens in major industrial nations classified as self-employed. Greece was first with 35.9%. We, the US, were...last with 7%.
John Schmitt and Nathan Lane, Center for Economic and Policy Research.
Shocked? I was. I see us as the country of risk-taking entrepreneurs. We’re not. We’re near last in fact.
I looked at national tax rates, both statutory and effective.
Statutory tax rates are not the rates we pay. Just ask those who held bank accounts with UBS. (Ask their ex-spouses, also.) Statutory rates are the rates in the statutes before our accountant finds the exemptions. Effective tax rates are the rates we pay. They are the statutory rates, net of exemptions.
And the OECD reports we have the lowest effective corporate tax rates in the world. By odd coincidence we have the highest statutory corporate tax rates.
To their defense, the OECD did report the connection between tax rates and economic activity.
Again, the disconnect is shown between tax rates and the rates of self-employment, entrepreneurship and small business. We have the lowest effective corporate tax rates. We have the lowest rate of self-employment, also. This is important. Why? Self-employment, entrepreneurship and small business...they are the primary drivers for job creation in any economy. They are the only job-creating drivers during a recession.
We're in a recession. They, you, become even more important. We, collectively, need to know what lever to push to generate more jobs.
Back to the quandary:
Why can countries with higher effective tax rates have higher percentages of small business and entrepreneurs and self-employed?
We can see the impact of this demographic on our rates of recovery from this recession. Look at the different rates of recovery from the global recession. Our rate of recovery remains...last. Asia has the fastest recovery rate. It’s led by China and India. Germany and France (France?) lead Europe out of its recession. EU suffered only a .1% drop in their GDP this past quarter. We suffered a 1% drop in our GDP.
I went back to that study from Center for Economic and Policy Research. Here’s their conclusion:
One plausible explanation for the consistently higher shares of self-employment and small-business employment in the rest of the world’s rich economies is that all have some form of universal access to health care. The high cost to self-employed workers and small businesses of the private, employer-based health-care system in place in the United States may act as a significant deterrent to small start-up companies,12 an experience not shared by entrepreneurs in countries with universal access to health care.
Those countries with the highest rates of entrepreneurs, self-employed and small business are the same countries with:
- higher effective corporate tax rates than we pay here in the US
- access to affordable, universal, healthcare for its residents.
I have no data that refutes that conclusion. Do you? Ideology and faith-based reasoning is not data. Show the data that refutes this conclusion.
Or rant. But as you rant with word like socialism, government control, government rationing of healthcare, etc, remember the so-called socialist countries have higher rates of self-employment, entrepreneurship and small business are rising from this recession faster. And offer universal healthcare to their citizens.
Now, resume ranting, if you wish.
* Graph from Economix Blog.
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