There has been a lot of political rhetoric lately centered around the "Job Creators," and what we can do to encourage them to create jobs (in America). Most of it seems to be centered around (1) creating some sort of "certainty" for them regarding what sorts of taxes they might be expected to pay if the jobs they deign to create are successful in increasing their profits; and (2) lifting the supposedly onerous regulations we put on them regarding product safety, environmental protection, and perhaps royalties on what they withdraw from the earth's supply of non-renewable natural resources and other services they receive from our common ecosystem.
I contend that those who frame it this way are leading us astray.
First, the jobs that the so-called Job Creators actually create occur when (a) they want more personal services -- haircuts, manicures, acupuncture, botox, dry cleaning, catering; (b) they want more goods -- dinners out, boats, cars, swimming pools, airplanes, motorcycles, jewelry, wardrobe, fancy foods, alcohol, tobacco, etc.; (c) when they decide to build or rebuild a home, and furnish it.
The real job creators are those whose demand for products and services create jobs. A few percent of us have sufficient current income -- or sufficient wealth to draw on -- that it is fair to say that virtually all of their needs and many of their wants are being met. But the vast majority of us have unmet needs and certainly more wants. And I think it is fair to say that while it is human nature to want something for nothing, and that all of us want to meet our needs and wants with the least possible effort, it is also true that virtually all of us are willing to work, to serve others with products and services, in return for wages, be they from a single employer or a collection of customers.
So what's the problem? Why can't this supply of labor get together with this demand for labor, to the general benefit of our entire society?
I can point to several problems.
First, much of the nation's capital is in the portfolios of a very small proportion of our society, and that process of concentration shows no signs of slowing down, much less reversing. (Not surprising, since we've done nothing to correct the structural causes which produce it!) Joe Stiglitz has said that the FIRE sector is harvesting something like 40% of the profits of the productive sectors of the economy. This cannot be permitted to continue if we seek to create prosperity for all.
Second, ownership of America's choicest sites -- mostly in the central business districts of our biggest cities, but also in some of the scenic coastal areas and the suburbs surrounding those cities -- is in the portfolios of a very small proportion of our society (as well as in portfolios of foreign landlords). This may not appear to some to be a problem, but I assert that it is -- and a big one. (The good news is that it is readily fixable.) An acre of Manhattan land can be worth $250 million or more, while an acre of good farm land might be worth $5,000 -- a difference of 50,000 times! That is, 50,000 acres of farmland might be worth the same amount as a single acre of Manhattan land!!) A single 25x100 residential building lot in Manhattan -- 0.058 acre -- can be worth $10 million ... that works out to $172 million per acre.
Third, we tax labor income -- wages -- to fund federal and state spending. We tax the first $105,000 or so of wages at 15% or so to fund Social Security and Medicare (that includes both the employee's and the employer's contribution, as economists agree is appropriate). After exempting some amount of income in proportion to family size ($15,200 for a family of 4) and some additional for a standard deduction ($11,900 for married filing jointly) or some combination of itemized deductions (which go mostly to high-end urban/suburban homeowners in northeastern states, with big mortgages and significant property taxes, and California owners, with big mortgages and more modest property taxes), the Federal Income Tax taxes the next dollar of wages at 10%, and the rate rises to 15%, 25% 28%, and, for a tiny but noisy minority of us (adjusted income over $217,450 after exemptions and deductions, for married filing jointly -- which Romney calls the middle class), to 33% and 35% on the marginal dollars (not on all of one's income). But 86% of us pay more in payroll taxes than we do in federal income taxes, when the employer's portion is taken into account. [source: http://www.cbo.gov/publication/43373, table 8.] It is worth noting that 15% [social insurance] plus 10%, the federal tax rate on the first dollar after deductions and exemptions, is 25%, but that for those whose household income is well above the $105,000 cut-cutoff, the 35% bracket is not all that much higher than what comes out of the pockets of the low-income worker.
So 25% to 35% of the portion of our wages beyond that allowance for some basic expenses, are being taken to fund federal spending, and in most states, more for state spending.
The federal spending, and much of the state spending, goes to projects whose effect is to increase local land values in specific places -- infrastructure, public goods of various kinds. Oddly, we fund it via taxes on wages! Wouldn't we be wiser to fund it via taxes which fall on those land values, which are so concentrated into a relative few pockets -- pockets which are currently not asked to contribute much, but receive so much from those who need to occupy those choice urban sites. I do not begrudge the owner of a luxury building the right to keep the portions of the rent he receives which can be attributed to (a) the qualities of the building itself and (b) the services he as landlord provides, but much of that rent is attributable to neither of those factors; rather, it is a function of .... (all together, now) Location, Location, Location, and value which is created by the community, not by that landlord!
Fourth, most of us of working age, and particularly our young people, are paying at least 30% of our income for housing, and many, many people are paying a far larger portion of their income. On top of that, many have student loans, car loans, and perhaps credit card debt, and live paycheck to paycheck. Many young people who bought a home during the 2002 to 2010 period are upside down on their mortgages, owing the lender more than they could sell the property for, and are thus effectively trapped in those homes until prices rise or someone does something to renegotiate their mortgage, or they win big in the Lottery. Thus they cannot move to meet their families' changing needs, or leave the area to accept a job in another part of the country.
So what does this have to do with Job Creation? Well, if those of us who don't live on the really choice bits of urban or coastal land were relieved of some portion of their tax burden, including the 15% that goes for social insurance, we'd have more to spend on satisfying our other needs and wants, and virtually all of that would create jobs. Here, in the U. S.