The Real Story on the Employment Crisis
Posted by PaulM on 09 Feb 2010 at 05:50 am | Tagged as: 2010 Election, Education, Federal, History, Lowell, Lowell 2010, Presidency, Uncategorized
NYTimes columnist Bob Herbert continues writing about the jobs crisis in today’s paper. See his analysis and comments about an unemployment study by Northeastern University. Read it here.
FROM THE ARTICLE…the Center for Labor Market Studies explained in its report: “A true labor market depression faced those in the bottom two deciles of the income distribution; a deep labor market recession prevailed among those in the middle of the distribution, and close to a full employment environment prevailed at the top.”
I feel because the “top’ are the leaders who generally are in charge of creating an environment to creat jobs, is why reaction to creating jobs is so slow. Because they have not felt the pain. It is not a criticism, but an observation, What else could explain their lack of urgency. Hearing and living it are two different life experiences. I think that they should include the unemployed on the panels of all the “job summits”
Deb: “I think that they should include the unemployed on the panels of all the “job summits””
What a commonsense, useful, GREAT idea. No jobs panel should be without that IMHO.
..And the underemployed among us who are either working part-time or hourly wage jobs we’d never *want* to do but making the compromise because: a) there are bills to pay and, b) full-time jobs are so hard to come by in this tough economic climate.
A significant contributor to prolonged unemployment in a recession is our current US tax system that greatly rewards pay offs to capital (i.e., dividends & capital gain income from investments) over pay offs to labor (i.e. wages).
Income from capital is tax advantaged at special, low rates (and there are arguments it should be, thought not to the gross extent it is currently) while the affect of payroll taxes (7%+ on up to $106,800 gross wages after which it drops to the Medicare-only rate 1.65% on all wages) disproportionately reduces the net income of the middle and lower wage earner. Thus, the combined tax burden on a low or middle income worker is much less progressive than the income tax tables, alone, would suggest and leave that worker with less relative disposable income.
Lack of disposable income translates into lack of mobility. It restricts one’s ability to achieve the financial security (savings, borrowing capacity at favorable low rates, adequate insurances . . . ) that can enable individuals to afford the more or better education required for higher paying employment in good times and greater employment flexibility in bad times. It is one reason that economic mobility has stalled in the US over the last 20 years. Parents cannot afford to better their or their childrens futures with expensive education leaving skills and economic mobility lowered.
The US is large enough in population that even though a small % of citizens, those making > $200,000 comprise a large number of people with an interest in leaving the US tax regime (income AND payroll taxes) as is. In addition, there is much incomplete and mis-information about the tax system (like leaving consideration of payroll taxes out of almost all tax discussions) that keeps even those disadvantaged by the current system is a frenzy about “taxes”. I have to believe (or else I would simply despair) that were middle and lower income voters to understand how underserved they are by the current tax regime, they would make their votes count to change it.
And one last point of fact: tax deferred savings (401(k)s, traditional IRAs, 403(b)s et al . . . ) DO NOT benefit from the lower rates on capital income (gains or dividends). The income that accrues to a tax deferred investment (except for from a ROTH which is never taxed) is taxed at ordinary (not capital) income tax rates when withdrawn.
So yes, more US citizens are participants in the capital market through retirement savings but NO, not all participants in the capital markets get the same tax treatment.
Partisan eye candy!
“The red bars are the accelerating rate of job loss during President Bush’s last year in office; the blue bars are the decelerating rate of job loss during President Obama’s first year of office.“
The problem with this simplistic graph Jack is that it doesn’t take into account that there are less jobs to be lost today than there were in April of ‘08 when the steep declines really started to hit home. Of course the rate of job losses is going to decrease, because of all the jobs lost in the year and a half before that.
The most important aspect of those numbers is that a year after a stimulus plan that was supposed to create jobs, jobs are still being lost.
JDayne, hasn’t the capital used to generate more income already been taxed? It’s taxed when it’s earned. It’s taxed when it returns money on an investment. It’s taxed when you die. How many different times should money be taxed and what rate is enough to satisfy government’s unending need to feed itself and grow?
Right in Lowell misunderstands jdayne’s post or the US tax code or both. Return OF your invested capital in not taxed by the income tax system, just return ON the investment, whether capital gains or dividends. The question is why income from invested capital needs to be taxed at a lower income tax rate than income from wages, especially since the income from wages is also subject to the employment tax. The employment taxes are also assessed on employers as well as employees, providing a disincentive to job formation. With high unemployment, shouldn’t we provide a tax incentive for creating jobs, not just for investing? It would perhaps be one thing to provide a tax break for capital investment that actually builds a business that creates jobs, but there is no evidence that my buying stock in the stock market achieves that end. Finally, very little wealth in America is subject to taxation at death. The “death tax” is a boogie man almost entirely created from whole cloth by the political right.
I understood correctly Gardner. My point is, income earned on capital investments SHOULD be taxed at a lower rate because the money used to invest in the first place was already taxed. It shouldn’t be treated as a payroll tax, because it’s not earned in a job. It’s earned in a manner that could very well lead to losing all of it. Last time I checked, they didn’t offer me unemployment benefits when one of my stocks went belly up.
As for income tax incentives for job creation, I’m with you 100%. We should be providing incentive for businesses that judge success based on job creation and long-term financial health as opposed to bottom line profit today and instant stockholder gratification.
However, you don’t have to tax the hell out of capital gains to reward job creation. As a matter of fact, a sound policy with both could be just the tonic needed to kick start the economy and return America to its rightful place as the world’s dominant economic superpower.
RIL, last I heard, unemployment was 9.7%. Read up, pally: Paulson: Unemployment could have hit 25%
RIL, do you blog anywhere else? I’d like the chance to see your “A” Game.
I don’t have my own blog, if that’s what you’re asking.
If you’d like to see my “A” game, bring your “A Reading” game. (wink, wink) I was referring to the stimulus plan that was supposed to create jobs. The bailout was a totally separate entity. Which, by the way, was first started by the Bush Administration.
Am I to assume you’re now praising GW for his foresight in saving us from greater economic peril? I didn’t think so.