Walker's Tax Cuts: Would It Be Impolite To Say … I Told You So?

That whooshing sound you’re hearing is the sound of Caledonia businesses hiring multitudes of people into their workforce. They are doing so in lockstep with the other businesses in this state, and indeed the nation. Happy days are here again! Thank God for the Republicans…and for their finding that magic elixir – the cure-all known as tax cuts!

What’s that you say, you don’t hear the whooshing? You got me there. I was just kidding. Truth be told, there will be no massive wave of hiring. Though that was the desired outcome of the just passed tax cuts by the Republican Legislature and signed into law by Governor Scott Walker.

This policy is ineffectual… and they know it.

Caledonia businessmen are not stupid. Even with the tax break, there is little incentive to hire workers in substantial quantities. And why not? Let’s do some simple math. If you hire a worker at $8 per hour, the yearly salary would be $16,000 dollars. If your business has total gross revenues of under $5 million, you get a $4,000 dollar tax credit for each “new job.” That leaves the owner to find a way to support the additional $12,000 dollars he has added to his payroll. That can only be done by increasing business – selling more products and services. Without any increase, that $12,000 dollars hits the bottom line… tax credit notwithstanding. Like I said, they’re not stupid. Neither is “Big Business” with its record profits and well over a trillion dollars in reserves.

What they’ve done is they have led the horse to water, the horse wants to drink, but they provided it with a thimble of water.

This tax cut is a real nice piece of feel-good legislation. A Republican promise kept. An ideology served. They will be pointing to this legislation four years from now saying they lowered taxes. What they won’t be telling you is the actual cost/benefit result. I’ll do it for them… I’m happy to oblige.

Reducing revenues can’t solve reducing the over $220 million budget deficit for this year and Wisconsin’s 3.2 billion debt; which is exactly what tax cuts do. Walker will have to cut from somewhere. Will it be from Medicaid, Medicare, school funding, state benefits, entitlement programs; all of the above?  (He says that he will do so with “compassion.”) In the end what you have is exactly what they accuse the Democrats of doing – redistributing wealth. Only this time it is going in reverse. We give to those who have more and take away from those who are struggling. Nice job.

In my January 9 column entitled “First Do No Harm,” I cite two studies by a non-profit, non-partisan think tank that states in part, new firm formation (and in particular “high impact” small firms) is relatively constant regardless of the economy or public policy towards creation and that “policies will affect the numbers at the margins” and little else. Between 2008 and 2009, all the new jobs created came from these young firms. Not all small businesses are job creators.

So, I ask our Republican leaders, on the point of job creation; is it impolite to say I told you so?