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Tax Relief or 'Mere Parsimony?'

A new, nonpartisan report examines whether there is a correlation between tax cuts and job creation.
 
 
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I've always thought that a politician running for office promoting tax cuts is a bit like campaigning for student council president on a ''homework relief'' platform.

Can't you just see it? ''These liberal teachers want to take more of your time away. I want to give some of your time back to you by passing a homework relief bill in the student senate.'' All the students in the cafeteria erupt in applause.

One big problem with that analogy is that homework is widely perceived to be good for the individual student, whereas taxes are seen as a burden. But I wonder if taxes were discussed with different language would the same 'I-got-mine-too-bad-if-you-don't-have-yours' mentality prevail.

If people saw taxes as a United States membership fee or, to put it in market language, as the price of admission to the ''best country'' in the world, do you think ''tax relief'' would be pandered as a panacea for all of America's social ills? Or would politicians who howl about tax cuts be seen in the same light as someone who wants full country club benefits but doesn't want to contribute to the club's restaurant maintenance costs because he brings his own lunch and wants to discourage club dependency?

Apparently, I'm not as smart as economists, some of whom will probably write me in a futile attempt to explain Econ 101. Sean, it's very simple. Taxes serve as an incentive or disincentive. If you cut taxes, it provides an incentive for the business sector to create jobs. Tax cuts = job creation.

I just don't get it. What I do get, though, is that if you lined up all the economists in the world, side by side, you still couldn't reach a conclusion. Nevertheless, President Bush told us in his Jan. 11, 2004, radio address that ''for the sake of our economic expansion, and for the sake of millions of Americans who depend on small business for their jobs, we need Congress to act to make tax relief permanent.

''Making tax relief permanent,'' the president went on to say, ''is a simple step that would keep our economy growing, so that every American who wants to work can find a job.''

The folks at United for a Fair Economy, a nonpartisan think tank that tries to ''raise awareness that concentrated wealth and power undermines the economy,'' has a new report out that examines whether there is a correlation between tax cuts and job creation.

According to the report, from June 2003 to December 2004, only 2.6 million new jobs were created. ''That's 1.5 million fewer jobs than expected without implementing the tax cuts, and 2.9 million fewer jobs than promised with the tax cuts.'' (See the full report here.)

To test the theory that tax cuts create jobs, UFE researchers examined five occasions since World War II when there had been a major tax decrease or increase followed by at least four years with no major reversal in tax policy. ''Some tax cuts were followed by job growth, some by job loss. The same is true for tax increases,'' the report found, which would indicate that the ''tax cuts = job growth'' formula doesn't necessarily compute.

Also, the report noted, the number of ''good quality jobs'' (defined as those paying at least $16 an hour, health insurance and pension benefits) has remained flat at 25 percent of all workers. And, while there's scant evidence that tax cuts create jobs, there is considerable evidence that tax cuts create ''economy-choking'' deficits.

Some will consider this typical ''liberal'' drivel, but I consider it an affirmation of something the intellectual father of conservatism observed. ''Mere parsimony is not economy. Expense, and great expense, may be an essential part of true economy,'' wrote Edmund Burke.

How about this economic equation: ''tax relief'' = ''mere parsimony.''

Sean Gonsalves is a Cape Cod Times staff reporter and a syndicated columnist.