Across-the-board corporate tax cuts don't do much to create jobs. That's according to a 2017 study by the Institute for Policy Studies. It compared 92 publicly-held corporations who paid less than the 35% corporate tax rate. It found that, between 2008 and 2016, these corporations lost jobs while the overall economy increased jobs by 6%. Instead of paying taxes or hiring, these companies bought back their own stocks. They also increased CEO pay at a higher rate than the average for companies listed on the S&P 500.3
This was a similar finding to a 2014 New York University study. It compared companies in low-tax states to those in high-tax states. They found the tax rate didn't affect job creation unless tax cuts were offered during recessions.4
Payroll tax cuts are the most cost-effective ways to increase jobs because they lower the cost of labor. These cuts create jobs in four specific ways:
- Companies with popular products immediately use the savings to hire more workers.
- Other companies use the savings to reduce prices. That increases demand, which necessitates hiring more workers.
- Some firms use tax savings to allow them to buy more goods. This benefits manufacturers.
- Many businesses use the cuts to raise wages to retain good workers. The workers spend more, increasing demand.
According to the CBO, every $1 million in payroll tax cuts creates 13 new jobs.
The payroll tax cuts specifically targeted for new hires is the most cost-effective tax cut. Every $1 million in targeted payroll tax cuts creates 18 new jobs. It lowers the cost of new employees when compared to existing workers or investment in new equipment. That changes employers’ decision-making in favor of new hires.
That's idiotic. The study was from 2017. Just think about it. If corporate tax rates go up, businesses leave. Trump brought businesses back.