Remarkably, despite the severity of the current recession, government at all levels has reduced the number of jobs (instead of hiring, to offset job losses in the private sector, as they could have). And now, starting up with 2011, the increasingly united political elite of both parties are in agreement that no more money will be spent on creating jobs! The budget deficit comes first, they say, people and families be damned.
A third measure--a one-time, one-year, 10% surtax on the $3 trillion total in hoarded corporate cash--would produce an additional $300 billion in government tax revenue.
Therefore, a total of $1.15 trillion could be raised by these three measures in the first year alone.
A fourth tax measure could require the wealthiest households to pay the equivalent of the 12.4% payroll tax that the bottom 80% (i.e. the 92 million middle- and working-class households) already pay on their annual income. If the wealthiest 1% of households were required to pay that same 12.4% on their total income (including their dividends, capital gains, interest, rent, etc.), just as the bottom 80%/92 million already do, the payroll tax would produce an additional $85 billion in tax revenues, in the first year as well as in every subsequent year.
The next wealthiest 19% of households, about 22 million of them, earn both capital-gains incomes (like the wealthiest 1%), and wages (like the bottom 80%). But they too now pay the 12.4% payroll tax only up to $106,800 a year and, like the top 1%, pay nothing at all on their capital-gains income.
So, if they too were to pay the 12.4% payroll tax equivalent on all their salary, including that in excess of the current $106,800 ceiling, as well as on all their non-salary capital-gains incomes, it would raise another $85 billion a year. The total tax revenues have thereby risen to roughly $1.32 trillion in the first year, and $255 billion each year thereafter.
That $1.32 trillion would more than cover the U.S. federal government's currently projected budget deficit of $1.3 trillion. If the entire amount were dedicated to reducing the deficit, it would, in turn, eliminate any possible need to reduce:
- social security benefits,
- Medicare and Medicaid benefits,
- student loan amounts,
- other social programs that might be proposed in the next U.S. budget.
A fifth and final tax proposal: Impose a permanent transactions tax on all financial trades--stocks, bonds (per $100 value), as well as on the trillions of derivatives trades over the counter (including interest rate swaps, currency swaps, etc.). A simple $1 fee for every stock trade would have virtually no negative effect on stock trading. Similarly a 10-cents-per-$100 bond purchase fee/tax would amount to a mere $10 tax on the purchase of, say, a $10,000 U.S. Treasury bond -- an amount that would hardly deter the bond sale.
With the passage of the Dodd-Frank financial regulation bill in June 2010, for the first time some derivatives trades will have to occur in clearing house transactions, which means they will now be recorded. A financial transactions tax on derivatives trading (of similar dollar proportions as for stocks and bonds) would therefore raise additional and quite significant amounts of tax revenue. In fact, an additional $150 billion a year in tax revenue would be raised from such a financial transactions tax.
The New Necessity of Government Job Creation
Today's terrible reality, that we must now finally face up to, is that businesses, on the whole, simply won't be creating more jobs unless forced to; therefore government must step up to the plate. That means a direct shift in government policy from relying on markets to create jobs by flooding corporations with cash via bailouts, zero interest rate loans to banks, and multiple business tax cuts, to a government policy of direct job creation, as required.
An effective program would target immediate, intermediate, and long-term job creation. For example, service sector jobs can be created more quickly, whereas jobs on large infrastructure projects take much longer to ramp up. The same applies to alternative energy projects.
A third of the available first-year funding, about $500 billion, should go toward establishing a government Alternative Energy Public Investment Corporation (AEPIC) to produce solar, wind, and other infrastructure, so as to jumpstart these new industries. The current approach of the Obama administration is to provide government loans to private sector company startups. However, it is clear that these comparatively small companies are increasingly unable to compete with Chinese and other European companies, and are in decline financially. So we need to face the fact that only a large-scale U.S. government project can compete with other, heavily government-dependent, subsidized, and virtually government-run companies in this sector, in Asia and Europe.
Another $250 billion would fund traditional infrastructure jobs, emphasizing infrastructure repair projects in the U.S. Labor intensive projects should also be given strong preference, as opposed to big-ticket-cost projects that hire few people initially and where most of the funding is spent on expensive equipment and materials.