Over the past year, the real average wage for non-supervisory employees has risen 2.8%. That equates to about a $1,200 increase in purchasing power for the typical household this year. Last year, real median household income was also up 1.1% after inflation. This rise in take-home pay helps to explain how Americans have had the disposable income this Christmas shopping season to pay $600 for PlayStation 3 computer games and $150 for the Kid-Tough Digital Camera for three-year-olds.
It is true that income and wages are still about 2% below the peak they hit in 2000 before the dot-com bust and recession. But a new Treasury Department analysis finds that, measuring from the start of the peak of each expansion, wages so far in this decade’s cycle are running ahead of the recovery pace during the 1990s. Thus the “stagnant wages” story can join the “jobless recovery,” the “outsourcing” crisis and the runaway budget deficit as other tales of woe that have all turned out to be evanescent.
We certainly agree with those who’d like to do more to lift worker paychecks, so here are two ideas. First, make the Bush tax cuts permanent. If Congress lets them expire in 2010, as many Democrats are urging, the average family will suffer the equivalent of a $2,000 a year pay cut.
Second, slash the corporate income tax. A recent study for the American Enterprise Institute by economists Kevin Hassett and Aparna Mathur examined 72 nations over 22 years and found that “wages are significantly responsive to corporate taxation.” In today’s global economy, capital migrates across national borders away from high-tax nations to places where tax systems are less punitive. Workers suffer when capital flees, and job and wage growth slow.
Many political leaders have adapted to this reality, which is why the average corporate tax rate across the globe has fallen over the past 25 years to an average of about 30% from 50%. The AEI study finds that, if the U.S. were to cut its 35% corporate tax to the OECD average of 30%, American manufacturing workers would gain nearly a 10% pay raise dividend within five years, which is the equivalent of roughly a $3,500 a year pay boost.
Read the whole article.
More money in the free economy means more jobs and more wealth. If liberals gave a damn about people they’d sign up for this right now. But they care about their power and will demonize the productive in order to attain and keep that power.
While we’re cutting the corporate rate, hopefully we can eliminate it at some point, we need to be cutting personal tax rates too. Many small businesses are subchapter-s and LLC’s. Those businesses should get a tax savings too.
The money that should be taxed is the money that someone spends on themself. If they earn a lot but reinvest it in the economy that’s a positive for the economy.