Newt Gingrich’s American Solutions for Winning the Future blasted out a press release yesterday outlining Gingrich’s “new” jobs plan, entitled “Jobs Here. Jobs Now. Jobs First.” In the time-honored Gingrich tradition, the plan is essentially a basketful of giant tax cuts targeted at corporations, wealthy investors, and the heirs of the richest American families.
Gingrich claims that “the following four tax cuts will help create jobs here and jobs now and fundamentally shift power from politicians to small business.” He also told Politico that he “has lined up the support of several members of Congress to introduce legislation incorporating his tax plan.” So here’s what we would be getting if Gingrich’s plan were enacted (all calculations after the jump):
1. Cutting the corporate tax rate from 35 percent to 12.5 percent.
As was extensively discussed during Sen. John McCain’s (R-AZ) failed presidential bid, cutting the corporate tax rate simply does not create jobs. According to the Congressional Budget Office, a corporate tax cut “does not create an incentive for [businesses] to spend more on labor” and “is not a particularly cost-effective method of stimulating business spending.” This cut would cost about $2.1 trillion over ten years.
2. Abolish the estate tax.
Gingrich seems to be under the impression that Paris Hilton is a job-creating machine, as this tax cut primarily benefits ultra-wealthy families making up 0.2 percent of estates. According to the Center on Budget and Policy Priorities, “repeal of the tax would add $798 billion to deficits over the first decade in which its effects would be fully felt (2012-2021),” while the Tax Policy Center points out that “the estate tax can’t have much effect on hiring by small business because hardly any owners ever face the estate tax.”
3. Abolish the capital gains tax.
Gingrich has been trying to get this particular cut enacted since 1997, and claimed that it should be enacted because “this is the rate that Alan Greenspan testified was best for economic growth.” However, the notion that capital gains cuts spur economic growth is false. After the 2003 capital gains tax cut, growth in non-residential investment “only matched the historical norm.” Instead, this cut would overwhelmingly benefit the wealthiest taxpayers.
4. A two-year, 50 percent payroll tax reduction.
The payroll tax funds the Social Security and Medicare trusts, so Gingrich’s proposal hurts the fiscal condition of both programs. (The Making Work Pay tax credit in the Recovery Act accomplishes the same thing, without hitting Social Security and Medicare.) Meanwhile, the cut would result in $926 billion in deficits over the next two years. Gingrich claims that he will pay for this with $300 to $400 billion in repealed Recovery Act money and leftover TARP funds. But there is only about $80 billion left in TARP, so this would leave more than $400 billion in unpaid deficits. Plus, repealing the Recovery money is precisely the wrong thing to do now, as it is needed to do real, practical things for the economy.
In the end, Gingrich’s plan amounts to throwing money to mainly the well-off and hoping that it will have some positive effects. That’s not what is needed to get the country out of its economic rut.
1. Corporate tax revenue is projected to be about $3.3 trillion over the 2010-2019 budget window. Cutting the current 35 percent rate to 12.5 percent would reduce revenue to about $1.2 trillion ($3.3 trillion x 12.5/35), resulting in $2.1 trillion in deficits.