Tax Cuts May Not Buy Anything but Votes

Re “Beware the Payroll Tax Cut,” Commentary, Dec. 6: John Palffy says that if payroll taxes are cut, fast-food operators may hire more employees. People only get hired when added business requires it. At Christmas time, stores hire more salespeople, but as soon as Christmas is over they let them go. If payroll taxes are cut, the savings could just as easily go to profit for the owners or reduced prices for the customers. There is no requirement that more employees have to be hired.

Palffy also implies that any tax savings that go to the rich are automatically invested in new factories, thereby creating more jobs. People don’t build new factories unless they can sell the output. At present, the world can build 75 million automobiles and only sell 55 million. The world is awash with capital, which is why interest rates are so low worldwide.

The only real shortage we have is of apartments, which makes rents high. Therefore wages have to be high, which makes it difficult for businesses to compete. In the 1970s we built twice as many apartments as we do today because the marginal tax rate was about 60% and people wanted the tax shelter that apartments provide. Today the marginal tax rate is about half as much and therefore the tax shelter is only worth half as much. If the rich get a tax cut they may use it to push up stock prices, but that doesn’t mean new factories are getting built.

Robert C. Mason

Simi Valley

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I agree with Palffy’s assessment of the proposed stimulus bill. What he left out was that Democrats and Republicans in Congress agree with him too. They know it’s baloney. It’s just another opportunity to buy votes.

Warren H. Raabe

Lakewood