With the real unemployment rate probably well above 10 percent, we have to, as President Kennedy said, “get America moving again.” When I visited Occupy Wall Street, I felt the frustration of young people who wanted to work but couldn’t get an interview, much less a job. What’s even more frustrating is that when I visit business owners and employers, I meet people who want to hire, but can’t.
Capitalism requires capital. When government robs capital from investors in the form of high taxes, it takes away the money that creates jobs - real private-sector jobs that contribute to the health of our economy. The businessmen I meet want to expand, want to hire and think they can find a market for what they sell, but they lack capital.
Meanwhile, the federal government is spending us deeper and deeper into debt while we shell out billions in foreign aid we can no longer afford and trillions more for foreign wars in which our national interest is just not apparent to me.
Republicans and Democrats have both failed to respond to this reality. In order to create jobs now, we need radical surgery, not a haircut. Here I present a simple but drastic economic plan to foster a boom in America.
First, we need to get rid of the income tax. When our first great Supreme Court justice, John Marshall, equated the power to tax and the power to destroy, he was predicting what’s happening to our country right now. Giant, slow corporations spend their money on lobbying because tax avoidance is where their profit is. General Electric earned $14.2 billion in 2010 and paid zero taxes on it. Why? Because it has the lobbyists to get subsidies and tax breaks.
But those mom-and-pop stores? The tech startups? The nimble new corporations with new ideas and new visions for our economy? They pay as much as 35 cents on every dollar they earn. When the company pays its employees, the government taxes that money again. We need to stop taxing work, savings and investment. I advocate removing all income taxes, all capital-gains taxes, and replacing them with a consumption tax, kind of a national sales tax called the Fair-tax.
We also need to get rid of payroll taxes. Look at it from the perspective of employers for a moment. When they want to hire someone, it costs more than just the wage they’re paying. They have to pay payroll taxes, including for Social Security and Medicare. That cost is about 10 percent of the wages they pay an employee. Remove that burden, and employers will be able to hire 10 percent more people. With an unemployment rate of 10 percent, why wouldn’t we jump at this chance? The Fair-tax replaces employment and payroll taxes.
So how does Fair-tax fund the government? When anyone purchases a new good or service for personal consumption, be it a DVD or a yacht, the person is taxed. Fair-tax doesn’t tax used goods or business-to-business purchases.
Some think the Fair-tax is regressive, but in fact it’s progressive - taxing the wealthy more than the poor. Fair-tax issues a “prebate” for families to spend on food, clothing, transportation, medical care or whatever they want to spend it on - it’s their money. Undocumented immigrants will pay their taxes if they want to buy anything. They need a Social Security card to receive a prebate, so the incentive is for immigrants to get themselves on the books as fast as possible.
At the same time, I have proposed cutting the federal budget by 43 percent to bring it into balance. It can be done. It requires the will and ability to ignore and even fight the special interests that have a vested interest in more and more government spending. Our system is corrupted by special-interest campaign contributions. Crony capitalism permeates our government. The result is that, as the Congressional Budget Office reported this week, the deficit for 2012 will once again exceed $1 trillion.
When I was governor of New Mexico, I had the highest job growth of any of the 50 governors. But I didn’t create a single job - businesses did. I just got government out of their way. We have an unprecedented opportunity to use today’s crisis to return us to economic growth and prosperity. Never before has the government been such an obstacle to employment. Republicans and Democrats have regulated and taxed our economy to where we’re lagging behind Brazil, Russia, China, Israel and India in terms of growth and innovation.
Government can’t grow us out of this mess - government is the problem. Radical tax reform and spending discipline can bring America back. Let’s get America working again.
Gary Johnson is the Libertarian Party nominee for president and a former Republican governor of New Mexico.