Dismal Jobs Report Should Serve as Warning Against Tax Hikes

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Posted by Isabelle Morales on Friday, May 7th, 2021, 12:25 PM PERMALINK

The U.S. economy added just 266,000 jobs in April and the unemployment rate rose to 6.1 percent, a far cry from Dow Jones estimates which predicted 1 million new jobs and an unemployment rate of 5.8 percent. While it's good that 266,000 people got jobs last month, there is still a long way to go to recover from the pandemic.

Nearly 40 percent of jobs lost during the pandemic have not been recovered and 8.3 million Americans are still out of work. Further, millions of Americans are still underemployed. About 5.2 million workers are employed part-time for economic reasons, meaning they would prefer to work full-time, but cannot gain the hours needed to do so. March’s reported employment gains were also revised downward by nearly 150,000 jobs, from  960,000 to 770,000 jobs.

Given the still-recovering economy, now is not the right time to impose Biden's $3.5 trillion in new taxes, including taxes that will harm small businesses, working families, and investment. 

The American people share this concern. In fact, voters believe, by an 80 to 20 margin, that we should not raise taxes coming out of the pandemic, according to a new poll conducted by HarrisX and commissioned by Americans for Tax Reform. 

Biden’s tax hikes would eliminate one million jobs in the first two years and would eliminate 600,000 jobs per year over the first decade, according to a study by economists John W. Diamond and George R. Zodrow, commissioned by the National Association of Manufacturers.  

As noted by Stephen Entin of the Tax Foundation, workers bear nearly 70 percent of the cost of a corporate tax through lower wages and fewer jobs.  

Republican tax cuts and deregulation ensured that the economy was the strongest it had been in modern history. Before the pandemic hit, the unemployment rate was 3.5 percent. Over 5.1 million jobs were created from December 2017 to February 2020. Median household income increased by $4,440 or 6.8% in 2019 -- the largest one-year wage growth in history. Unemployment rates for Black Americans was 5.8 percent, with Hispanic unemployment standing at 4.4 percent. 

The Biden administration should not attempt a recovery which implements policies contrary to ones which caused the strongest economy in modern history.

As Jason Furman, an economist at Harvard University explains, “I think this is just as much about a shortage in labor supply as it is about a shortage of labor demand. If you look at April, it appears that there were about 1.1 unemployed workers for every job opening. So there are a lot of jobs out there, there is just still not a lot of labor supply.” 

One reason for this dismal jobs report is Democrats' policy to pay people not to work. At the current federal unemployment supplement level of $300, 37 percent of workers make more on unemployment than at work. In this way, the federal government is offering over one-third of the workforce an incentive not to work. Others have said that, because schools and day care centers have not gone back to normal operations, parents are prevented from going back to work.

While we currently face a problem with labor supply, President Biden’s proposed $3.5 trillion in tax hikes would threaten labor demand as well.

Today's disappointing jobs report shows that we still have a long way to go to fully recover from the economic damage the pandemic caused. With 8.3 million people still out of work and 5.2 million people underemployed, now is a bad time to impose $3.5 trillion in taxes hikes on small businesses, working families, and investment.

Photo Credit: Department of Labor

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