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Private-sector tax dollars boost economy

April 10, 2011|By ART CALLAHAM

In my last column, I explained how the government, by funding projects, creates private-sector jobs. In this column, I will explain why private-sector jobs are better than government jobs.

The reason is the fourfold return of taxes for private-sector jobs versus a threefold return for jobs within the government. The return is taxes paid back to the government by workers, and in the private sector is the taxes paid by the employer. Those taxes paid back can be reinvested in more projects, perpetuating economic growth.  

In the private sector, a working person pays, in some manner, the typical three types of taxes: property tax, sales tax and income tax. The same is true for a person working for the government. The fourth type of tax paid by private-sector employers is the corporate tax. The government does not tax itself; therefore, the government, as an employer, does not contribute the fourth tax.

Now, let me answer my critics. I’m not advocating raising taxes just to create jobs — although creating jobs with tax money is not a bad use of tax dollars. I do not want to see taxes raised, and you probably don’t either.  Whether a member of the Democratic, Republican, Libertarian, Green or other party, I have yet to meet a single person who demands to have their taxes raised.

Just like death, taxes are inevitable. The trick is to use tax revenue in the most efficient and effective method for the greater good of those taxed.  Governments, generally, are not the most efficient or effective managers of anything. But governments using tax dollars to create private-sector jobs is, all-in-all, a better use than many functions governments perform. I will, of course, exempt “provide for the common defense” and “public safety” from any list of things that governments don’t do well.

I also know that “liars figure and figures lie.” However, the cost to an individual local taxpayer pales when compared to the greater good of using local tax dollars to attract other dollars that help create local jobs and stimulate the local economy.

You might be wondering: If the local taxpayer could get back a share of the local tax dollars if we didn’t do a project, couldn’t that same local taxpayer get back a share of the state and federal money? The simple answer is no.

State and federal funding allocated to a local project and not used or refused because we as a community don’t deem the project worthy will not be returned to the local taxpayer. Those funds will be spent somewhere else.

Let’s use my examples from last week of local projects with state and federal funds as part of the total funds allocated to the projects. The total cost of the airport runway extension was about $61 million, with $57 million coming from the federal and state governments. Had we not extended our runway, some other airport would be completing its runway project, most likely an airport not in Maryland since the bulk of that $57 million came from the federal government.

In the library renovation example, if we refused the $11.5 million in state funds, some other library in Maryland would be using the money. I get passionate about this when I hear politicians argue for less government, less government spending and lowering taxes, all the while talking about creating jobs. I’m not arguing for more government, more government spending or raising taxes; I’m just saying that less, in terms of government, means fewer jobs.

In my two examples last week, the use of local tax dollars to create 425 jobs for local residents by attracting money from state and federal levels is a positive role for all government levels in our local economy.

The government might not be as efficient or effective at creating jobs as the private sector; however, government’s role in creating jobs is a better use of taxpayer money than creating some new program or continuing to fund a program that has failed.

We might bash government or even bash the efficiency of government workers or the effectiveness of our elected government officials, but try doing without government and we will quickly see how much worse off we can be. This is particularly true whenever we fail to see the value in spending local tax dollars to attract money from other levels of government to complete local projects and to create or sustain local jobs.


Art Callaham is a local community activist and president of the Washington County Free Library Board of Trustees.

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