Saturday, July 31, 2010

What is a jobless recovery?

A jobless recovery is when companies still maintain or gain large profits with less people.

In 2009, Fortune 500 companies tripled their profits by $391 billion, and reduced their payrolls by eliminating over 800,000 jobs. The company is doing great, to the people that were laid off it is another story. New Jersey, as of June had 17,100 fewer people in the labor force, and last month we lost another 1,900 jobs.

Another factor stagnating job growth is high taxes. A study by the Center on Wealth and Philanthropy suggests that states that target the rich for tax hikes may pay a stiff price. New Jersey alone suffered a $70 billion loss in wealth from 2004 through 2008, as many businesses left for greener pastures. The dilemma we face is not only that the wealthy are leaving; the bigger problem is that we can’t get anyone to move here. There have been a larger percentage of wealthy households leaving, than those entering the state.

State tax hikes would hit the wealthy exceptionally hard if President Barack Obama gets his way. For 20011, the Obama administration proposes to allow the Bush tax cuts for those earning more than $250,000 to expire and reducing the value of deductions (including for state and local taxes) for those earning $250,000 plus. Also, some of the upper-middle- class will lose all the advantages of state and local income tax deductions to the alternative minimum tax.

With the private sector generating little tax revenue and with a newly enacted 2 percent cap on property tax increases, the public sector will encounter more pain.

Until we have substantial job growth, incentives to entice companies back into the state, or innovative ways to keep companies from leaving, without an economic recovery, the state will continue to have a budget deficit.

As long as the state has a deficit it will raise taxes eventually on those who no longer have the means to pay.

You may have a jobless recovery, but not an economic one.

~ Joe Sinagra

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