5 simple ways to jumpstart the economy

By Michael Kleen

Published: August 15, 2011

Martin Van Buren, our 8th president, once remarked, “The less government interferes with private pursuits, the better for general prosperity.” Those words were no truer when they were spoken than they are today. It is time for government to get out of the way and let us do our jobs. In that spirit, here is a list of five simple things government and ‘we the people’ can do to put our country back on the path to prosperity.

1. Sales Tax Holiday. Suspending the state sales tax would immediately boost consumer spending. A sales tax holiday puts money directly into the hands of consumers and does it in a way that requires that they spend money to save money. According to the Peoria Journal Star, when Illinois suspended the state sales tax on basic school supplies for two weeks last August, consumers spent $323 million and saved $16 million. This year, citing the state government’s inability to stop its out of control spending, Governor Quinn cancelled a repeat of the holiday.

Sales taxes hurt low income families and, ideally, should be dramatically reduced or eliminated altogether. According to the Institute on Taxation and Economic Policy, a 6 percent sales tax amounts to roughly a 1 percent income tax rate for families in the highest income brackets, a 3 percent tax on middle-income families and a 4.5 percent tax on the poorest families. That is because, generally, wealthier families spend only one-sixth of their income on items that are subject to sales taxes, while low-income families spend three-quarters of their income on taxable purchases. Suspending the sales tax on food, clothing, and other essential items would bring much needed relief to consumers.

2. Payroll Tax Holiday. Employees are one of the first things businesses cut when times get tough because they represent such a high percentage of the cost of doing business. Payroll taxes add to these costs and make employers think twice before hiring. One thing the Federal government got right last year was to grant a 2 percent reduction in payroll taxes via the Tax Relief, Unemployment Insurance Reauthorization, and Job Creation Act of 2010, however, that does not go far enough. Since the majority of new job growth is generated by businesses that are less than five years old, it has been suggested that all payroll taxes be suspended for new businesses. George Osborne, Chancellor of the Exchequer of the United Kingdom, has proposed giving a payroll tax holiday for the first ten jobs businesses create in that country. If similar proposals were enacted here, it would encourage new businesses to hire more employees than they would have otherwise.

3. Buy Locally. If you are serious about seeing the economy recover, spend your dollars at locally owned stores instead of national retailers. Every dollar you spend contributes to the revitalization of the community. According to a 2002 study by Civic Economics, spending $100 at a chain bookstore generated $13 in local economic activity, while spending the same amount at a locally owned bookstore generated $45 in local economic activity. A more recent study, conducted in Michigan in 2008, found dramatic advantages in locally owned pharmacies, grocery stores, and restaurants over similar national chains. They found that just a 10 percent market shift to locally owned businesses in one county in Michigan could create 1,614 jobs and $53.3 million in additional wages. This is because local stores pay higher wages, spend more money in the community, and keep their profits in town.

4. Repeal Blue Laws. In these tough times, the government should do all it can to encourage entrepreneurship. Unfortunately, state and local governments continue to restrict economic activity through restrictions called blue laws. Blue laws were widely passed in the 1800s and were designed to enforce religious standards, particularly the observance of Sunday as a day of worship or rest. Blue laws still exist in many municipalities throughout Illinois in the form of alcohol sales restrictions and prohibitions on horse racing and car sales on Sundays. These laws should be repealed immediately so that those who wish to conduct business or make purchases on Sundays can to do so without restriction or penalty. Business owners—not the government—should decide whether or not they honor the Sabbath.

5. Demolish Excess Housing. Prices are largely driven by the laws of supply and demand, and those laws caught up to us with a vengeance during the housing bubble of the past decade. Prior to 2006, housing prices were artificially inflated and construction companies built millions of housing units during the boom. Eventually, however, the bubble burst and many of these homes were left abandoned. The exodus from inner cities to the suburbs added to the excess of empty houses. All these empty houses are now creating a strain on the market—driving down prices at an alarming rate. In order to balance out supply and demand, excess housing should be bulldozed, especially in the inner cities where abandoned properties have become a magnet for crime. This will create jobs for construction workers and allow developers to come up with new uses for that land.

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Michael Kleen is owner and proprietor of Black Oak Media. He holds a M.A. in History and M.S. in Education, and is the author of the audiobook “The Creeping Hand of the State” and Other Reflections on America’s Orwellian Future, among other works.

Tagged with: Blue Laws, Buying Locally, Consumer Spending, Housing Bubble, Payroll Tax, Prosperity, Sales Tax, Tax Holiday, taxes