Mike Krzyzewski is the coach of the Duke basketball team, and is paid a salary of $7,200,000 per year. “Coach K” has reached just about every coaching milestone there is in college basketball, and is well worth the salary that Duke has decided to pay him. The decrease in tax rates enacted by the Republican leaders will result in a decrease of several thousands of dollars in taxes owed by Coach K. How will the additional dollars to Coach K lead to job creation? His job is to recruit the best basketball players available, teach them the fundamentals of basketball, motivate them to play his way, and prepare them to win basketball games. Giving him additional money through tax reduction does not lead to any job creation.
In 2011, Cam Newton signed a 4 year contract with the Carolina Panthers for $22 million. If he continues to improve his game, he will be able to sign a much larger contract when this one expires. As an NFL quarterback, he is well worth the money the team pays him. But the reduction in tax rates enacted by the Republican leaders will result in thousands of additional dollars that Newton will have in his bank account. Will these additional dollars result in job creation? Newton’s job is to master the offensive schemes that his offensive coordinators have developed, read defenses better, pass more accurately, and lead his team to the playoffs and to the Super Bowl. Giving him more money through tax reductions does not create jobs. For the team as a whole, the salary team payroll for the Carolina Panthers players in 2013 was $58.4 million. The tax reduction on this payroll in 2014 would be over $1 million, funds that would be used at the discretion of the individual players, not job creation.
Tom Ross is president of the University of North Carolina system and is paid an annual salary of $525,000. He has enormous responsibilities, and he is worth the salary that he receives. The reduction in tax rates will give him several thousands of dollars in additional cash, but his additional cash will not create more jobs. His duties are to lead the 17 institutions of the UNC system and administer the funds that are allocated to the system by the General Assembly. When the funds to the university system are cut, Ross will have to cut jobs, not create more. His personal additional funds from the tax cut will not enable him to create more jobs in the university system.
In 2013, Brian T. Moynihan, CEO of Bank of America, received $12 million in base salary, stock awards and other compensation. This pay package represented a 70% increase over his pay in 2012, and this pay was made to him because of his leadership in producing the outstanding performance of the bank in 2012. Based on the new tax rates, a salary of $12 million in 2014 would result in a tax decrease of over $200,000. This personal tax savings of Mr. Moynihan would not result in any job creation. His job is to operate the bank in such a manner that enhances stockholder value, not necessarily job creation. To increase profits and stock prices, it may be necessary to cut jobs, not increase them. In fact, Bank of America cut nearly 25,000 jobs in 2013, about 9% of its work force, in spite of record profits. Actually, the record profits were partially a result of the job cuts. Any tax decrease awarded Mr. Moynihan would not create new jobs at Bank of America.
Mike Krzyzewski, Cam Newton, other members of the Carolina Panthers football team, Tom Ross, Brian Moynihan, and other high income individuals have achieved the American dream. Through their own hard work and perseverance, they have accomplished great things. Their success is to be congratulated, not envied. It has been estimated by CNNMoney.com, however, that the reduction in the taxes of high income individuals because of the tax law changes will cost the state over $2.4 billion in reduced revenue over a five year period. Other estimates place the reduction as high as $5.8 billion over the next five years. How will this shortfall be made up? If these individuals pay less taxes, who will pay more? The answer, of course, is that middle income and lower income individuals will pay more taxes, and further cuts will probably be made to the public school system, higher education, benefits for the poor, and other public services. For example, transportation improvements are needed in the state, but the North Carolina Department of Transportation estimates a $1.7 billion decrease in transportation revenue (from the traditional transportation revenue sources) over the next 10 years. About 11% of the roads and highways in North Carolina are rated deficient, and about 30% of the bridges are considered structurally deficient or functionally obsolete. Additional funding is needed for improvements in these areas, but it certainly cannot come from income tax revenue.
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