Cutting taxes on the Rich will not create Jobs

“Cutting taxes on the Rich will not create Jobs.”

The current economic voodoo requires we believe that if we cut taxes for the top 10% of earners, they will turn around and hire people to work for them. This is bullshit. Give a business owner more money in his pocket and he is unlikely to hire additional workers or buy more equipment unless there is a reason to increase output/capacity. The managers of Acme Widgets are always going to try to produce enough widgets to meet demand with the least number of workers possible. Adding capacity without demand will cause Acme to go broke.

The adherents of ‘supply side’ will argue that the owners of Acme might invest that extra million in a new business venture (perhaps starting Acme Services). They are unlikely to do so unless there is a market for whatever services Acme offers… and if the underemployed are not buying new widgets, they are unlikely to buy other items… so the smart bet is that Mr. Moneybags will put his money to work in the international money market. Unfortunately, if Mr. Moneybags increases his investment from 1 million to 2 million, it is unlikely that his bank will hire more tellers or security guards to work at the local branch. Increases in Mr. Moneybags’ portfolio will make his brokers and bankers happy, but will not require significant additional people working at the bank or brokerage. More money in the banks and in the market will only create jobs if there is something for all those employees to do.

One could also argue, I suppose, that Mr. Moneybags might spend his additional money on ostrich skin boots, gold plated toilets, ivory golf tees and similar trappings of wealth. And if you own a jewelry store on Rodeo Drive, perhaps the tax breaks are good for you. But luxury goods make a lousy basis for an economy simply because there is only a small number of people who can afford to buy such things.

The only way to create more jobs is to get the middle and lower classes spending again. This probably means things like raising the minimum wage and eliminating the Bush tax cuts would be a better strategy than the course of action chosen by both the Republicrats and Demmicans. The middle and lower classes (who make up more than 90% of the US population) tend to spend almost as much as they earn and will buy ice cream cones, cars, ipads, gasoline and similar items in greater numbers than the rich ever will, even though the rich may be willing to pay premium prices. Additional demand for all of these things will spur business growth and revenue for the state. Although under this scheme, the rich might have less money, they will actually be more inclined to increase the size of their pool of employees in the businesses they own because the demand will be there… and if the demand is there, the smart people will invest (and thus make more money for themselves). Money doesn’t cause business growth; demand does.


15 Comments on “Cutting taxes on the Rich will not create Jobs”

  1. Prince Herb says:

    While this is quite true, that demand powers the economy, it has also been extremely unfashionable for any politician who wishes to be seen as a Serious Person to acknowledge it. The ability of the top 0.1% of earners to buy politicians lock, stock, and barrel has seen to that.

  2. limpey says:

    Blukreem: If it is so obvious, why haven't any of the supposedly “populist” movements who say that they “want to get America back on the right track” thought of it?

  3. Taketoshi says:

    limpey:

    Because the “populist” movements aren't actually populist–they're underwritten by the same groups that profit greatly from the current state of affairs in Washington, but who were concerned that public image issues with the Republicans in the 2003-2008 period would undercut their traction on our national discourse. So they worked to put together a new face to essentially all the same tired old “cultural” arguments for Reaganism.

  4. Prince Herb says:

    Saving and investing both ultimately require spending. There's no point in investing in anything if there's not any demand for the product. Saving itself is nothing but deferred spending – defer too much spending to some unspecified future date and the result is that there's insufficient spending in the present time to keep the economy from grinding to a halt. Which is to say that none of these activities is more moral than the others, but that they require to be kept always in balance.

  5. tax cuts for the rich makes baby jesus cry

  6. Stef, I think that if the timetable for a U. S. withdrawal is “once we get the Iraqi state fixed”, then the U. S. will NEVER withdraw. The U. S. fedgov does not even provide Americans with a good government, so there's no reason to expect the fedgov to be able to do so for the Iraqis. (And I don't think the fedgov would even want to do so if it could. It much prefers weak and corrupt client states that can be kept in its back pocket.)

    Imagine where you live. Now imagine it filled with U. S. soldiers and all their weapons. Now imagine that they can't speak your language. I do not want large groups of heavily-armed 20-year-olds where I live. They do not make me feel safer. They make me feel far less safe. I bet dollars to doughnuts that the Iraqis feel the same way.

  7. maasenstodt says:

    I think that all taxation is necessarily the same thing as theft and should, therefore, be abolished.

    Since it is the wealthy/political classes who profit from government action (at the expense of the lower/productive classes – to say nothing of those poor brown skinned people overseas who Geoffrey mentions), it follows that any gradual elimination of taxation (or even reductions in taxation) should proceed from the bottom up.

    However, so long as the powers that be (who are represented by both the Republicans and the Democrats) can continue to make the masses believe in the utterly fraudulent notion that they gain more by government's existence than they lose, I don't expect much to change.

  8. Blair says:

    I have absolutely no problem with being taxed as long as the money is being used efficiently, ethically and for important infrastructure and societal support. I'm perfectly happy finacially contributing to society.

    But the rich, who are generally absolute cunts about hanging onto every cent they can, can be taxed out the ass AND the minimum wage can get jacked waaaay up and I would be thrilled.

  9. limpey says:

    JD Jarvis: I'm not sure what you are saying. Do you make more than 250k a year and still have trouble paying your heating bill? If so, time to invest in some storm windows.
    The tax cuts in question are structured to give more relief from taxation to the top 10% of earners in the US. Unless you are in that demographic, your relative income has dropped by an estimated 10% over the past 12 years… whereas the top 10% of earners in the US have seen their incomes rise by an average of ~300%. I suppose I can understand why the extremely wealthy would want to keep that… but how one would qualify for these tax credits aimed at protecting investments and inheritance and still not be able to pay the heating bill is a bit beyond me… unless I have misunderstood something.
    Geoffrey: I don't know how to figure out what the Iraqis 'want.' But we may have created a failed state that cannot stand on it's own. Since we created the current chaos, I can understand why US soldiers might not be popular on the ground in Iraq. But unless there is a credible power that can provide basic law and order, I fear that if we withdrew tommorow, Iraq would become the next Somalia where everything is fucked up and everyone is at the mercy of whatever warlord is rolling through town that week.
    Massentodt: I no longer believe in anarchy. There are just too many bad people in the world for it to work. Although I wouldn't say I enjoy paying taxes, I like fire fighters for when things catch on fire, cops to arrest rapists, laws to prevent someone from killing me and taking my stuff, libraries, literacy, etc., so I see taxes as worthwhile. I also believe that there are just some things that should not be done for profit (like prisons). The privatization of prisons has resulted in too many abuses for me to have faith in 'capitalism' as the 'one size fits all' solution. Capitalism is great at producing things like new ice cream flavors, ipads and RPGs… not so good at law enforcement, education or corrections.

  10. maasenstodt says:

    The fact that there are bad people out there is a primary reason to avoid creating societal structures that give a small group of people the power to use violence against the rest of us, because it is the bad people that will be drawn to use that power.

    There's absolutely no need to steal from people in order to have fire protection, security services, libraries, etc. Like you and like the vast majority of people, I'm glad to pay for them. I just don't want to have a gun put to my head to support the legally-mandated only game in town.

    As for prisons, I couldn't agree more that things as they are now are deplorable. But please don't think that the “privitization” schemes of right-wingers, whether in prisons, retirement plans, or anything else, have anything to do the free market. They simply represent a shift of power from one side of the government-industrial alliance to the other.

    Finally, I'd suggest that a capitalist society and a socialist society as they are popularly defined are simply variations on the same theme – power brokers using the mechanism of the state for their own ends. Neither has anything to do with true liberalism, which works towards the maximization of human freedom and prosperity.

  11. maasenstodt says:

    BTW, I think Geoffrey's comments are dead on. When you're digging yourself into a hole and you want to get out, the first step is to stop digging.

    The us government seriously screwed things up in Iraq, but the ultimate solution is not to continue feeding the problem simply because the withdrawal symptoms are likely to be ugly. Unless and until the locals are able to take responsibility for their own security, the situation cannot improve.

  12. JDJarvis says:

    @limpey, with the bush cuts it's a good chunk of money for my family and we are far short of 250k a year. I got the new windows a couple years ago and updated my heating system, none of which I would have been able to pay off as quickly without the Bus Tax cuts.

    Yes the top 10% get more from the tax cuts. For those of us in the middle they are still very meaningful. A 3% difference is a mortgage payment for an awful lot of Americans.

    Frankly I don't know how any politician could support such a hit on families or why anyone would want to increase taxes on those of us under $250K who do in fact benefit from the Bush era cuts.
    Is there long term impact from the cuts that is costing us? Most certainly, but it's hard to get behind D.C. taking that mortgage payment today or even next year so they can jack up the spending even more.

  13. See what happens when you cut taxes and thereby starve the public education system?

  14. Malcadon says:

    Raising taxes on the rich makes the baby Supply-side Jesus cry! ;P

    Yes, “trickle-down economics” is total bullshit, unless its a massive golden-shower on working stiffs. It did not work with Reagon, and it did not work with Bush – it will not work a third time!

    The “populist” movement was a large astroturf-roots movement by a bunch of marginalized weirdos who clam to be the mouth-piece of our whole nation, and was given lip-service by the mass-media machine, only to bitched when the media was calling-out their weirdness. Ultimately, their movement was not as “populist” or successful (unless you count being such rigged obstructionists, that they are only contributing to the vary “waste of tax-payer dollars” that they seek to abolish) as they clam, and they dont speak for everyone – like myself – so fuck them!

    I hear a lot from the Right about the “evils of big government”, but we must put our trust in big business and a free-market based on fiscal-anarchy – no consumer or environmental protection, no employment protection or security, and no anti-trust laws! Somehow, they think that business growing to levels like Omni Consumer Products from RoboCop is a really good thing – fuck them!

    The war on Iraq was a shit-brain move – even a mentally retarded person could have called-out the dubious nature of that bogus intelligence report that got us into the war in the first place. And yes, it was a MAJOR contributor to out debt. I know its in bad form to have a mentally handicapped person to honor a debt, when they have no comprehension of their actions, but I'm running a deficit on sympathy, so lets send “Dubya” (and his running-mate, Snidely Whiplash) the bill!

  15. JDJarvis says:

    “Raising taxes on the rich makes the baby Supply-side Jesus cry!” <- that's good.


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