You know, I teach middle school band. One of the things I have to teach my budding young musicians is how to play together in tune. Most of the kids can tell when they are in tune with their neighbors, but they cannot tell who is sharp or flat. So, I make sure that one of my students is playing the pitch in tune. Then, I have the other student decide if he is flat or sharp. He plays. If it sounds better, he guessed correctly. If it is worse, he guessed incorrectly. If it sounds worse, I tell the student to go the other direction.
So, in the case of macroeconomics, it seems to me that we have guessed how to keep the economy humming by cutting tax rates. Things got worse. So, let’s try something else. If things get better, then we’re on the right track. If not, then there’s nothing that says we can’t tack back in the other direction.
And demand, which is a word you seem to be allergic to, drives both. With no demand there are no jobs, or rather, fewer jobs, which decreases demand still more. Those without jobs of course cut spending, but even those with jobs do also, since they are afraid of losing their jobs. With a decrease in demand factories are under-utilized, so there is no reason to invest capital in increasing production.
So, they park their money someplace safe, and wait for a better investment climate. That’s being smart. In fact, everyone is doing exactly what is in their best interests, and we bump along with no money.
Now, you can decrease taxes on the rich more than the poor, but that just gives them more money to not invest. If instead you took some money from them and gave it to the poor and unemployed, they would spend it, increase demand, and create jobs.
If we were in a situation where tax rates for the rich were reasonable and the deficit were under control, you’d just increase the deficit. But since Bush screwed the pooch on both of these, we have low tax rates for the rich and a big deficit. The most obvious way of getting money to increase demand is taking it from the rich, who have it. Since there is a ton of capital around, it is unlikely to hurt investment.
BTW Keynes said that government should not run a deficit during times of prosperity. Sure glad that Bush was an anti-Keynesian, aren’t you?
BTW, as for what would have happened in 2001, economists don’t just guess, they have models. Tax cuts made sense in 2001, but Bush’s tax cuts were weighted to the rich, so the middle class did not get the stimulus required and the recovery was very slow. So what would have happened in not just a guess - and I believe most economists thing it was the wrong strategy.
I didn’t think I’d have to point out the obvious: that the 5% drop in overall revenues was, in fact, due to the worsening state of the economy. However, the drop in revenues collected from the highest marginal earners was 60%–far more than could be attributed to the economy.
You know, that’s the kind of shallow thinking I thought that people here were immune to. I mentioned that tax revenues in Oregon from the rich dropped by more than half after a bill was passed that increased the rate charged to them, and then you inferentially mention the recession, as if the recession caused a contraction in the economy of 60%!
Look, I get it. You hate corporations and the rich. Tax 'em into oblivion and we’ll all be better off. Destroying corporations and the rich will create jobs!
This is illustrative of the fundamental misunderstandings that have permeated this discussion. Cash is not capital; capital is not cash. You can’t “spend” capital–you can liquidate it, and spend any resultant cash, but that’s not the same thing at all.
I don’t know what you think a “fair” amount would be. My guess is 100%, based on your assertion that it would be much more wisely and socially optimally spent by the government. So to summarize your argument, take all that cash away from the undeserving corporations and spend it on infrastructure. And when those corporations need the cash, don’t have it available, and go belly-up as a result? No problem. We don’t even need to worry about the jobs lost as a result–that guy who works in IT can retrain to drive a loader for his new infrastructure job.
Oh by the way, I realized you very well might not know something: those greedy corporations already paid corporate income tax on those earnings that generated that cash. So you want to re-tax the remainder?
One other thing you might be ignorant of: if those corporations do use that cash for capital improvements, their tax liability would decrease. Their cash hoarding thus generates more tax revenue for the government than if they had spent it on capital improvements.
Here’s how I differ from, it seems, 99% of the population: I am not whipped into a froth by the fact that some people are rich. I would not mind if there were twice as many rich people as there are now, in fact.
Why not? Life is not a zero-sum game. The rich man isn’t rich because he takes money from the poor; that’s a stupid populist fallacy.
To answer your question as if it were an actual question, no, there has never been a time when a good time was had by “all.” Nor will a good time be had by all when we reach that socialist nirvana when every single person has the exact same amount of money. It is neither fair nor unfair that there is economic disparity–it’s a simple aspect of reality.
I favor a safety net for all, so that there is a minimum income level regardless of circumstances. I cannot see a rational–or even moral–reason for any kind of upper limit on wealth, even “obscene” wealth (translation: more than I have), as one poster puts it.
The hoarding can continue until the Earth crashes into the Sun for all the wealth holders know, or care. They have no endgame. Certainly none that accounts for anyone less fortunate.
I honestly think that a lot of them would sooner go broke and take the country down with them.
If cash is not capital then we can dispense with the notion that higher taxes will affect capital investment.
This is the most inellectually dishonest argument made on this issue. I don’t know what the optimum balance is, but returning to the pre-Bush tax rates is certainly reasonable, especially considering that was the rate during one of our most prosperous decades, and still half of what it was during our other most prosperous decade.
You’re confusing corporate tax with personal income tax, which is the subject of this debate. Unless, of course, you believe corporations are people.
Again, personal income tax, not corporate. I don’t know if you’re ignorant, but you certainly are confused. But, I’ll humor you. Capital spending would employ people which would generate jobs which would get the economic engine turning and lead to even more jobs, thus improving the economy some more and so on and so on. High employment is better for the economy and tax collection than cash sitting in a bank. Using your argument, corporations should save 100% and never spend any money as far as tax collection goes.
You said that after the tax increase, three companies that had been planning to expand in Oregon decided not to. You didn’t say a thing about any existing companies leaving. If there had been, then you might have a case for saying that the tax increase drove down revenues. But if all the same businesses from 2008 were still around in 2009, then their incomes must have decreased. Hard to blame that on the tax increase, though.
And consider this; when the economy suffers a downturn, some people are going to move from the higher bracket one year, to the lower one the next. That could be why the number for the two brackets are so different. Perhaps the economic hit was 15%, and it knocked enough people out of the top bracket that it dropped by 60%. But those people wound up in the lower bracket, causing it to only show a 5% drop. Possible, or not?
Bullshit. Quote anything I’ve said that supports that, or retract and apologize.
To me, the term “Job Creator” indicates either someone is brain dead or trying to inflict brain death on others. You simply can’t say that everyone who earns more than $250K has a damn thing to do with creating jobs. Drew Brees and Johnny Depp are both very well paid, yet neither one is inherently responsible for creating any jobs. If Brees breaks his arm, the #2 QB steps in. If Depp turns down a part, someone else gets it. They both could pay significantly more taxes and not create any fewer jobs.
To hear Republican talking points, every person makes every single life decision based on taxes. Real people don’t live that way. There is no way Michigan could raise my taxes enough to make me move to Mississippi. I’m not going to sell my house if my property taxes go up. I’m going to plug along doing my same old thing no matter what taxes do, as will the rest of the 99%. As for the 1%, they aren’t going to take their ball and go home just because they might pay a little more taxes. They aren’t saying, “Gee, I’d like to build this plant, but only if I get to keep 75% of the profit and not 73%.” If there are customers and they can make a profit after taxes, they’ll meet the demand. The problem is that demand is low. Cutting taxes doesn’t help this. Cutting government spending makes it worse. That teacher you want to cut spends her money at the local business. Cut her job so that the local businessman has a lower tax rate, and you’ll find the local businessman has a greater percentage of nothing.
And while we’re at it, don’t make statements like “money they’ve already been taxed on”. It makes no sense. You make money, you pay a tax. You take what’s left and invest it, that’s new income, not already taxed old income. There is no such thing as double taxation. Give it up already.
Ditto for uncertainty. If Bill Gates and Steve Jobs demanded certainty, there would be no PC that you’re reading this on right now. If there is a market, people will fill the need and make money. We don’t have to coddle them and assure them that nothing will ever change in the world.
It’s not an either-or thing. I do think there is a bit of uncertainty influencing the lack of investment. It’s not either everyone is certain and so is investing like no tomorrow, or everyone is completely uncertain and not investing at all.
People are rightfully uncertain about the future of Europe and possible american governmental shutdowns/defaults. And they’re wrongfully uncertain about possible regulations and taxes, but whether or not their fears are misplaced is immaterial. And I’m not saying it’s a huge influence on investment. But if there were more certainty there would be more investment.
Right, and this points to another disingenuous argument bandied about by the 2% crowd where they carp about unemployment while refusing to take into account that a lot of the unemployment is due to the slashing of government spending they’ve been demanding.
Certainly there are people who believe corporations are ‘evil’ (your words). There are any number of examples where corporations behaved badly. This is why we have the regulations we do. And there are people how dislike corporations and wealthy individuals because they think the wealth disparity is ‘unfair’. I work with someone who says things like ‘[Celebrity X] got [$X million] for doing [something]. She doesn’t need that much! She should use that money to help people.’
But most of us here are not saying that corporations and wealthy individuals are ‘evil’. We’re not saying that they should be punished for being successful. We’re saying that the economy is in trouble. We’ve pointed out that empirical evidence shows that cutting taxes too much results in the loss of jobs, and the loss of jobs puts the brakes on the economy, and that a bad economy results in less demand, and less demand results in the loss of jobs.
You talk about incentives. ‘Higher taxes remove the incentive to make money, thus jobs are lost.’ I hear this sort of thing from the Right all the time. ‘Why should I work, if the government gives me everything free?’ But history shows that nearly all people will choose a job over the dole, for reasons that should be obvious. History also shows that higher taxes do not result in job losses. And no one here is talking about raising taxes to high levels. We’re talking about returning taxes to historically low levels that are sufficient to sustain the economy.
If you believe that we want to punish corporations and individuals for being successful, or that we are seeking to destroy corporations, then you are flat wrong, full stop.
Yet another misleading stat, assuming it’s even true (care to cite?) Since the recession hit, the percentage of wealth owned by the top earners actually went UP. In current dollars, the average American makes less now than in the late '70s. You think the same is true for the top 2%?
Right now, we have a demand problem, not a supply problem. Corporations are sitting on cash, the rich are richer than they’ve been in decades, but unemployment is still high. Businesses need work to do, that happens when the masses have money to spend.
For someone relatively unschooled in economics like myself, it seems pretty simple:
The only reason most businesses hire more people (or even improve their own facilities) is to meet more demand- why build another factory/warehouse, or hire extra workers, if you don’t expect people to buy the extra products that will be made? And new demand mostly comes from people (or the government) buying stuff. So the way to get businesses to hire more people is to buy more stuff, or get consumers to buy more stuff.
It seems to me that even if the government could give small businesses a 50% rebate on their taxes, they’d only spend more on the business (hiring or capital improvements) if they couldn’t meet all their orders- they’d likely sit on the rest- why spend it when people aren’t buying?
So it seems to me that the way economies really work is from the bottom (or the middle) up- give more money to more people, and most will spend it- whether they get it by being hired to build bridges and fix roads or by dropping money from helicopters.
Here is a report on the drop in state income tax revenues in 2009.
We see that California, which did not have a tax increase, fell by more than Oregon.
Now this doesn’t cover the revenue from the wealthy. However, in 2009 income inequality actually decreased, because the rich got hit harder by the stock market decline, so that kind of drop is not surprising. A Google search reveals some WSJ articles on the rich moving income ahead of the increased taxes - that is common, and settles out over time. I don’t have a subscription, so can’t look further.
What would be interesting to see is tax revenues for 2010. Inequality has increased again, so I’d expect revenue from the rich would rebound a lot - but not from the middle class.
This just illustrates that a state tax system strongly dependent on income taxes is a bad idea, since it is more volatile in downturns. We in California know this well. During the worst of it they could have fired every person working in state government and still not closed the deficit.
