This may be a GD, but since it’s tied to the election I thought I would toss it in here first…
Since the republican opposition to a tax hike on the 1% has always been “you’re going to hurt job creators” I wonder if it would be possible to tie the increas in the tax rate to the unemployment number?
If the “job creators” want lower taxes than start spending and hiring folks again. If unemployment is at 7% the tax rate on those making over 250,000 would be say 38%. Unemployment drops to 6% the tax rate would then drop to 6% etc…
Is this something that has been done before or could even be done legally? Not sharp on the tax laws but it seems like something that could work…?
Job creators aren’t rich. They’re the people that want to be rich. The rich are risk averse and anti-competitive and more likely to destroy jobs than create them. No way they will ever agree to anything that doesn’t lower their taxes. Once they reach zero they’ll insist on increasing their welfare payments.
Dumb idea. Business’ hiring decisions are affected by the political and economic climate. A business could choose not to hire because of uncertainty regarding future costs (as can be seen with Obamacare), where they believe the costs associated with a policy will outweigh the benefits of expanding their payrolls. Burdening a business with an artificially inflated tax rate will simply cause them to scale back their workforce or to provide diminished products and services. Both of which are counterproductive to the stated goal.
Consumers are the job creators. Businesses hire (or expand) because they’re getting more orders/buyers/customers. New businesses begin and start to hire because they believe there’s an unexploited demand that they are targeting. Hiring is generally reactive- there’s more work (making widgets/serving customers/etc.) to be done, so people are hired to do that work. Sometimes it might be proactive- but only because there’s an expectation of more orders/buyers/customers, not because of a windfall for the business due to a tax decrease.
Policies that are intended to lead to more job creation should be based on this- essentially the “middle outward” approach rather than the “top down” approach.
No it’s not been done before because, with all due respect, it’s a terrible idea. Firstly, you generally don’t want to raise taxes during bad economic times, and this would do exactly that. If you must raise taxes, better to do it during good economic times, but this does the opposite. Also, taxes need to be somewhat predictable (for both sides of the tax game), and this would have it be all over the map.
And while I don’t buy into the idea that raising taxes a little will kill employment, even the folks who do aren’t saying it’s the only reason.
If one buys the premise of high taxes causing unemployment, then this would be a positive-feedback mechanism, and the one thing I know about positive feedbacks is, they break. Often catastrophically, if they don’t have some more graceful failure mode designed in. And if one doesn’t buy the premise, then what’s the basis for this idea, anyway?
But by the same logic you also don’t want to cut government spending during bad economic times. But if we are going to decrease the deficit we are going to have to do one or the other. I think that halting spending on infrastructure, research and support for the lower classes (who will actually put the money back into the economy) is the worse of the two. Spending actually puts money back into the economy and increases much needed demand. Tax breaks will just used by the wealthy to buy T-bills since there is no demand to make real investment worthwhile.
From that point of view tax breaks to the rich at this time is just creating debt to give them money to buy the debt we create. So its just writing them an IOU without getting anything in return.
If there was a shortage of capital such that there was unmet demand that couldn’t be met since no there weren’t enough concentrated funds to create a business, then supply side economics would make sense. But we are not in that state. Interest rates and inflation are at an all time low, and companies are sitting on monumental piles of cash. Giving them more won’t change their business plan.
Tax increases that will hurt consumption are indeed bad ideas in weak economies. Tax increases that hurt investment would be a bad idea if there was a shortage of capital for investment capital - which is not true today. Redistributing idle money from the rich into job creating infrastructure improvements is a good idea, though the usual suspects are outraged.
And that the average Republican doesn’t get your and Lord Keynes’ point about raising taxes during prosperous times shows how ignorant they are.
Surveys I’ve seen show that political uncertainty (to the level we see it) has little to do with investment decisions. The cliff is another matter. In fact Krugman has talked a lot about how austerity measures were supposed to raise confidence in Europe - and have failed miserably.