What would blue eyed people, as a class, do with the money on average and how does that compare to the basic needs and other options in the economy for that money? Are blue eyed people particularly known for turning X amount of money into X+Y amount of money?
Money, let us remember, is a philosophical stand-in for “services I rendered for the well-being of the rest of humanity” put into a fungible form that allows me to extend the good will I earned with Bill by fixing his washing machine to the general economy. I can trade my chit in with anyone in the land, rather than having to wait around until I have something I need that Bill, specifically, would be able to help me with. I did services - be it production, fixing, management, or whatever - that were in demand by society. In return for that, I get to trade that in for services from others equivalent to how much society believes that I contributed via my services.
Turning X money into X+Y money is, excluding cases of fraud or theft, almost always indicative of having improved the welfare of society.
Are you being serious here? I’ve read this a couple of times to be certain I wasn’t being whooshed.
“On average…?!?” The average 40-year-old on minimum wage may spend that extra $1,000 in a few days, but why do you assume it will be, “blown,” in a casino. Is the base assumption that a 40-year-old on minimum wage is simply a wastrel with no sense at all? It is entirely possible (maybe even probable) that this hypothetical 40-year-old on minimum wage (who is almost certainly in debt, malnourished, has improper medical care, or some combination of the three) will spend that money to pay back rent, or buy better food, or maybe somewhat nicer clothes to try to get a better job. All of which has a direct, multiplicative impact on the economy.
It is possible, but by no means a sure thing, that the rich person with more money will invest that money. How will they invest it? What if the best returns are on foreign bonds and stock funds? They’ll invest there, and that helps the American worker hardly at all. What if they buy stock in an American company, thereby increasing (however slightly) that company’s stock price, who turns around and gives the CEO a bonus for improving the company’s stock price. How did that help the American worker.
Trickle-down economics doesn’t work, no matter how many hypothetically benevolent rich people there are.
There are (at least)two problems with your perspective that cutting taxes on the wealthy will boost the economy.
The first is your comment that it’s not worthwhile to give everyone a $50 a year raise. While I would agree with that, the “raise” that most Americans got from the last tax cut was not much larger, yet was lauded as such a great thing by the conservatives who pushed for it. If you argue that $50 a year is nothing, then what is a couple hundred over a year? When does it become “real” money?
And the second is that the rich are not taxed on investments. If you invest money into a new or growing business, then you can write those taxes off. You don’t need a tax cut to invest, investing is its own tax cut. Having higher taxes encourages investment, rather than consumption or offshoring. Lower taxes does not encourage investment, it instead, encourages people to extract money from capital that other people have invested in.
And pay just over 38% of all Federal income taxes. The top 5% of US wage earners (by adjusted gross income) pay 59% of all Federal income tax. Conversely, the 61% of US wage earners who earn less than $50k per year pay only 5.4% of Federal income tax receipts. That leaves the “middle class” (about 35% of the population) to pay about 35% of the Federal income tax receipts.
People love to quote the first half of the story, but usually omit the second. It seems to me to be pretty damn fair.
This is so many kinds of wrong it’s near unbelievable. Especially when you start counting all the multi-generational fortunes out there. Even if you credit the robber barons who gained all that money (which I generally don’t) by what possible metric are their spoiled rich grand-kids “rendering service for the well-being of the rest of humanity?”
Of course, you’re leaving out payroll taxes. According to this, all but the top 20% of earners pay more in payroll taxes than income taxes. People love to quote stats about income taxes but usually omit payroll taxes.
A) I did specify that theft and fraud don’t count. (Though, the robber barons were probably still better from an economic and social standpoint than feudal lords or Communists or most other things that had come before them in the social hierarchy.)
B) Nepotism is harmful to the economy if it’s too extreme, but that’s secondary to the question of whether or not money counts as a fungible representation of “services rendered”. If I invent the cure to cancer, am rewarded with $10b for the patent and production, and decide to hand that money to my children - then my children are gaining the favor that I earned. That’s not fair from a societal standpoint but money on its own is sort of pointless unless you have the ability to reward yourself and that will often mean trying to improve the lot of your family - not just yourself. Some amount of nepotism is probably necessary or else the profit motive would go away for a lot of people, and the amount of good deeds that everyone did would reduce.
Really, a better example of money not equalizing “services rendered” is the fact that people have different abilities at self-promotion and haggling. A better haggler and self-promoter will earn more than someone who isn’t. If you’re a line cook, you’re stuck with a line cook’s wage simply because most people in that class aren’t good at bargaining for a living wage. They accept the minimum to survive today and not the minimum to survive until death. That ends up distorting the market away from the philosophic ideal and requires things like Social Security to be implemented to make things fair again.
It’s imperfect, but the general concept is still relevant and useful.
One discussion I find missing is the definition of “investment”. If we accept the argument (stay with me here) that tax cuts = more investment, the disconnect for me is that too many assume that investment means creating new business or expanding existing business. Whereas when I put my money in a mutual fund or buy a stock, I am not creating something new or expanding something (directly). Instead I am trading something that has already had it’s most useful capital extracted by the creator long ago.
How is that fundamentally different than buying a work of art for investment?
My question would be - what percentage of tax cut generated investment is simply entering the market by trading existing instruments, rather than creating new business or expanding business directly?
That, to me, is the weakness of the trope that tax cuts create investment.
If you give Apple a tax break you only increase their reserves.
Apple knows how many iPhones it needs to make each month based on sales data. Giving Apple more money does not cause them to make more iPhones. Demand is the same as it always was. So they just bank the extra cash (or do stock buybacks). Production does not increase, hiring does not increase, wages do not increase. Why would they?
Now, if you give Average Joe a tax break he is likely to go out and spend it thus increasing demand for iPhones.
If Average Joe has to choose between new school clothes for the kids and a sound, blue-chip stock, he will consult with his investment counselor. She has most likely already decided.
Which might increase Apples profit enough that they make almost as much money as they got in the tax cut. The down side with this of course is that a bunch of undeserving peons got iphones.
It is a good area for investigation. As said, Google Scholar seemed to have bupkis. I didn’t search terribly hard though, since the OP was asking for some logic, not a dogmatic truth.
There is no lack of money at the top. If there was a lot of sound investments, that needed money, people would be borrowing and interest rates would go up. As T-bills are still at or around 0% but people keep buying them because there is nothing better to do with their money… So what is happening is that govenment is increasing its debt load to give money to the rich who in turn are using that money to buy the governments debt. So economically all thats really happening is that the government is handing out a bunch of IOU’s to the rich, with no other result than to preserve/increase the inequality of future generations.
Back in the Regan era of high interest, high inflation, and high taxes it might have made sense to invest money at the top where it was hard to borrow, and have them produce more products to reduce inflation. But these days its pointless and counterproductive.
I don’t understand this “simple logic.” Explain it to me.
The way I see it, tax cuts generally increase savings, investment, or consumption, which surely have stimulative effects. However, these stimulative effects basically never offset the increased government debt that almost always results from the tax cuts. But the government debt is not in any sense “the economy.”
Tax cuts don’t stimulate investment. Investments are tax deductible, and so are encouraged by higher taxes. Lower taxes encourage consumption or investments in foreign markets. Lower taxes do also encourage savings, but that doesn’t stimulate the economy when banks are sitting on trillions of dollars of excessive reserve that they cannot find anyone to borrow. Consumption can stimulate the economy, but the wealthy are going to use less of the savings for goods than the less fortunate, so if stimulating the economy is the reason for the tax cut, then cutting the taxes on the lower income brackets has a much greater effect. Savings do nothing for the economy when banks are sitting on trillions of dollars in excessive reserve that they cannot find anyone willing to borrow.
No, the reason for tax cuts for the wealthy is because it is the wealthy that are making the big donations to politicians. It has nothing to do with stimulating the economy or anything like that, it is only because they want more money and less taxes, and have the power to implement the desires of the 1% in a democracy. All the stuff about it being good for the economy is hand waving justification for what they want to do.
While the immediate trigger for the recession was the games that financial institutions played with bundled debt, the country and its (in)ability to respond to the various financial boondoggles was very much a product of tax cuts added to waging an unnecessary war. Even before the WTC/Pentagon attacks, there were warnings that the Bush cuts were leading us toward unnecessary deficits.
This premise is exactly wrong. If you give a big tax cut to people who already have more money than they need, what they will most likely do is put it in a hedge fund or other investment that will give them a solid yield. Now, some of the money in that hedge fund MIGHT get used to invest in start-up companies, but I’d bet it will really be used for insider trading, which will only take more money out of the pockets of the little guys.
On the other hand, give $50 dollars to a bunch of people who are getting by pretty much day to day, and those $50 (times a bunch of people) will almost certainly be imediately fed into the economy to buy things those folks need. THAT will have a positive effect on the economy.
Start-ups and small businesses are going to happen if there is a need for them. Bill Gates and Paul Allen didn’t start Microsoft because they got a tax cut. They saw an opportunity and worked their butts off to build a company to take advantage of that opportunity.
For fucks sake, I explained it in post #4. The entire point is to give rich people more money. Full Stop, nothing more, that’s it. Any and all explanation past that is complete bullshit.
Thank you; you helped me with the point I was making. “38% of all Federal income taxes” is not compatible with Sage Rat’s “very small percentile of the revenue pie.”
But I agree with others that payroll taxes and sales taxes should be included among taxes when the distribution of tax burdens is debated. When this is done, as Warren Buffet famously points out, the burden on the middle class is higher than the burden on the rich, in percentage terms. (Actually, Buffet’s claim does NOT even require inclusion of sales tax.)
The rich still pay more in absolute terms of course, and many will call that “unfair.” If a rich man wants to fly economy class on an airplane he gets his ticket for the same low price as a wage earner. When the rich man buys eggs at the supermarket he pays the same price as everyone. If he wants to eat free at a soup kitchen he won’t be turned away (he might want to be careful about the clothes he wears to the soup kitchen). Why then should he pay more than the working man (in absolute terms) when the IRS comes calling? Isn’t this unfair?
Many of those arguing for the American right-wing sure seem to think it’s “unfair” that the Kochs don’t get to keep all their Billions.
What do I think? I think that as soon as you use the word “fairness” when discussing government fiscal policy, the debate has been derailed. Is the reason we’re borrowing Trillions of dollars from China that we want to be “fair” to Charles and David Koch?
(Normally I’d rant for another paragraph or two. Instead just zoom in on the final sentence of the previous paragraph, and say it out loud once or twice. Then resume your debate.)