Congress, Justice, Politics, Society

Who Really Creates Jobs?

Respectfully submitted by Lawrence Rafferty (rafflaw)- Guest Blogger

We have heard for years now that the wealthy and corporations need their tax cuts because without them jobs will not be created and the economy could fall back into recession. I guess I first heard of this concept during the Reagan years with the so-called “trickle down” economics.  The claim that economic benefits and improvements trickle down from the very wealthy to the middle class and the poor was one that helped ride Reagan into office and continues to be claimed by some as the way out of recession.  Indeed, the Republicans, since the George W. Bush administration have been insistent that the tax cuts for the wealthy are the key to promote increased employment for the country.

It is time that we look deeper into the claim that lowering taxes for the wealthy and for corporations will actually increase employment and separate the truth from fiction.  “Based on IRS figures, the richest 1% nearly tripled its share of America’s after-tax income from 1980 to 2006. That’s an extra trillion dollars a year. Then, in the first year after the 2008 recession, they took 93% of all the new income.  Wealth is even more skewed. The richest 10% own 83% of financial wealth, which they’ve skillfully arranged to be taxed at just 15%, ostensibly because they pump that money back into job-creating ventures.”  Common Dreams  

If I read those numbers correctly, the richest 1% continued to increase their wealth during the first year after the start of the recession while the middle class and the poor took significant hits in employment and income.  Basically, if the Right’s call to continue the Bush tax cuts and to cut corporate taxation in order to increase employment and wealth for all is to believed, would we not have already fully recovered from the recession since the tax cuts have been continued to this date and the effective corporate taxes are far below the actual corporate tax rate?  Just what did the Bush tax cuts do for President Bush’s record in creating jobs?

“The current President Bush, once taking account how long he’s been in office, shows the worst track record for job creation since the government began keeping records.”  Wall Street Journal  The Wall Street Journal wrote those words just as President Bush was leaving office and they compared all prior President’s records at job creation during their terms. It surprised me that even the much maligned Jimmy Carter administration had a far better record in job creation than President Bush, according to that same Wall Street Journal article. With that recent record of poor job creation, why would anyone believe that reducing taxes on the wealthy would create a bonanza of new jobs?

We have also heard repeatedly that the economy won’t grow jobs because corporations are taxed too much.  This refrain is one that baffles me.  Especially since I and others have written in the past of the many large United States companies that have paid little or no effective Federal taxes in recent years.

“Many corporate leaders have noted that other OECD countries have lowered their corporate tax rates in recent years, but fail to mention that these countries have also closed corporate tax loopholes while the U.S. has expanded them. As a result, the U.S. collects less corporate taxes as a share of GDP than all but one of the 26 OECD countries for which data are available.” Citizens for Tax Justice 

These same corporations make Billions and pay a lower effective tax rate than the poor of this country.  “Corporations even pay less than low-wage American workers. On their 2011 profits of $1.97 trillion, corporations paid $181 billion in federal income taxes (9%) and $40 billion in state income taxes (2%), for a total income tax burden of 11%. The poorest 20% of American citizens pay 17.4% in federal, state, and local taxes.”  Common Dreams

The numbers tell us that it is not the wealthy and big corporations that create jobs, but the middle class.  According to that same Common Dreams article linked above, “A recent study found that less than 1 percent of all entrepreneurs came from very rich or very poor backgrounds. They come from the middle class.  That deserves repeating. Entrepreneurs come from the middle class.  Not surprisingly, then, since the middle class has been depleted by the steady accumulation of wealth at the top, the number of entrepreneurs per capita has decreased 53% since 1977, and the number of self-employed Americans has decreased 20% since 1991.”

If the numbers tells us that jobs are not being created when the tax cuts for the wealthy and for large corporations are continued or even increased as has been suggested by the Right, then why should we believe those calls for continued lower taxes on the wealthy?  What do you think is the truth and what ideas do you have to increase employment?  And before I forget, Go Bears!

Additional Sources:  The Taxonomist

139 thoughts on “Who Really Creates Jobs?”

  2. @Bron: What caused the Internet Boom was government investment in universities that created all of the hardware and communications protocols, and the release of work to the public domain of HTML, email protocols, error-correction protocols and mathematics, encryption and security protocols and many other innovations by the academic inventors that got them to work reliably and permitted e-commerce in the first place. No private corporation imagined the Internet and built it, it emerged from thousands of solutions released to the public domain.

    Much of that work was done on behalf of the DoD, it is true, but it became public knowledge nonetheless.

    What created that good economy was government investment in fundamental research so that new knowledge and technologies could be created and made public, thus creating opportunity for entrepreneurs to exploit, with relatively modest investment and risk. The government spent billions of dollars. but created millions of opportunities for citizens to earn tons of profit and save tons of money.

    Very much like their building of the Interstate Highway system, I’d say.

    That is common sense; government spending on fundamental research and problem solving is one way to create a good economy.

  3. The top 5% pay 59% of taxes collected. The top 10% pay 71% of taxes collected.

  4. Ralph, since I have no idea what a “Leftist” is as compared to, say, a “Rightist” in your world view, my only choice is to accuse you of name calling, despite your denial of doing so.

    As I recall, a communist is supposed to be a ‘leftist’ and a fascist is a ‘rightist;’ however, I have received emails that accuse the President of being a communist and a fascist in the same sentence. Those are Excedrin moments. Since I am neither a communist or a fascist, but consider myself a progressive, what does that make me? What does your position make you? Perhaps a fascist, since you appear to claim the mantle of being a ‘rightist”?

  6. If Warren Buffett–a chearleader for Obama–were to pay the more than $1 billion in back-taxes, plus the interest and penalties that he owes during the current Obama administration or during his next term, then I will eat my words. Until then, I am absolutely correct, and you cannot dispute the facts. (But I can assure you that the hypocrites–Buffett and Gates–aren’t going to pay their fare share of taxes that they already should pay, let alone new, higher taxes.)

    Also, there is no name-calling in my posts. That’s something I leave to you Leftists, and, in fact, that is about all you’re capable of doing, as the art of argument totally eludes you. You may not like being charactized as Leftists, but that is the most apt political term that exists to describe your agenda. The middle class has ALWAYS fared poorly under any Leftist regime. The facts speak for themselves. You may not like the facts, but you can always do what you do best: create slogans and slants to avoid those facts. You may resume your Leftist cheerleading sessions now.

  7. FRANKLY:

    I havent felt anything in my gut. But if you look at those great charts you provided you can see an increase in real income during the Reagan years and during the Clinton years due to the internet boom, it is right there and it shows that a good economy raises all incomes. But then that is just common sense.

    Taxes are the single biggest expense to most families making less than about $100,000 per year what with federal, state, local property taxes, sales tax and social security and medicare taxes.

    The single biggest thing to do is lower taxes on the middle class, raising taxes on the rich is going to do nothing to help the middle class. Raise them if you want but then cut the middle classes taxes by 25 to 50% across the board. But you cannot because the middle class is who carries this country on their backs in the form of SS, state and local property and sales tax. All taxing the rich is about making the middle class feel better.

    The proper thing to do is cut everyone’s taxes.

  8. “Basically, if the Right’s call to continue the Bush tax cuts and to cut corporate taxation in order to increase employment and wealth for all is to believed, would we not have already fully recovered from the recession since the tax cuts have been continued to this date?”

    No. The big piece of the the puzzle that you didn’t account for in your supposition is expectations. The first thing you learn in Finance 101 is that investment decisions are made based on the present value of future expected cash flows. Throughout the Obama Presidency, it has seemed very likely that the Bush tax cuts would soon be allowed to expire, or even that tax rates will be increased beyond pre-Bush rates. As such, these significant probabilities of tax increases were factored into every analysis of whether a potential investment was viable. This has hindered the economic recovery.

    These same corporations make Billions and pay a lower effective tax rate than the poor of this country.  “Corporations even pay less than low-wage American workers. On their 2011 profits of $1.97 trillion, corporations paid $181 billion in federal income taxes (9%) and $40 billion in state income taxes (2%), for a total income tax burden of 11%. The poorest 20% of American citizens pay 17.4% in federal, state, and local taxes.”  Common Dreams

    The data you provide to back up your contention that corporations “pay a lower effective tax rate than the poor of this country” compares apples to aliens, and includes factually incorrect information (it would be helpful if you expanded the scope of your research beyond fiercely partisan organizations such as “Common Dreams: Building a Progressive Community” and the “Center for Tax Justice”).

    For example, you compare a corporate tax burden (consisting of ONLY state and federal INCOME taxes) to a poorest American tax burden of 17.4% (consisting of Federal, State and Local taxes for personal and corporate income, including payroll, property, sales, excise, estate, etc. and even Social Security Contributions – see the footnotes on your referenced link). You do realize, I assume, that corporations pay enormous sums in payroll, local property and local sales taxes, as well as regulatory expenses, but you perhaps chose not to include any of them in your analysis to make a deceptive point, while similarly bumping up the tax burden of poor people by 5% by including their FICA investments in their retirement.

    Determining whether Keynesian or Austrian macro-economic policies make more sense is tough, at best, but this article sheds no light on the argument.

  9. Ralph,
    You are just wrong on all counts. Buffet has supported paying more taxes as has Bill Gates. But why should they pay more than their counterparts? Your idea of a discussion is to call names and clamor about a Leftist agenda.

  10. Ralph, Most of us are discussing issues, problems, causes of problems, possible solutions to problems and not making attributions to left or right agendas. You’re making absurd accusations and insults that are not appreciated by me.

  11. Ronald Raygun: Went in dumb, come out senile. hustlin round Atlanta in his alligator shoes, he’s keeping the big guys Up.

  12. If the point of this article was the rich get richer, the poor get poorer, and the middle class get squeezed, then I’d say that’s fine. There are ample facts to support that conclusion, and many articles have aleady been written demonstrating this point. And if another point of this article is that the middle class is the real engine of job growth in the USA, then I’d say fine again. That point has also been made many times before and there is ample evidence in support of it. But, alas, raising these well-established points is not the purpose of this article.

    The real message of this article is not enlightenment, but the promotion of a Leftist agenda. The underlying message track of bass and drums that gets the Leftist folks up and dancing is “Democrats good, Republicans bad.” No surprise there, as the Leftists will always go with their own popular, predictable 4/4 signature rhythm. Over this rhythm track, the rhythm guitar layers on another familiar theme, “Tax the rich.” The guitar chops blend effortlessly with the pounding drum/bass track. Finally, the lead vocal chimes in with a message that mirrors the drum/bass track, “Obama good, Romney bad.” Of course, you can’t really hear the words, as they are not precisely and clearly articulated anywhere within 10,000 miles of a Frank Sinatra (a singer their grandparents might have listed to), but the Leftist “kids” understand the lyrics. But there is no melody, nor harmony. Those aren’t needed to convey the real messages, and besides, they require imagination and creativity.

    The article does not bother to ask some real important questions. For instance, if Obama is supposed to want to tax the rich and not the middle class, why were his biggest backers, the ones who really put him on the political map to begin with among the wealthiest individuals? Why was Wall Street nearly 100% behind Obama, not McCain? And why is that Warren Buffett likes Obama’s policies so much? And it’s not just because Obama has permitted Buffett’s Berskhire Hathaway company to get away with not paying more than $1 billion in back-taxes alone (not counting interest and penalties), much as Buffett enjoys not paying his fair share of taxes. And how about George Soros? Does he like and support Obama so much because he wants to pay more taxes?

    These are common sense questions that never even occur to the blind, deaf, and dumb Leftist mentality. No, they have to stick to the music they understand. That they can dance to. When it comes to politics, they want none of that highbrow classical music, jazz, or even progressive rock. Thus, they don’t want to hear about how Obama’s “Affordable Care Act,” which imposes ever HIGHER taxes on the middle class–not the wealthy at all. They don’t even observe the Orwellian use of the term”affordable” in the name of the Tax, errrr, I mean the Act.

    Many years ago, the Leftists came up with a new tax concept called the Alternative Minimum Tax (“AMT”). It was “sold” as a tax on the very wealthy. But guess what, who pays most of the nation’s AMT taxes today. You guessed it, the middle class. Obama’s plans are not really different. In fact, they are worse. The AMT, at least, was a stealth middle class tax. Obama is shamelessly going after the pockets of the middle class with no such subtleties. For just a sense for what Obama is really about, see this article: http://lonelyconservative.com/2012/09/obama-will-raise-middle-class-taxes/

  13. Blouise, LOL. We Italians call it agita. My old man hated Nixon and would have to eat Rolaids whenever he saw him on tv.

  14. @rafflaw: What I also find ironic is that when the middle class does finance an entrepreneurial venture, it is almost always with savings, which is after-tax income. The middle class is not typically given the opportunity or tools to finance a business startup with anything else, they cannot really manage their revenue stream, collateralize short term loans, operate on a few hundred thousand in unsecured credit, etc. The “loans” they can get are 18% credit cards.

    I think it is also pretty unfair what a corporation can write off as a business expense, that individuals cannot. The business writes off rent, all utilities (including cable and internet access), furniture and decorations and cleaning supplies and equipment, computers, grounds maintenance, janitorial maintenance, building and HVAC maintenance, vehicle maintenance and fuel, sales taxes, property taxes, licensing and permit fees, construction expenses. Even food.

    All of that stuff is necessary expenses to LIVE, too, but we are forced to pay for it with after-tax income, and corporations are not.

    I think, if the Republicans want to stick with the idea that Corporations are people, then I think people should have equal rights with Corporations, and we should be able to write off all of OUR living expenses before we compute any income tax. Most of us would end up paying zero taxes.

  17. rafflaw,

    Thanks for this article!

    Frank Luntz is the “word man” for the conservatives/Republicans.

    *****
    Capitalists and Other Psychopaths
    By WILLIAM DERESIEWICZ
    Published: May 12, 2012
    http://www.nytimes.com/2012/05/13/opinion/sunday/fables-of-wealth.html

    Excerpt:
    There’s been a lot of talk lately about “job creators,” a phrase begotten by Frank Luntz, the right-wing propaganda guru, on the ghost of Ayn Rand. The rich deserve our gratitude as well as everything they have, in other words, and all the rest is envy.

    *****

    Frank Luntz warns GOP: Health reform is popular
    By: Mike Allen
    May 5, 2009
    http://dyn.politico.com/printstory.cfm?uuid=130628F1-18FE-70B2-A81BBE8E2316F81D

    Excerpt:
    Dr. Frank Luntz, a top Republican consultant on the language of politics, is warning the GOP that the American people want health-care reform and that lawmakers need to try to avoid directly opposing President Barack Obama.

    “You simply MUST be vocally and passionately on the side of REFORM,” Luntz advises in a confidential 26-page report obtained from Capitol Hill Republicans. “The status quo is no longer acceptable. If the dynamic becomes ‘President Obama is on the side of reform and Republicans are against it,’ then the battle is lost and every word in this document is useless.

    “Republicans must be for the right kind of reform that protects the quality of healthcare for all Americans. And you must establish your support of reform early in your presentation.”

    Instead, Luntz says Republicans should warn against a “Washington takeover” of health care, and insist that patients would have to “stand in line” with “Washington bureaucrats in charge of healthcare.”

    Luntz, the author of the bestselling book “Words That Work: It’s Not What You Say, It’s What People Hear,” has been involved in creating much of the language Republican lawmakers used from 1994 through 2004, but was tossed out by the House leadership in 2005. One of his coups was popularizing the phrase “death tax” for “inheritance tax.”

  19. “nick spinelli
    1, September 9, 2012 at 3:32 pm
    I think we should eat the rich.”

    ————————————————–

    Take the Little Purple Pill first to combat heartburn as the very wealthy are all known to be carriers of acid reflux disease.

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