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
nick,
Ah … Capricorn … that explains a lot. (nodding head wisely) Capricorns make good detectives.
Instead of introverted, I’ll venture “reserved”, practical, stubborn (as in persevering), and resourceful. That is you as you see yourself. (There is also a tendency to pessimism and melancholy.)What others see may be different depending on the time, date and place of your birth which sets the ascendant or outward appearance as well as the moon placement which determines much of the emotional make-up.
Deny it as much as you want but I know Capricorns have an interest in the occult in spite of your naturally skeptical turn of mind. Do you have problems with your knees … long standing (no pun intended) problems with your knees?
J. Edgar Hoover and Richard Nixon were Capricorns.
See? Fun!
one t … I got overly excited
Otteray Scribe
1, September 10, 2012 at 7:25 pm
Dang, raff. I was going to get into a discussion with Slarti and Gene about the General Theory of Relativity and information stored in the event horizon of black holes. You’re no fun.
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Boycott!!!!!
@Bron: sip a good Port
No alcohol of any kind for me. Or tobacco, or any other mind altering drug. I did have half a glass of excellent wine about six years ago at a Christmas party, at the urging of my host. I think that was the last time I consumed alcohol. Your philosophy seems clearly drug induced, but then, I am a civil libertarian, I think you have the right to do any drugs you want.
Dang, raff. I was going to get into a discussion with Slarti and Gene about the General Theory of Relativity and information stored in the event horizon of black holes. You’re no fun.
OS,
Can you leave Algebra out of it? 🙂
Capricorn. I never read Cosmo and looked @ Playboy for the boobs! I would read the interviews.
Bron, Mexico does NOT have a drug problem. AMERICA has a drug problem and Mexico happens to be in the through way between lots of cocaine growing regions. I see much more drug use of all kinds in America. Not much drug use by average people in Mexico, it is not socially acceptable in this Catholic country.
Bron, if you have never been to the border, you do not know what the he11 you are talking about. NAFTA was a disaster for Mexico, as is the drug war. You wouldn’t last on hour in one of the slave labor factories on our border w/ Mexico. Why do you think they come here? Because if they stayed at those factories they would die.
America put a million farmers a year out of work by dumping government subsidized corn into Mexico. It is our fault that Mexico is so bad now. I lived there for 3 years and saw it change after NAFTA. If you ask Mexicans, they all say, “change your trade policies to provide living wages and environmental protections” and “end the freakin’ drug war”.
It affects us here- we now see pollution from these unregulated slave labor factories showing up on the beaches of San Diego. Heavy metal pollution like lead. Terrible environmental damage that will cause all those Mexican workers to die much too young if they do not get out.
America refuses to take the lead on this human rights issue, it is disgusting.
Tony C:
China is a totalitarian country.
India is trying to transition to capitalism from socialism and is a very corrupt country and has a terrible caste system. No upward mobility there.
Mexico is a corrupt country and has a serious drug problem.
Maybe if their countries were more free that would not be an issue.
Personally I think pricks that pay their people like crap give ammunition to occupy wall street types. They [occupy types] think less freedom is the answer, I think the answer is more freedom.
Corporations are pretty much only worried about the bottom line and the return to shareholders. But that is their right. Dont buy from Wal Mart or purchase any product made in China, India or Mexico. Tell the companies who sell those products why. If we all did that, I imagine there would be change. But we wont all do that because some of us need the savings these products provide.
Not everyone can be wealthy like you and sip a good Port from their comfortable chair while waxing philosophic about how badly the poor in India are treated by Wal Mart.
OS:
I was not slamming liberals.
I was just curious why the developers thought liberal should be negative, why not Robert Mugabe and Stalin and Hitler on the negative axis instead of Ghandi and the Dali Lama.
@Bron: The problem isn’t Keynes or Marx, the problem is the complete lack of protection from workers. If you want to see your policies in action, go to Mexico, India, China, and interview the workers there. Do they have to work in dangerous, unhealthy conditions for survival wages to make the Waltons billionaires? No, they can always choose to not survive, right?
That is the real problem, your fantasy of a “good economy”, infinite mobility, and infinite choice is nothing BUT a fantasy. In the REAL “free markets” the workers cannot ever get ahead or get enough capital to do their own thing because they are working 14 hours a day just to get enough to eat, and Walmart may profit $100 on that work, but they have zero incentive to share any of that profit with the worker, who is trapped by their ridiculous desire to keep living.
Bron, you asked earlier about the positive and negative numbers. Simple. It is a basic X-Y axis. Straight from 9th grade algebra. It is called the Cartesian coordinate system. More explanation here:
http://en.wikipedia.org/wiki/Cartesian_coordinate_system
nick spinelli,
My last comment was geared towards the Cosmo finish … remember Helen Gurley Brown, editor-in-chief of Cosmopolitan Magazine? If so, do you remember the quizzes? Rather like reading Playboy for the articles. In other words, pure foolishness but entertaining none the less. That’s how I looked at that test we just all played with. Indicative of absolutely nothing but fun. Now, what’s your Sign? 😉
Shano:
lets see, Mexico is a stinking cesspool of drugs and corruption, add to that a statist economy and you have a recipe for disaster.
The problem isnt fair trade, the problem is the other economic policies of Washington, DC.
Just say no to Keynes and Marx and everything will work out OK.
By the way, the inexpensive products make things easier for the middle class and poor.
Wal Mart doesnt put shops out of business, consumers do by buying from Wal Mart. They purchase from Wal Mart because they save money.
@Shano: Sanders is wrong, there simply is no solution that makes that kind of trade work. I am to the left of him on this. Going to Mexico, China, India, Pakistan, or any of these other countries lets big business circumvent all worker protections, payroll taxes, and safety regulations.
It is impossible for Americans to compete with what is in essence slave labor; oil ships are cleaned in Indian ports by workers with zero safety gear at all; they die, get cancer, ruin their lungs, fall and break their backs, get paid $3 an hour and are replaced like commodities. No American company can do that at an American port and compete. Period.
There is no technology that does it better; Exxon or BP can go anywhere and they already found the cheapest place on the planet with the most ruthless exploitation possible.
I do not see what Trade Agreement Bernie can negotiate that would fix that or level the playing field between American workers and foreign workers in countries that treat their citizens as expendable as toilet paper.
Bernie Sanders says:
“Senator Sanders believes that our unfettered free trade policies have largely contributed to our shrinking middle class, job loss, and the ever-widening gap between the rich and poor. If the United States is to remain a major industrial power, producing real products and creating good paying jobs, Sanders believes that we must develop trade policies with Mexico, China and other countries that protect not just the CEOs of large corporations, but the working people of our country.
“Nobody I know believes we should place a wall around this country. Trade is a good thing, but what we must begin doing is negotiating fair trade agreements that reflect the interests of working families in America, working families in other countries, and not just large multinational corporations and the CEOs who help write these trade agreements,” Senator Sanders has said.
Free trade is very good for the large multinational corporations who can throw American workers out on the street, move abroad to China and other low-wage countries, hire people there for pennies an hour, and bring their products back into this country. For those people, for the CEOs of large corporations, unfettered free trade has been a very good thing, but for the middle-class and working families of this country, for working families and poor people in Mexico and in other low-wage countries, unfettered free trade has been an unmitigated disaster.
What happened with the passage of the North American Free Trade Agreement? In Mexico, the agricultural sector has been decimated by cheap exports from American agribusiness. Poverty has increased, the middle class has declined and people are literally dying in the desert trying to flee Mexico for the U.S. Working families in Mexico suffer, the rich have gotten richer and we now have the obscenity of one of the world’s wealthiest people, Mexican Carlos Slim Helu, coming from a country in which millions of families struggle to feed their children. Sanders knows we can have trade policies that can do better, that must do better.
It is not only Mexico and other developing countries that have been hurt by these unfettered pro-corporate free-trade agreements. It’s also the working families in the U.S. who are now engaged in a horrendous “race to the bottom.” Despite an explosion of technology and a huge increase in worker productivity, poverty in America is increasing, the middle class is shrinking, and the gap between the rich and the poor is growing wider. In the past six years, millions of good-paying jobs in the U.S. have been lost as companies shut down here and move to China and other low-wage countries.
nick:
yep, corporations need to be weaned from the government teat. But the politicians will scream bloody murder when you take away their protection racket and the money that comes from it.
@Nick: and hits those who can’t work and on fixed incomes the worst.
Worst in terms of hardship, worst in terms of total lost, worst in the short term or worst in the long term?
I will draw your attention to two aspects of inflation that make the rich hate it:
1) It reduces the buying power of cash assets AND
2) It reduces the buying power of debut that is to be repaid.
Since the rich own most of the cash assets, and are the creditors for the vast majority of debt, inflation drives them crazy. It isn’t even an income tax, it is an asset tax: The more people owe you, the more you lose due to inflation. In terms of actual money, the rich are hit hardest by inflation.
For the working poor, inflation is largely a temporary and survivable situation. They demand more buying power and get it; prices are raised to cover the higher pay that they need, because they are irreplaceable (not individually, but no business person focused on profits runs a charity, so they do not employ people they do not need, so by definition the employees are necessary to the business). So for the working poor (or most hourly employees, including the middle class) the hit of inflation is typically a temporary hardship.
People on fixed incomes are hurt more in terms of hardship due to reduced buying power, both in the short and long term, that is true.
I am just pointing out that the shape can change depending on your focus; whether it is money or hardship, short term or long term.
Fair Trade would create more real jobs with a living wage all around the world, we should try it some time.