The Truth About Taxes and Job Growth
Submitted by Cohiba on Mon, 11/21/2011 - 8:52pm.
In 1946, at the conclusion of WWII, our national debt was 120% of GDP. Between the years 1946 - 1973, the debt dropped dramatically to 32% of GDP. During those years, the marginal tax rate was 70% for our top earners (even higher under Eisenhower). CEOs on average earned 50 times that of their workers (today it is over 500 times their earnings).
Today the national debt stands at $ 15 Trillion, roughly equal to our GDP. Some economist feel that sustained debt at or over 100% is a recipe for financial collapse. But, it is mathematically impossible to reduce our debt unless we have a budget surplus, rather than a deficit. Is it possible to reduce our deficit (create a surplus) without some increase in taxes?
Some members of Congress would have us believe that an increase in taxes would be a job killer. But, proposals to increase taxes (on the top 1%) have been focused on the individual (or family) marginal tax rates. Executives don't make hiring decisions based upon their personal tax rate! Can you picture Jeff Immelt declaring a hiring freeze at G.E. because his personal tax rate jumped?
And what about the Doctors, Lawyers, Professional Athletes and Rappers who are included in the top1%. These folks don't employ anybody accept housekeepers and gardeners. How many people will Peyton Manning or Kobe Bryant hire or fire if their personal taxes go up or down?
The late Justice Brandeis once said, "we can have a democracy in this country, or we can have great wealth concentrated in the hands of a few, but we can't have both."
I Am Wondering if the ....
Republican Party has determined if they would combine the six " candidates " attempting to run for president if they really had the equivilant of a full brain between them. Regardless of party affiliation this has to be the dumbest group of candidates I have ever seen run for president. They collectively are making it rather simple for Obama. They also are making Carter look like he may have been a genius.That and the fact the current administration has been very successful in getting rid of some of the top tier terrorists and that regardless of what Hannity says the economy is growing out of the second biggest recession ever.Well if all else fails Haley Barbour out of Mississippi the "pardon expert "could run under the law and order ticket.These guys are an example of no child left behind or I got a trophy for last place syndrom.
Two-Horse race
Clearly the Republican primary is boiling down to a two-horse race between Romney and Gingrich. The others have all self destructed and I can't seen another Romney alterative coming into the fray at this late stage.
Personally, I think Republican voters will have an easier time forgiving Newt for his personal baggage than they will be able to forgive Mitt for Romney-Care and his flip-flopping on abortion. If I was a betting man, I'd put my money on Newt.
I think the more interesting match-ups will be in the Senate. Thirty Three Senators are up for re-election, including 20 Democrats. And, Congress is at all time low approval ratings. That said, I've read many pundits claiming that Democrats have safer seats. They need to pick up seven seats to kill the filabuster. I can't imagine them picking up seven, but I'm fairly certain that the GOP can't pick up the 13 seats they would need to kill a Democratic filabuster, so regardless of which way the general election goes, I think we'll have another do-nothing Congress, with filabuster being used by either party to kill an up or down vote on anything significant.
Photo Finish...
I have thought for some time that we need someone to galvanize the country in a singular approach. Newt comes with some baggage but listen , no one is perfect.I can see Newt running and winning the election. He would seem to be his own man and would take the necessary steps to allow some consensus that could be construed as middle ground. He has some practical ideas and is not afraid to verbalize them. It will be interesting. I do believe that the hard core republicans are misreading the people though and I would be surprised if they gained seats anywhere. I do see where Newt would be a little Reagan like and may perhaps be able to bring people together by doing some good old fashioned jaw boning with Congress.Given all that , Obama may begin to recognize a simple move to the center and becoming a little tougher is in order to be re-elected. Either way it will be interesting. This type of election may bring us back to sensibility.
Cohiba , it Sounds Like the Economy...
may be improving as a result of some continued focus by the administration in spite of the republican roadblocks. Perhaps if they all got together on both sides it would be even better. On another note... I am attempting to picture what a discussion about the strategies the president would have to deal with. The discussion would include Herman Cain , Michelle Bachmann , Rick Perry and Ron Paul. It appears the qualifications to call yourself a candidate for president have been reduced to "tot time at the YMCA". For those not familiar the program is kind of instructional for those 3-5 years old helping them get ready for kindergarten or grade school. I can't imagine the four of them presenting a good book report. Do they really think the American people are that dumb ? I hope the momentum continues for everyone's sake.That being said , the republicans efforts to begin construction on the pipeline from Canada to Mexico would be a tremendous boost to the economy in terms of jobs and less dependence on imports for oil. I would also suggest that we don't go down the path of too green too fast as far as government investment. The entry into the business is still too risky outside of private investment money. After all capitalism does have some risk involved in venture capitaliststaking some chances. My attempt at "fair and balanced ".
A few issues
Let me respectfully take issue with a number of your statements. Let's tackle them one by one:
You seem to indicate that the debt (as a % of GDP) dropped dramatically due to the high tax rates. The only reason the debt dropped as a % of GDP was due to the growth of GDP. Tax rates played no significant part.
In your time frame 1946 - 1973 we had 8 years of small surplus (also known as spending less money that you take in). The majority of deficit years were less than 1%, so we did not significantly add to our debt. GDP nearly tripled during that period. Tax rates played no part. Best way to fix the debt? Grow GDP.
Your second major flaw is that you treat data regarding tax brackets as if they are individual human beings. This is a false assumption. Most actual human beings in the top 20% of income earners do not stay there very long. Most people in the bottom 20% do not stay there very long. Following individuals opposed to tax brackets paints a different picture. The following data is from the Department of Treasury. I have provided a link if you become bored over the holiday www.treasury.gov/resource-center/tax-policy/Documents/incomemobilitystudy03-08revise.pdf:
People typically start their career in the lower bracket, move up as they gain experience, have families etc. and move back down at the end of their career. Also note that income distribution statistics do not provide in any way a clear picture of wealth. They seldom include money received by the government. They also include the retired who as a segment of the population have the highest wealth. Because of this, most income distribution studies grossly underestimate the incomes of the bottom %. The highest are typically overestimated because they do not take into account taxes paid.
Finally, I don't understand all of your hostility toward CEO pay. What is it to you? CEO's don't get paid at the expense of you or anyone else. In large corporations where billions of dollars are at stake, if someone can come in and their decisions result in reduced mistakes and save the company $100 million, well $9 million in pay seems like a bargain. If every CEO's pay was cut in half tomorrow, how would this make one difference to anyones way of life other than the CEO? It wouldn't.
Issues with your issues
Mookster,
The point is simply this ...
By the way, I've nothing against CEOs. The point there was made to illustrate that our middle class has disappeared. I could care less what a CEO makes. But I do care that the wealthiest Americans are getting wealthier while the middle class is getting poorer.
You solution to reduce debt by growing the GDP won't work without a middle class.
As Usual ...
... a thoughtful set of ideas by Cohiba ... and plenty to consider, but I think it would be even more applicable to bring it down to where the rubber meets the road - the Independent Dealer ...
Let's put aside what the Jeffie Immelts of the world do in their crystal palaces ... let's talk about the, presuming the same set prices for every Independent Dealer ...
... and when you do that, you talk about their cost of doing business, which includes taxes ...
... so, if you raise the taxes on the Independent Dealer, what affect do you have on the economy ???
Well ...
1. You make the Independent Dealer less able to hire more employees ... Actually, you might cause him to have to downsize and lay people off ...
2. You make the Independent Dealer less competitive against the Big Box Boys because those entities pay their employees less since they are simply order takers, delivery people, and alike ... As opposed to well-trained, well-informed, members of the community ...
3. You make the Independent Dealer less likely to be able to invest in their communities, which include charities and other outreaches ...
You see, while it is fashionable to talk about the hackneyed "top 1%" like Jeffie Immelt, but the real people any tax increase would affect would be the job creators - no, not the people who hire folks in fistfuls - but the real job creators in your community - Independent Dealers !!!
The real news in the economic world these days is the plethora of the "economic advisors" who are going back to the classroom, where they can be wrong about their theories but not affect REAL lives ... just the students whose tuitions (paid for by their parents) pay their salaries !!!
Independent Millionaire
Bob,
I used Jeff Immelt as an example in this posting because he makes more than $ 1 Million per year and is, therefore, in the Top 1% of US Earners. Proposals to increase taxes as a means to help balance the budget were originally focused on the Top 2% of earners (families making over $ 250,000 per year after deductions). The focus has now been shifted to the Top 1%, which are families making over $1 Million per year.
So, let's talk about the Independent Dealer. I have never met an Independent Dealer whose net income was over $1 Million per year. I'm not talking about $1 Million in sales - I'm talking about $1 Million in net profit (after all deductions).
My guess would be that any Independent Dealer, whose personal net income is over $ 1 Million per year, probably doesn't make hiring and firing decisions. He probably has managers that do that for him. And, he probably wouldn't tell his managers to stop hiring or start firing based upon his tax rate. He'd tell his managers to hire or fire as necessary to keep his business strong so he could continue to take home the big bucks.
Don't let Republican rhetoric fool you into thinking that taxes on the Top 1% will be a job killer, or that reduced personal income taxes on the Top 1% will be a job creator. The only thing that will be effected by taxes on the Top 1% is the political contributions they make.
Out of the Equation ...
Cohiba,
When I said, "Let's put aide what the Jeffie Immelts of the world do ..." I was trying to bring the discussion down to the small business owners who are the ones I believe have job creation/maintainence impact ...
I didn't want to get into the whole top 1% conversation because I think that it smacks of income redistribution, and that only works inside college classrooms with former economic advisors who have realized they ought to have stayed in the classroom ...
I wanted to discuss impact on the Independent Dealer, and those three (3) points I made ... The Independent Dealer, who I define as those people running stores in neighbourhoods all over the country, paying salaries, and maintaining the livelihoods for the employees thru simple service to their demographics ... I'm not talking about the multi-store people, or those who hire people to run different branches, anyone like that ...
Those are the people who are not making expansion plans because they have no faith that our Government is anything but disfunctional ... Increasing tax rates in any sense hurts these people the most and that hurt DOES trickle down !!!
If that's not what you and others wanted to talk about, then, fine ... another time, but I think that before you try and fix the big picture you need to heal the grass roots first ... nothing ever grew and flourished without a strong root system, and our country is no different !!!
Have a wonderful "Control the Turkey Population Day" !!!
Bob and Job Creation....
I know of no one who will not open or expand a business because of taxes. The primary reason people start/expand a business is because the opportunity to make more money is the catalyst. There is enough tax incentives with capital expansion and various tax breaks that allows one to get started well. The overiding issues remain expensive worker's comp. and other local issues. However the true blue blood person who wants to take a chance will in fact do that when the demand for more product or services is there. I suspect we have been very productive and too much perhaps is made elsewhere. Demand must surpass supply before jobs are created. If that happens just watch job creation. All the rest means little. Just look at the times when the economy was great. It had to do with demand. It has very little to do with the 1% or the 99%.
Malarky
In this land you are responsible for decisions made by your elected representatives, AND the elected representatives of your ancesters.
If they spent it, you have to pay for it.
Cutting spending is not going to pay down new or legacy debt.
Cutting taxes certainly won't pay down any debt.
If we were arguing Calculus, or maybe Geometry or Trig, I might understand the confusion.
We are instead arguing addition and subtraction, and there is no excuse for arguments here.
Eliminate the Bush tax cut........and then some.......and you would still have to pay for 30 years of tax cuts past.
Math
Eliminate the Bush tax cut on incomes over $200k = $98 Billion per year extra in your pocket based on 2008 tax receipts, provided nobody changes their behavior as a result. Maybe less now due to the recession. We spend about $1.5 trillion per year more than we currently take in. Big Friggin deal on your $98b. We are less screwed by a fraction of a percent. If your ship is sinking fix the hole where the water coming in.
I have agued time and again, raising rates does not mean you will have more money. The data backs me up. Tax receipts as a % of GDP remain stable regardless of the rates on high income. If you want more $$ you should be focusing on strategies that grow our GDP.
New Math
Eliminate the Bush tax cuts across the board. The real money is in the Middle Class.If you are suggesting that getting from HERE to the budget Nirvana over THERE will require both CUTS and TAXES, then we are on the same page........a page that not a single elected Republican is on.Since your boat is already full of water, I kind of think you might want to bail too, even if you patch the hole.
Some Malarky
I agree with some of what you say, Yes we are responsible for the action or inactions of our elected officials. But I think the point that some are making is it is a balance . Cuts alone will not make this nor will tax increases on the personal or corperate side. It is a bit more complicated then that. Some hang their hats on the IRS data that show revenue went up when the marginal rates went down.We had a budget surplus from 1998 to year ending 2001.While in 2002 tax reciepts went up, congress was like a kid in the candy store with money in the bank to spend and never stopped. Nonessential programs, bureaucratic waist and organizations should be scrutinized at the very least.The facts still remain that we do have the highest corporate tax rates which leads to exportation of those jobs we all want to create, and we have a tax code that 99% of us don't understand and the 1% know how to manipulate. We have a government that mandates departments to have an 8% increase in budgets. we also have a congress that has no idea of spending within its means. In my eyes we need a dramatic overhaul of our tax code and the federal budget to correct and reverse the trends that are taking place right now. This is only my humble opinion.
Irresponsible Elected Officials....
present the biggest problems with our economy.The general idea of a capitalist society is to have constant growth. With that services need to be increased and improved. That requires revenue in any language.The problem with many Republicans is they want to compare us with other countries on taxes , countries that are backward and simply put do not support the world as we do. I know of no mandate to increase spending by 8% per year. That is republican rhetoric that is just not proven. Again I will tell you this , business people making decisions on growth are concerned with profits , not taxes. Job growth will come once demand exceeds our internal ability to deliver. 8% unemployment is more than likely the new 5% model these days. We are just too productive. Business is mainly concerned with regulatory issues concerning worker's comp ,EPA and othe ridiculous rules that affect one's ability to work effectively in our country.Republicans also complain about poor teachers...how about the parents who act irresponsibly not holding their children to a standard of performance most of us had to live by. Don't Obama for something that has been brewing for years . Did you watch those folks from Iowa talking about who they would vote for ? They are ill informed and live in a bubble in small town Iowa and they will control who gets nominated ? Good luck with that. Perhaps we should all look inside ourselves and determine we are our own worst enemy but just don't quite realize it yet.Too many people have uneducated opinions and others follow them because they speak brashly with no substance. When you speak mof flip flopping here is some keen advice. Those who cannot see the need to change their course from time to time will perish. So those of you who are firm in thinking we should never change our minds need to rethink that and quickly.
Do your research
No mandate just fact and is a common practice. Look at the budgeet procedure of government depatments. It is called base line budgeting and when you hear of someone cutting the EPA by 4% it is a cut in expansion. How many government contracts have you filled ? There are departments of the federal government that will spend money to make sure that they use the budget they were given. You are correct on a point, that a capitalist system servives by growth, but not governmental growth, it's foundation stands on the growth of the individual, self relience not subservancy to a governmental organization, not dependency of a government program. Give a man a fish and he will eat for a day, give a man a net and he will eat for a life time. You are also correct in the fact that many of the voting public are very ill informed,or not informed at all. The elections are becoming nothing more then a popularity contest with great slogans and whoo looks the most presidential. AS we may have our differences but on this day I would like to wish you and yours a very happy Thankgiving.
roadwarrior...
I went to college with someone who is a county supervisor and I served as a hands off advisor for a local congressman. To suggest 8% budget growth is real or mandated is absolutely inaccurate. As I stated in an earlier response , jobs will be created when demand exceeds supply regardless of what else happens. Eventually the cycle will occur , like it has for over 100 years.A healthy economy or company needs about 4% growth to function normally. I suspect that the unwritten rule in government has some built in plans to expand as the population expands. The rule is not hard and fast. Happy Thanksgiving to you and yours.
Correction of facts
Here is a snipit from the Pew Institute:"The CBO provides scoring of legislation, usually by estimating economic impact over a ten year period. Now that we've finished the set-up, here's the punch line. Total federal spending amounts to $3.73 trillion for FY 2011. If both Houses of the Congress were to vote to freeze spending for FY 2012 at FY 2011 levels; the CBO would have to score that legislation as a $9 trillion budget cut over ten years! We wouldn't actually spend one dime less in FY 2012 than we did in FY2011; but because of the baseline budget rules CBO would have no choice but to report a $9 trillion cut to federal spending over that following ten-year period."This my friend is how base line budgeting works on a national level. Say what you will, but the increase in all federal budgets are shown very clearly in this example. I am all for growing those essentail parts of the fed but not at a greater rate of the overall economy. And that is what has been happening over the past 40 years.
So Given That...
consider a growth in population of well over 50% in that time period in the US. If there was very little or no government what do you think the impact would be on world security , education , civil rights , human rights ,etc. Are you suggesting that we leave the destiny of the people in the hands of Bernie Madoff , Miliken from the 80's , Donald Trump and Wall Street ? I suggest that from a purely economic point of view the government needs to increase to supply services and support for the mass of the average person.What is so wrong with those of us fortunate enough to make sure we have the knowledge that we help those in need ? Thirty of those past forty years you speak of actually increased the standard of living for most people. It appears the past ten years of deregulation has caused more turmoil and a change in the balance of a shrinking middle class. Do you suppose the majority of the people just want a handout ? If you do you are somewhat misguided or brainwashed from the republican diarrhea . The vast majority of people want the opportunity to work hard and make a living with the opportunity to live a relatively comfortable life of owning a modest home , a car and take a vacation and see their children become educated. Not to deregulate business and see the problems that have brought our economy to a near financial collapse because of the greed on Wall Street and beyond.I would guess those people in government care more about you than does Madoff or his buddies.It is not unusual for people like me to care about those less fortunate warrior. I count my blessings and will help support where I can for those who need the support.That does not make me or people like me weak minded.I actually spend time out in our factories talking to employees quite a bit. Just casual talk , potlucks , company sponsored lunches and dinners. I stay close to them and I think that is a pretty good cross section of what the working people want. It has been the same at every organization I have worked with.
Taxes and Contributions
The marginal rate for the personal income taxes of the top 1% has no impact on their hiring decisions. But, it does have a big impact on their campaign contributions. Grover Norquist' No Tax Pledge is all about campaign contributions and re-election. It has nothing to do with job growth, and higher taxes on the wealthiest earners is not a job killer.
Cohiba.....
I agree wholeheartedly. The people I work for with lots of money certainly want to make money and taxes do not stand in the way of that. I have never seen that as a cause for no growth. Taxes frankly are a good problem to have to be honest. I watched this guy Grover on 60 minutes last week and he said life was better in 1900 with nearly no taxes. I am wondering what planet he was on during his American History class. There was little or no middle class , most people could not afford to purchase the products they manufactured and the gap was wider than the Grand Canyon in wealth distribution. Yes Grover perhaps you should go back to 1900.This guy is all about raising money and not telling people where it comes from or where it goes. Cheers Cohiba. 1900 really ? He is lost.