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Bigfoot, the Loch Ness Monster, Economic Growth from tax cuts
If Mitt Romney were to declare that his plan for Medicare relied on fairy dust, people would laugh. If he said that he was waiting for Superman—literally Superman, the one with the blue red 'S' and the dangling spit curl—to teach America's children, everyone would assume it was a joke. If Romney swore that bug-eyed aliens were central to his foreign policy, it would generate well-deserved snickers.

And if he said any one of these things over and over, if he insisted they were true, if he included them in nearly every speech, proudly repeated them to the press, and made them the centerpiece of his campaign... if he did that, the laughter would turn sour. Surely Romney wouldn't be able to give a speech without being met with derision. He wouldn't make it through an interview without the media tearing into his ridiculous and unworkable plans. He'd be laughed right out of the race.

So when Mitt Romney declares that his economic plan involves reducing taxes on the wealthy as a means of growing the economy... where's the laughter?

The assertion that there is a relationship between a growing economy and tax cuts is an old one. For many conservatives, the relationship seems one of pure common sense: allow the rich person to pocket more earnings, and they'll have more to spend on growing their businesses. Simply allow those at he top to "keep more of their own money," and the rewards trickle down to everyone. That this relationship isn't immediately obvious to the must casual observer among the hoi polloi is a source of irritation.

To better convince those who just don't get it, conservative economists have sought  elusive proof of this beast with the dauntless dedication and fervid belief of Bobo seeking Bigfoot. In just the last week, Hoover Institution fellow Thomas Sowell made a fresh stab at the idea.

In the early 20s the tax rate on the top incomes was 73 percent. The people making over $100,000.00 paid like 30 percent of all taxes. By the end of the decade the tax rate on the top had been cut to 24 percent. People making over $100,000.00 now paid 65 percent of all taxes, and the reason is quite simple:  when you have the tax rate at 73 percent people simply don’t pay it. They put their money into tax-exempt securities and rearrange their financial affairs.
Sowell neatly demonstrates both the core of the conservative argument and the requisite obliviousness inherent in being a proud Hoover fellow. Wasn't there something that happened around the end of the 1920s? A quick review shows that the share of taxes paid by the wealthy grew, not because reduced taxes stimulated economic growth, but because the reduced tax rates over that decade produced rapidly growing income inequality, a huge speculative bubble leading to the rapid collapse of the stock markets, and the plunging of the economy into the Great Depression. The rich shouldered a larger share of the tax burden by 1930 not because things were so rosy, but because they had captured nearly all of a rapidly shrinking pie. This is not particularly good evidence that tax cuts = fun times.

Over the last sixty-five years, we've given tax cuts for the rich another go, dropping the top rate repeatedly. Every time we've done so, it was in response to the argument that reducing the burden on those all important "job creators" would unleash the economic hounds and fuel an economic surge.  So how did this stretched-out second take on Hooverism work out for us?

The non-partisan Congressional Research Office recently completed a study of the relationship between tax rates and the economy from 1945 to date.  In 1945, the top tax rate was 90%.  It was cut to 70% in the 1960s, and to 35% today. More importantly for the very wealthy, the rate on investment income was 25% in the 1940s, peaked at 35%, then fell down to 15% today. The tax burden on the wealthy has decreased steadily.

So how'd that work out for us? It turns out, not so well. The top tax rate was found to have no link to greater savings, no link to greater investment, no link to a stronger economy. Actually, that last bit is not true. The study did find a relationship between tax rates at the top and economic growth. A negative relationship. The economy grew faster when tax rates at the top were high.

What do you get when you cut taxes on the rich? Greater income inequality. The one definitive change fueled by cutting taxes on the wealthy is that more and more of the money is held in fewer and fewer hands.  Remember that old bit of common wisdom among conservatives about letting a rich person pocket more out of every dollar? As it turns out, that's exactly where it goes–in his pocket. Decreasing taxes on either income or investment earnings doesn't fuel job creation. It doesn't spur innovation. It just makes sure that the money flows to one end of the pool and stays there.

Slow motion Hooverism hasn't worked any better than the more rapid variety. It's generated the same high rate of inequality, distorted markets, falling levels of employment, and overall economic catastrophe as it did the first time. When it comes to cutting taxes, we've preformed the experiment. We've done it not once, not twice, but many times over a period of nearly a century. It hasn't worked. It doesn't work. The evidence is in. The central tenet of conservative economics has been utterly and conclusively shown to be false.

Any politician who promises to right the economy through cutting taxes on the wealthy might as well invoke the Easter Bunny, and any reporter who fails to point this out is failing the public.

There is a difference between believing in the existence of Bigfoot and counting on reducing taxes on the rich as a way to boost the economy. Bigfoot is simply very, very unlikely. Conservative economics are a myth.

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Comment Preferences

  •  Lower taxes (15+ / 0-)

    What's wrong with reducing taxes for wealthy Americans? It may not really help the economy, but it will make the cranky rich people happy. They own the country, after all. Why shouln't they be happy in the country they've bought?

  •  one doesn't have to be an "institutionalist" esp. (8+ / 0-)

    a "Hooverist" (sic) know that other structural factors related to the Thrifts, predecessors of the S & Ls and holding of mortgages particularly in the heartland also contributed to the bank failures

    Sowell neatly demonstrates both the core of the conservative argument and the requisite obliviousness inherent in being a proud Hoover fellow. Wasn't there something that happened around the end of the 1920s? A quick review shows that the share of taxes paid by the wealthy grew, not because reduced taxes stimulated economic growth, but because the reduced tax rates over that decade produced rapidly growing income inequality, a huge speculative bubble leading to the rapid collapse of the stock markets, and the plunging of the economy into the Great Depression. The rich shouldered a larger share of the tax burden by 1930 not because things were so rosy, but because they had captured nearly all of a rapidly shrinking pie. This is not particularly good evidence that tax cuts = fun times.

    yksitoista ulotteinen presidentin shakki. / tappaa kaikki natsit "Nous sommes un groupuscule" (-9.50; -7.03) 政治委员, 政委‽ Warning - some snark above ‽

    by annieli on Sun Sep 23, 2012 at 06:08:10 AM PDT

    •  The old 47% canard is Sowell's recycled garbage (15+ / 0-)

      Either he fit the 1930's argument around the 47% meme or the 47% meme is just a recycled 1930's argument. It doesn't really matter. Either way that Sowell came to the above conclusion is irrelevant because both involve intellectual dishonest. Quelle Suprise. An intellectually lazy, completely distorted and fraudulent column from a conservative "thinker." Why I never!

      •  them canards are bigger than ducks and in VT (2+ / 0-)
        Burlington, Vermont Since the time of the Iroquois, people along Lake Champlain have reported seeing a monster in it. Modern Americans call it "Champ," and their opinions about it tend to fall into one of two camps: either it's a prehistoric whale, or it's a log. Whatever it is, both the Vermont and New York state legislatures have passed laws protecting it.

        In 1984 the state of Vermont put up a monument to Champ. Most locals have heard of the monument, but have never seen it -- and it's easy to understand why. It's a squat granite block, hard to spot on the end of Perkins Pier, and hardly big or flashy enough to do justice to a monster. "Dedicated to Champ, Beula Aquatica Champlainiensis, and those people in Vermont who have seen Champ," is its inscription, along with a goofy rendering of Champ, and the logos of the Rock of Ages granite company and the Vermont state lottery.

        Update: There are a few other signs of Champ spirit around town. And Tipster Brian reports the local minor league baseball team is now named the "Vermont Lake Monsters," in honor of the creature.

        yksitoista ulotteinen presidentin shakki. / tappaa kaikki natsit "Nous sommes un groupuscule" (-9.50; -7.03) 政治委员, 政委‽ Warning - some snark above ‽

        by annieli on Sun Sep 23, 2012 at 07:03:48 AM PDT

        [ Parent ]

  •  The hunting of the snark (25+ / 0-)

    The banker's fate

    They sought it with thimbles, they sought it with care;
    They pursued it with forks and hope;
    They threatened its life with a railway-share;
    They charmed it with smiles and soap.

    ...

    But while he was seeking with thimbles and care,
    A Bandersnatch swiftly drew nigh
    And grabbed at the Banker, who shrieked in despair,
    For he knew it was useless to fly.

    We may be short of bandersnatches, but hunting economic improvement via voodoo economics will be just as painful.
  •  The laughter soured long enough ago for the mess (8+ / 0-)

    to have acquired a pseudo-'patina' of hoary tradition, to replace the illusion of cardboard postures

    This year, I'm doing something I've never done before - I'm voting a straight Democratic ticket

    by chmood on Sun Sep 23, 2012 at 06:09:23 AM PDT

  •  Instead of George (11+ / 0-)

    Instead of a picture of George Washington from a dollar bill maybe that last pic should be on Ayn Rand since the chances of her philosophy working are even less than the odds of Bigfoot or the Loch Ness Monster ever being found.

    “I believe all Southern liberals come from the same starting point--race. Once you figure out they are lying to you about race, you start to question everything.” ― Molly Ivins

    by RoIn on Sun Sep 23, 2012 at 06:09:25 AM PDT

  •  Why lump in Bigfoot with the (3+ / 0-)
    Recommended by:
    sparkysgal, Churchill, Janet 707

    fraudulent Loch Ness (so-called) Monster? While Sasquatch has reams of evidence supporting his existence, this supposed "monster" from Scotland has all of one picture evidencing her existence, a picture that most experts think was a hoax.

  •  the problem (13+ / 0-)

    the things you mention requiring fairy dust would be believable to most right wing voters these days, thats the problem, you cannot try rational arguments with these people, because their value system is "I hate the black guy"...they are voting against their own best interests with unbelievable evidence and still don't get it

    •  I wish you were right (3+ / 0-)
      because their value system is "I hate the black guy"...they are voting against their own best interests with unbelievable evidence and still don't get it
      Their indoctrinated values are are right out "1984", they (the so call 27%) believe whatever nonsense the RWNM tell them to believe. Lead by Faux Noise and Rush and the cottage industry of talk radio, mega churches, local pols,  newspapers  and bloggers that make their "message" pervasive.

      The exposure to the RWNM cumulative effect gave us the Tea Party, the Xtianits Dominionist movement, trickled down "economics", Neo Racism, the NeoCons permanent war mentality and  now the "47% non real Americans moochers".

      What all of the above have in common? Glad you asked, none of their premises and proposals have a tether to facts or logic, it must be, and it is, accepted as canon by a large minority of people (that vote).

      And it is has been very successful, it got Reagan, HW Bush, and GW Bush to the WH and a myriad of lesser pols elected.

      The problems now for the puppeteers of the outrage machine are:

      a) Their subjects are a dwindling minority-majority.

      b) The consequences when their proposals are followed by actions are known (see GW Bush)

      c) Their true (and conflicting) objectives are truly unpalatable to vast segments of the population, including most of their followers

      d) The Reagan/Bush shtick of talking the talk but NOT walking the walk, doesn’t satisfy their followers anymore (See Romney, the Dick), they want a true believer in the WH, and as a corollary to c) NO ONE fits the bill  (see: the klown car).

      Remember the modern GOP is not a political party is a conglomerate oof competing Lobbying groups and is binded together by the common goal of festing on the carcass of the carcass of America.

      So no is not hatred for the "black guy" this is just another tool in their arsenal.

      "First they ignore you, then they ridicule you, then they fight you, then you win." -- Mahatma Gandhi

      by IamTheJudge on Sun Sep 23, 2012 at 07:47:25 AM PDT

      [ Parent ]

    •  Another problem is that of those still leaning (1+ / 0-)
      Recommended by:
      JerryNA

      Romney, some think that whatever he says doesn't matter. That once in office he'll be both hampered by the realities of office, and the other Romney, the one that's actually a moderate republican, will finally make his appearance.

      A dangerous assumption given the pressure the tea party can put on any repub these days.

      Vote Tea Party Taliban! Bring the Burqa to America.

      by Pescadero Bill on Sun Sep 23, 2012 at 08:12:20 AM PDT

      [ Parent ]

  •  Belief in something usually trumps the truth. (16+ / 0-)

    It happens again and again as you point out. People want something to be true. They will rationalize about it and ignore reality in order to get the thing they want to settle comfortably in their psyche.


    The difference between stupidity and genius...genius has limits. ~ Einstein

    by jim in IA on Sun Sep 23, 2012 at 06:11:18 AM PDT

    •  Belief is based on "truth" (2+ / 0-)
      Recommended by:
      Alumbrados, jim in IA

      And "truth" does NOT equal fact.

      That's a difficult one for those of us in the "reality-based community" to keep in perspective. Focusing on secular/social policy and outcomes or basic science, truth and fact are effectively interchangeable. But in the messy chaotic day to day world, where we have to deal with people of all perspectives and often much shorter and challenged attention "opportunities", belief and faith (not necessarily religious) can be manipulated at critical moments to trump what is seen by "one's lying eyes."

      When you are right you cannot be too radical; when you are wrong, you cannot be too conservative. --Martin Luther King Jr.

      by Egalitare on Sun Sep 23, 2012 at 07:10:17 AM PDT

      [ Parent ]

  •  Terrific article (6+ / 0-)

    I've said similar things for years, but not nearly as well, and I intend to share this one.

    Small typo: please change "tenant" in the third paragraph from the end to "tenet."

  •  the loch ness monster (5+ / 0-)

    story is about as believable as the compassionate conservative idea.

  •  And it won't cost us a dime! (6+ / 0-)

    Sprinkle some magic pixie dust (aka RepubliCrack) and those tax cuts for the rich magically cause trickle down profits for everyone. And by lunch, Romney will invade China and have it conquered by dinner. Psst. I hear tomorrow he will turn all teh gay straight again.

    Snip.

  •  +1 for the title alone (6+ / 0-)

    Next there will be GOP witch hunts and burnings at the stake.

  •  Thom Hartmann was making the argument (29+ / 0-)

    the other day that when the top tax rate for income over a million dollars was 91%, there was a strong disincentive to pay executives more than a million dollars.  As a result, he said, corporations put their profits back into growing their businesses.

    Give me your tired, your poor, Your huddled masses yearning to breathe free
    ¡Boycott Arizona!

    by litho on Sun Sep 23, 2012 at 06:13:24 AM PDT

  •  When tax rates are high (15+ / 0-)

    the wealthy/corporations have a choice - pay Uncle Sam or invest in their businesses.  When low they bank their money and demand of their businesses to make more with less......

    "If fighting for a more equal and equitable distribution of the wealth of this country is socialistic, I stand guilty of being a socialist." Walter Reuther

    by fugwb on Sun Sep 23, 2012 at 06:14:37 AM PDT

    •  If only (1+ / 0-)
      Recommended by:
      Witgren

      they would bank their money. Money in the bank really does "trickle down" because it's available for loans to other businesses. What they actually do is hire smart guys to figure out investment vehicles, like CDO's and CDS's that keep it out of the economy. The bumper sticker is "Rich people sequester money".

      "If I pay a man enough money to buy my car, he'll buy my car." Henry Ford

      by johnmorris on Sun Sep 23, 2012 at 07:39:05 AM PDT

      [ Parent ]

  •  Keep saying.....'Been There....Done That' (3+ / 0-)
    Recommended by:
    mkor7, wasatch, Janet 707
  •  There is a point to be made there… (5+ / 0-)

    …tax too high and people avoid paying it. Tax too low and you increase inequality, choke off revenues, and increase the likelihood of a downturn.

    Conservatives like to make the case that if 73% is better than 90% (okay I'm buying), then 25% must be even better (that's crazy talk).

    Liberals like to dismiss the validity of the so-called Laffer curve, missing the point that we've been on the downside that curve since Reagan took office.

    There is a happy medium in there in which we both maximize compliance, revenues, and economic stability. IMHO that's somewhere higher than where we were at when Clinton left office, but lower than when Carter left office.

    That Romney wants to lower rates from the deficit creating rates of today just shows he's both nuts and bereft of ideas and a sound economic education.

    (And Sowell? Well all you need to know is Hoover Institution, a think tank whose purpose is to spin the Presidency of Herbert Hoover out of the competition with James Buchanan for "worst Presidency ever").

    Teh stoopidTM, it hurts. Buy smart, union-printed, USA-made, signs, stickers, swag for everyone: DemSign.com. Get your We are the 99% Yard Sign.

    by DemSign on Sun Sep 23, 2012 at 06:17:31 AM PDT

  •  The laughter is coming from the top .01% (12+ / 0-)

    They're laughing all the way to the bank.

    "Remember, Republican economic policies quadrupled the debt before I took office and doubled it after I left. We simply can't afford to double-down on trickle-down." Bill Clinton

    by irate on Sun Sep 23, 2012 at 06:18:44 AM PDT

  •  i will laugh on november 7, until then it's (2+ / 0-)
    Recommended by:
    Churchill, Janet 707
  •  The middle class is what buffers the (10+ / 0-)

    rich from the poor. Do these guys realize what happens once there is no longer that buffer?

    Lower taxes on rich, higher taxes for us, stealing our Social Security and Medicare. Pretty soon that buffer is gone....it is like not having a rat wall in the city.

    Government isn't the answer to all our problems, but tax cuts, deregulation and greed are the source of many of them.

    by coffejoe on Sun Sep 23, 2012 at 06:23:55 AM PDT

  •  identification bias (13+ / 0-)

    the idea (ok, canard) that the rich will invest more if they have more is based on the false thesis that the rich don't already have sufficient disposable income. This can take root because most of the people hearing this crap are actually in that situation themselves, and can thus extrapolate that to the rich person.
    Which is where the old Reagan-era bumpersticker came from: Fur Coats Don't Trickle Down.
    Of course the minute you point out that less well-off people should get any tax reduction benefit, precisely because they have no cushion and will spend the extra money, you get with the world's fastest pivot: The Rich Are Worthy. It's their money, dammit.
    Which means the previous argument was never the real argument at all, doesn't it?

    R-Money/R-Ayn, the ENRON Ticket, is not a campaign; it's a hostile takeover bid.

    by kamarvt on Sun Sep 23, 2012 at 06:26:08 AM PDT

  •  it's not just here (8+ / 0-)

    Cameron and Merkel are playing the losing tune from the 1930s--and nobody is laughing.  Europe is taking the express down--as will we if we try to trickle down one more time.  When we had Reagan, they had Thatcher, it's as if the Devil takes over every 20-30 years:  Science gets ignored and intuition takes over.

    Apres Bush, le deluge.

    by melvynny on Sun Sep 23, 2012 at 06:29:24 AM PDT

  •  91 percent tax rate myth (9+ / 0-)

    First, the 91 percent tax rate came from World War II as a method to prevent "war profiteering."
    Second, only one person ever paid the 91 percent.  He made a big newspaper splash as part of the war effort.

    The real tax on the rich back in those days was the capital gains tax, the top rate of which was 50 percent.

    So it would always make the taxpayer think one thing when he looked at the back of the IRS package that arrived in the mail shortly after Christmas, but in reality the rich people already had the system rigged even in the 1950s.

  •  I think more folks may finally... (5+ / 0-)

    be realizing what Mitt Romney really plans on doing should he get into office, in light of what's happened this past week with his 47%/Moochers speech and the subsequent doubling down that followed.

    Sure, some poor dude in, say, West Virginia may never pull the lever for President Obama, but now he finally may understand the complete disdain that Romney has for him and his economic circumstances.

    Now that person may sit on his hands, which is the same as a vote for our side.

    And please, Mitt and Paul and the few defenders you have left, quit calling that speech "inelegant" or "inarticulate."

    That was the real you.

    How about I believe in the unlucky ones?

    by BenderRodriguez on Sun Sep 23, 2012 at 06:37:20 AM PDT

  •  Mitt IS the Confidence Fairy! (10+ / 0-)
    [I]f we win on November 6th, there will be a great deal of optimism about the future of this country. We’ll see capital come back and we’ll see — without actually doing anything — we’ll actually get a boost in the economy.
    See Paul Krugman here

    Am I right, or am I right? - The Singing Detective

    by Clem Yeobright on Sun Sep 23, 2012 at 06:43:43 AM PDT

  •  Don't you know anything? (5+ / 0-)

    The supply of free market fairy dust expands to meet demand, silly. It's magic! Did you flunk wingnut preschool??

    Don't let millionaires steal Social Security.
    I said, "Don't let millionaires steal Social Security!"

    by Leo in NJ on Sun Sep 23, 2012 at 06:45:04 AM PDT

  •  Simply put, the wealthy wants to the Gilded Age. (2+ / 0-)
    Recommended by:
    Egalitare, Kimbeaux

    They don't care about income inequalities because they are insulated behind gated communities. The miseries of the poor are urban legends to them because a life of privilege has kept the blinders on.

    The only thing that makes them recognize their civic responsibility to their country would be a higher tax rate.  Otherwise, they get rewarded simply because they are in direct influence with those in power.  Greed keeps them that way. Because of that attitude, they feel they have lecture "those below them" via the media how to live as well as how to manage their money.

    Furthermore, they blame the poor when the country goes down the tubes.  The rich never think that when the middle class and working poor are given breaks to get up from under crime lessens and better things happen.

    It's as if the wealthy expect the 99 percent to become their serfs and nothing more.

    "Those who would give up essential liberty to purchase a little temporary safety, deserve neither liberty nor safety." --Benjamin Franklin

    by politicalceci on Sun Sep 23, 2012 at 06:46:16 AM PDT

  •  Wages Are Deducted BEFORE TAXES. (10+ / 0-)

    So it's HIGHER taxes that create the incentive to hire and grow the business, investing that money in the business.

    The entire conservative argument boils down to lying that businesses pay income tax the same way individuals do.

    Or from another angle, implying that owners pay wages out of their take-home pay.

    We are called to speak for the weak, for the voiceless, for victims of our nation and for those it calls enemy.... --ML King "Beyond Vietnam"

    by Gooserock on Sun Sep 23, 2012 at 06:50:48 AM PDT

  •  Bigfoot is a joke because he's only been (1+ / 0-)
    Recommended by:
    Gooserock

    reported in the tabloids, but lower taxes have been touted in mainstream publications such as The Wall Street Journal for years. President Ronald Reagan sold supply-side economics as he'd once sold cigarettes and 20 Mule Team Borax. There is even a "temple" to the theory where brains can be washed clean of all traces of Keynesian economics.

    While Bigfoot may be a joke there are museums where people can see caveman and dinosaur living side by side, just as god intended.

    If it were in the best interest of a wealthy someone to "confirm" the existence of Bigfoot, the resulting tide of propaganda would most likely drown out the laughter.

    A word of caution: You'll need extra-strong brain bleach if you click on the above links, as they link to propaganda sites.

    "The object of persecution is persecution. The object of torture is torture. The object of power is power. Now do you begin to understand me?" ~Orwell, "1984"

    by Lily O Lady on Sun Sep 23, 2012 at 06:51:02 AM PDT

  •  Sad thing is (3+ / 0-)

    Many Democrats have swallowed this "big lie".  It ought to be countered every time it's repeated by the thugs.

  •  The whole "tax cuts boost the economy" (3+ / 0-)

    is also an attractive argument because it promises that we can get something for nothing.  We can pay less money & also get more tax revenue, more jobs, more sunshine, rainbows and unicorns.  People never seem to realize that there's no such thing as a free lunch.

  •  The effective tax rates are too low that that to (0+ / 0-)

    make a difference.  Cuts from 90% or 70% are a shot in the arm.   Cuts from historically low rates don't make much of a difference.  

    Where we need reform is in the area of deductions and capital gains.  A two or three tiered flat tax with an exemption for those below a generous poverty level and no deductions would make a ton of sense, but you'll never see that happen.

    He only employs his passion who can make no use of his reason. - Cicero

    by SpamNunn on Sun Sep 23, 2012 at 07:02:36 AM PDT

    •  Another issue (4+ / 0-)

      is that the "merely wealthy" are grouped in with the "super wealthy" for tax purposes.  A family earning $400,000/year will get into the top tax bracket and will be considered wealthy (and $400,000/year is a crap load of money); but that family is lumped in with the CEO who makes $10 million/year (25 times as much).  [While the hedge fund manager who makes $20 million/year is actually treated better than both of them (and much of the rest of the public), paying only the 15% capital gains rate on his income.]

      There need to be fewer tax brackets at the bottom and more tax brackets at the top.

  •  Reince Priebus,"not the best week in the campaign" (2+ / 0-)
    Recommended by:
    happymisanthropy, Vicky

    80 % of Success is Just Showing Up ! ! !

    by Churchill on Sun Sep 23, 2012 at 07:04:32 AM PDT

  •  Priebus,"How much better off our kids 10-20 Yrs" (0+ / 0-)

    80 % of Success is Just Showing Up ! ! !

    by Churchill on Sun Sep 23, 2012 at 07:05:17 AM PDT

  •  Priebus,"I promise you on my life..."bigtime crazy (0+ / 0-)

    crazy

    80 % of Success is Just Showing Up ! ! !

    by Churchill on Sun Sep 23, 2012 at 07:06:53 AM PDT

  •  I'm not an accountant, but... (5+ / 0-)

    I'm pretty sure businesses get taxed on profits, not income.  So if a company hires more people, their profits drop (assuming income stays the same), which means their taxes drop.  I've never seen this argument made anywhere, so I'm wondering what I'm missing?  

    For many conservatives, the relationship seems one of pure common sense: allow the rich person to pocket more earnings, and they'll have more to spend on growing their businesses.
    Of course the main problem with this argument is that businesses generally only hire people when necessary to keep up with, or increase, demand for their product or service.  After all, why incur the additional overhead of more employees if they're not going to do anything to improve the company's bottom line?  Why would a Ford or GM hire more assembly line workers if the number they have can provide enough cars and trucks to keep up with demand?
    •  It's basic economics... (6+ / 0-)

      Jobs are fueled by demand, not by marginal tax rates.  Subsrcibers to convervative economic orthodoxy are either dishonestor ignorant about true factors driving the economy.

      •  John Galbraith (2+ / 0-)
        Recommended by:
        Mark Sumner, Hirodog

        described it as "Innocent Fraud". Fraud because the theory of economics touted by conservatives  is so obviously untrue and innocent because they really believe it. There's a reason for that:

        John Stuart Mill famously wrote to John Pakington:

            I never meant to say that the Conservatives are generally stupid. I meant to say that stupid people are generally Conservative. I believe that is so obviously and universally admitted a principle that I hardly think any gentleman will deny it.

        "If I pay a man enough money to buy my car, he'll buy my car." Henry Ford

        by johnmorris on Sun Sep 23, 2012 at 10:57:03 AM PDT

        [ Parent ]

    •  actually, that's commonly pointed out here (0+ / 0-)

      but not in the press. I don't think the economics writers in the press have the first idea of how businesses and taxes work, so they just repeat whatever rich people tell them.

  •  Priebus, "things went well last week [Romney]"` (2+ / 0-)
    Recommended by:
    Janet 707, Vicky

    delusional

    80 % of Success is Just Showing Up ! ! !

    by Churchill on Sun Sep 23, 2012 at 07:07:33 AM PDT

  •  Hah hah hah! errrrr.... (3+ / 0-)

    I get it-- the problem is there's hardly (any) progressive democrats in congress talking seriously about getting our economy out of the ditch.

    I can think of only one-- Jesse Jackson, Jr., who has recently advocated raising (finally) the minimum wage-- to the sound of crickets in the Hall...

    and now he's just recently left the hospital, possibly leaving politics.

    that leaves people like Kuc-- also leaving office the last I heard.

    thus, before we smack down the repugs.. I need to see the democratic congresspeople who actually have some sort of plan.. AND a way to get it thru congress.

    "A civilization which does not provide young people with a way to earn a living is pretty poor". Eleanor Roosevelt

    by Superpole on Sun Sep 23, 2012 at 07:08:23 AM PDT

  •  Pre"we've got specifics coming out of our eyeballs (0+ / 0-)

    80 % of Success is Just Showing Up ! ! !

    by Churchill on Sun Sep 23, 2012 at 07:09:06 AM PDT

  •  Pre"whistling past the graveyard on that issue (0+ / 0-)

    pres should meet with more than Beyonce and Jay-Z

    80 % of Success is Just Showing Up ! ! !

    by Churchill on Sun Sep 23, 2012 at 07:10:54 AM PDT

  •  Voodoo economics (4+ / 0-)

    That was what the first Bush said about Reagan's economics, before his silence was purchased by the VP slot.  

    Definition here

    We should get this phrase back into circulation.

    www.tapestryofbronze.com

    by chloris creator on Sun Sep 23, 2012 at 07:10:56 AM PDT

  •  Pre"we're not going to pay w/Akin in Missouri (2+ / 0-)
    Recommended by:
    annieli, Vicky

    wow, just threw GOP Missouri candidate under the bus.

    80 % of Success is Just Showing Up ! ! !

    by Churchill on Sun Sep 23, 2012 at 07:11:39 AM PDT

  •  Axelrod"Romney slandering 47% of the people (1+ / 0-)
    Recommended by:
    Janet 707

    that's not good

    80 % of Success is Just Showing Up ! ! !

    by Churchill on Sun Sep 23, 2012 at 07:12:40 AM PDT

  •  The Laugher (Laffer) curve (1+ / 0-)
    Recommended by:
    Churchill

    Does anyone in economic academia even believe the Laffer curve?  I doubt it.  So it's voodoo both on paper and in practice.

    "The real wealth of a nation consists of the contributions of its people and nature." -- Rianne Eisler

    by noofsh on Sun Sep 23, 2012 at 07:14:21 AM PDT

  •  Axel"5 tril tax cuts w/no specifics" (0+ / 0-)

    80 % of Success is Just Showing Up ! ! !

    by Churchill on Sun Sep 23, 2012 at 07:14:29 AM PDT

  •  Both Sowell (2+ / 0-)
    Recommended by:
    ferg, NoMoreLies

    and the writer to some degree simplify a complicated subject.

    This will take you to a page that documents changes in the top rate.  The thing to note is the difference between the INCOME rate and the capital gains rate.  The super rich pay  capital gains taxes - the highest it ever got was 39%.  It is worth noting that the cap gains rate was cut in 37 and again in 42 - when it was lowered to 25%.  There it stayed until 1968. The difference was done away with in the '87 tax reform act, and Clinton raised it 1 point (to 29) in '93.  It was cut to 21 in 97 and to 15 in '01.

    As a result, the actual tax the rich have paid has never been close to the marginal rate.  As the Institute for Policy Studies notes, in 1961 the rich paid between 27 and 42%.
    http://www.ctj.org/...

    The bitter truth of deep inequality has been disguised by an era of cheap imported goods and the anyone-can-make-it celebrity myth - Polly Toynbee

    by fladem on Sun Sep 23, 2012 at 07:15:30 AM PDT

  •  oh dear (2+ / 0-)
    Recommended by:
    happymisanthropy, Lily O Lady

    "The central tenant of conservative economics" is, of course, Daddy Warbucks. For "tenant" read "tenet."

    "Every journalist who is not too stupid or too full of himself to notice what is going on knows that what he does is morally indefensible." - Janet Malcolm

    by slangist on Sun Sep 23, 2012 at 07:18:08 AM PDT

  •  Mitt Romney, Confidence Man (3+ / 0-)
    Recommended by:
    chloris creator, Churchill, Janet 707

    If Mitt gets elected, the markets will suddenly have more confidence, businesses will start hiring and we will all live happily ever after, or so he says.

    I think however he is a different sort of confidence man...

    The first known usage of the term "confidence man" in English was in 1849. It was used by American press during the United States trial of William Thompson. Thompson chatted with strangers until he asked if they had the confidence to lend him their watches, whereupon he would walk off with the watch. He was captured when a victim recognized him on the street.

    Mitt Romney treats people like things. And he treats things - corporations - like people.

    by richardak on Sun Sep 23, 2012 at 07:28:25 AM PDT

  •  America has not changed in 50 years..!!!! (2+ / 0-)
    Recommended by:
    Janet 707, happymisanthropy

    "Take my word for it"...Joseph Smith said about the "Golden Plates"....

    "Take my word for it"...Mitt Romney said about his taxes from 2002-2009....

    THE AMERICAN ELECTORATE IS A BUNCH OF SUCKERS...!!!!

  •  We'd do better if we renamed Keynesian economics.. (2+ / 0-)
    Recommended by:
    Janet 707, Hirodog

    ....Demand-Side Economics.

    Repubs pulled the greatest scam over the past 30 years with "Supply Side Economics," and we're too stupid to use their marketing against them.

    Repubs started up the car, hit the throttle and sent it over the cliff, and now they're complaining that the black guy hasn't fixed it fast enough.

    by Bush Bites on Sun Sep 23, 2012 at 07:36:19 AM PDT

    •  Not a good idea (1+ / 0-)
      Recommended by:
      hmi

      The classic example of "demand-side economics" is Marxism.

      "The great lie of democracy, its essential paradox, is that democracy is the first to be sacrificed when its security is at risk. Every state is totalitarian at heart; there are no ends to the cruelty it will go to to protect itself." -- Ian McDonald

      by Geenius at Wrok on Sun Sep 23, 2012 at 07:48:35 AM PDT

      [ Parent ]

  •  It's All True (0+ / 0-)

    Literal belief in Superman, fairy dust, bug-eyed aliens and the Loch Ness monster is the foundation of Mitt's religion.

  •  Scraps from the table (1+ / 0-)
    Recommended by:
    Mark Sumner

    The best framing I've heard on this question is as follows:

    The rich have convinced us that we, who survive on scraps dropped from their table, are best helped by giving them more food.

    "The great lie of democracy, its essential paradox, is that democracy is the first to be sacrificed when its security is at risk. Every state is totalitarian at heart; there are no ends to the cruelty it will go to to protect itself." -- Ian McDonald

    by Geenius at Wrok on Sun Sep 23, 2012 at 07:48:08 AM PDT

  •  Rich Want to Pay Little or NO Taxes (1+ / 0-)
    Recommended by:
    happymisanthropy

    This scheme has not worked in the recent past  so why will it work now.  2007-8 showed how greed can bust the system so let's try getting all concerned to pay their fair share but people like Rmoney and Lyin' Ryan are used to gaming the system for the benefit of the super rich.  Obama thworts this plan for continued oppression by the 1-2%.  I hope the win is big for Obama and the defeat is vast for Rmoney and Lyin' Ryan.  We can then get on with moving the country forward and the right can retool or what ever they do when they are soundly defeated.

  •  The real job creators are us... (3+ / 0-)
    Recommended by:
    happymisanthropy, Hirodog, GTPinNJ

    the consumers.

    If we are confident in our jobs or source of steady income, we more likely to purchase Widgets that we want or need.

    The more Widgets purchased, the bigger the demand. The bigger the demand, more jobs are created to continue pumping out Widgets.

    It has nothing to do with tax cuts for the wealthy. They've had the lowest tax rates in decades and yet we shed jobs by the millions under those conditions.

    I for one know that no wealthy person opens a factory to supply JOBS. They open a factory to produce wanted widgets-and even then, they hire the fewest workers possible to ensure larger profits. There is no such thing as a benevolent job creator.

    YES WE DID! November 4th, 2008

    by Esjaydee on Sun Sep 23, 2012 at 08:07:17 AM PDT

  •  listen to Romney exclaim the word 'entitled' (0+ / 0-)

    he hit that word hard, he was emoting when he said that word.

    80 % of Success is Just Showing Up ! ! !

    by Churchill on Sun Sep 23, 2012 at 08:07:20 AM PDT

  •  ..entitled to food, housing, to who knows what... (1+ / 0-)
    Recommended by:
    happymisanthropy

    80 % of Success is Just Showing Up ! ! !

    by Churchill on Sun Sep 23, 2012 at 08:08:22 AM PDT

  •  Its Not the Tax Rate-Its the Actual Taxes Paid (1+ / 0-)
    Recommended by:
    happymisanthropy

    Great Post!! The biggest mistake people are making is it is not the taxrate but the actual taxes paid. The Corporations today are paying the lowest taxes ever recorded in 50 plus years due to the loopholes, writeoffs etc.

    The only way to improve the economy through the taxcode is to have focused tax credits for jobs created, business investment etc. period. Get rid of all loopholes and go after the offshore accounts.

    Unfortunately the corporations own both parties, Dems not as great as Repubs but they are still owned so nothing substantially constructive will be done until you clean up the corruption and money given to our representatives. This will not happen until we have a permanent fiscal heart attack followed by civil unrest or hopefully a second Obama term which includes a major judicial investigation of not only the criminals operating our banking system but the entire corrupt political practices of the elites.Please remember the Goldman Sachs' of the financial system have two wings-one giving to the Repubs and the other giving to the Dems.

    Chances of this happening are less than winning the lottery so the reason I am voting for Obama is he is the voice of reason at the margins, will hopefully not invoke the authoritarian response the Repubs would to massive civil unrest and most importantly, Obama appointing Supreme Court justices and lower court justices who are more just in interpreting the laws which will hopefully allow us time to remedy the massive problem of THE INEQUALITY OF INCOME.

    The upper class created the middle class as a barrier from the lower classes to go after them. With collective bargaining being at an all time low due to the offshoring of jobs to the cheaper labor markets without phasing in these trade agreements in order to have time to reeducate the workforce; the greedy rich have forsaken the middle class and no matter what Obama proposes, even with the best of intentions, it will not lessen the destruction of the middle class-perhaps slow it down but it is inevitable we will have civil unrest and I would rather Obama be President.

    What we need is social justice-living minimum wage-closing tax avoidance off shore schemes etc to even begin to try and solve the problems. Having lived in England and France for the past ten years; what the US needs is a combination of the French way preserving the entrepreneurship of the US.80% of the US would have a better quality of life under a French system.

    It can be done and the US has the one tenet still available to it which is it is the greatest country for EQUALITY OF OPPORTUNITY since its class system is based on how much you earn or have but it is a double edged sword since having class defined by your ability to earn runs against having social justice.

  •  Questions (0+ / 0-)

    I've read the CBO study, but questions remain. For instance, I don't see any attempt to take account of the fact that from 1945 and into the 70s, those high marginal rates on top incomes were accompanied by income taxes that reached right down to the bottom quintile (i.e., nearly everyone with any income paid some income tax). Is that related or unrelated to economic growth?

    My understanding is that membership in the 1% has declined markedly in the current recession. If these people now take a substantially lowered percentage of the national income (the CBO study cited here says 12.3% in 2007, down to 9.3% in 2009; elsewhere the figure I've seen cited is closer to 17% in 2007), does this not also mean that there is less to tax? If the top 1% pays a very large share of the total tax bill, is it in our interest to insure the growth of that category of tax payer?

  •  A few appropriate quotes from Kennedy (D) (0+ / 0-)

    “The largest single barrier to full employment of our manpower and resources and to a higher rate of economic growth is the unrealistically heavy drag of federal income taxes on private purchasing power, initiative and incentive.” -- JFK, Jan. 1963

    “A tax cut means higher family income and higher business profits and a balanced federal budget. Every taxpayer and his family will have more money left over after taxes for a new car, a new home, new conveniences, education and investment. Every businessman can keep a higher percentage of his profits in his cash register or put it to work expanding or improving his business, and as the national income grows, the federal government will ultimately end up with more revenues.” -- JFK, Sept. 1963

    “In short, it is a paradoxical truth that … the soundest way to raise the revenues in the long run is to cut the rates now. The experience of a number of European countries and Japan have borne this out. This country’s own experience with tax reduction in 1954 has borne this out. And the reason is that only full employment can balance the budget, and tax reduction can pave the way to that employment. The purpose of cutting taxes now is not to incur a budget deficit, but to achieve the more prosperous, expanding economy which can bring a budget surplus.” -- JFK, Nov. 1962

  •  Conservatives cling to Reaganomics... (0+ / 0-)

    and I believe that Reagan sincerely wanted to implement his conservative vision of smaller government and lower taxes- but with an ultimate goal of fiscal responsibility. Once they had the economy heading the right direction, after all, Reagan raised some taxes while the feds inched interest rates northward. This was the last attempt by the GOP at fiscal responsibility- the neocons completely disbanded the notion. Remember "debt is good"? Straight from the mouths of Cheney, Rove and their mouthpieces at Fox.

    But if you forget the politics and look at what we have been doing since 1980 - we have been implementing greater and greater stimulus. One Keyneysian stimulus after another. Republicans LOVE Keyneysian economics- at least the stimulus side of it. Oh stimulus is a bad word in 2010-2012 of course. Its fun to try to have this discussion with Republicans, because the word is right up there with 666 and Soros. But make no mistake- from interest rates to deficit spending to unfunded tax cuts we have been in nearly constant stimulus since 1980.

    A good question is why. I have a few theories I'm working on. But for sure: it made Republicans feel like they succeeded where Democrats failed. It made them feel exceptional. Karl Rove knows this.

    Laffer curve? Right. What an ironic name. It would be a real laugher if it weren't for the massive transfer of wealth to the 1% that came about as a result.

    And in case you want to know, I voted Republican my whole adult life, from 1984 until 2004. Perhaps I will again some day. Proponents of small government have some good arguments for it. But when America votes for big government, the bottom line is that we have to pay for it. That is called fiscal responsibility- and for the time being the Democrats are the ones trying to be responsible stewards of our economy.

  •  ECON 101 (3+ / 0-)
    Recommended by:
    Hirodog, GTPinNJ, Mark Sumner

    It's been more than 40 years since I attended college, so I don't know what they're teaching these days. Back then, if you took ECON 101, one of the things you'd learn is that  people don't go out and acquire land and erect buildings, or lease additional square footage, then fill that space with office or production equipment, and hire additional staff simply because the owners or senior managers got a tax break. People only expand, they only reinvest, when they have additional customers for their products or services.

    This is especially true in economic hard times. In a recession, aggregate demand is depressed, so it makes no sense at all to add to already existing excess capacity. Since expansion is a losing proposition, all profits are simply returned to investors. When incomes for the wealthy achieve a certain critical mass, and PE ratios reach historic highs, they start looking for ever more speculative investments. They simply create one bubble after another, until the system falls of its own weight.

    You can call it Reaganomics, call it supply side, call it trickle down, or call it horse and sparrow like they did in the late 19th century, but it has always been a fraud that violates basic market principles. This isn't capitalism; it's organized theft. It's income redistribution, and don't let anyone tell you any different.

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