Why Tax Cuts for the Wealthy Do Not Grow the Economy
Businessman Tom Steyer (AP Photo/Steve Helber)
In this video, billionaire Tom Steyer discusses the tax reform being contemplated in Washington, and discusses the validity of trickle-down economics, i.e., the theory that tax cuts for the wealthy serve to grow the economy.
Though he does a wonderful job, here’s an even more intuitively obvious way to look at this. Suppose you own a business and you wind up with $100K more after taxes that you thought you would. Do you go out and hire more employees? Is your first move to saddle yourself with their salaries, payroll taxes, workers’ comp, healthcare benefits, desks, phones, and computers associated with having extra people on your payroll?
If you answer yes, do yourself a favor and don’t even think about becoming an entrepreneur. The only reason a sane business owner takes on more employees is that he absolutely has to.
My partner and I had 210 employees at a certain point, and, as much as I liked almost all these people, I can promise you this: there wasn’t a single one of them whom I hired for any other reason than to deliver work that we had sold.
Even if you dispute this rough treatment of trickle-down economics, just look at the statistic results of its having been implemented in the real world. In the 1980s, under Reagan, the top tax bracket went from 70% to 38%. The result: The rich got richer, workers’ wages stagnated, and the gap between the rich and the poor widened. Now, eight people on this planet have more wealth than the poorest 3.5 billion.
Any decent person sees this as a moral outrage. But morality is only part of the issue; there are pragmatic reasons that extreme wealth inequality damages our society, i.e., the demise of real democracy. Financially-strapped, uneducated, angry people do not make rational voters. As a result, it’s possible that the ostensible democracy that once was the U.S. might one day elect a madman as president.
Oh, wait….
Craig,
If Tom Steyer wants to pay more tax,there’s nothing stopping him! I’m sure the IRS would be startled, but delighted with any donations !
Ol’ Tom’s plug for his beloved Democrat party is as simplistic as Bernie Saunders, and just as outdated.
What Tom and Bernie omit, is the economy no longer suffers from high inflation. Wages growth just leads to inflation, not more jobs. Once an economy becomes trapped in an inflationary spiral it’s a very hard to cancer to cure.
The US and many Western nations already haveoverqualified work forces. There are only so many highly qualified jobs before graduates can’t find employment. Governments already devote too much of taxpayer funds to create employment in the welfare sector.
Creating huge numbers of tax payer funded University graduates with degrees in social welfare to help the unemployed, is a typical leftist response to fixing unemployment !
If the US had a completely closed economy, Tom Seyers idea’s still wouldn’t work (Eastern Europe proved that), but they would make more sense. But the US is not a closed economy. The US must compete with other nations far more serious about competition.
Outrage ? Moral outrage? Outrage seems to be seems to be a growth industry, especially among the impotent and incompetent left.
The US Tax System has badly needed reform for the last 30 years. The proposed Tax reforms would dramatically enhance US economic ability to compete with other nations.
Let’s be really honest, rich individuals pay very little tax. As a result of high tax rates, ‘Tax Minimization’ has grown into a huge industry. The rich new high tech corporations from which Tom Steyer made his investing fortune pay virtually no tax.
Only the traditional industries, resources, agriculture etc, actually pay tax. (oil is America’s largest tax payer).
Taxing the rich sounds impressive and simple. In truth it doesn’t work. Capital is simply transferred to locations with more friendly tax regimes while investment in US enterprises becomes more difficult and expensive.
But the big elephant in the room, never mentioned by closet socialists like Tom and Bernie, is what to do with the crippling US national debt.
The US is living on it’s credit card. Like all credit cards the interest is limiting economic growth and confidence. American’s can’t keep demanding what they can’t afford.
The President’s Tax plan does more than ‘lower’ tax rates, it makes revenue payments simpler to levy and collect. Lower rates mean US enterprises have access to cheaper capital investment, which when coupled with the new US energy advantage, will greatly increase the ability of the US economy to compete.
Lower tax rates create employment and encourage tax compliance. Business can begin to pay down debt and invest in new technology creating new jobs. The US can begin to export value added products again helping to reduce trade deficits thereby reducing national debt,
‘Moral outrage’ at the rich is silly and more than a little juvenile. The object should be to make the pie bigger, not worrying about who get what,while the pie shrinks and grows stale!
But hey, just as a little icing, the tax plan does allow for a modest tax on the super wealthy.
This is a bold measure to revitalize the US economy to compete in the real world. America must embrace these tax reforms and not allow troglodytes. Luddites, and leftist ideologues water down or force compromises to ensure the plan becomes ineffective.
For once the American left must put aside it’s petty dogma’s and ambitions and support the nation’s survival.