A standard right wing talking point is that tax cuts for the rich and corporations create jobs.
This is, actually, true. They create jobs overseas.
The tax cuts’ two bills, in 2001 and 2003 – changed laws so that personal income tax rates were reduced, exemptions for the Alternative Minimum Tax increased, and dividend and capital gains taxes also cut.
Yet in the debate, it seems of no moment to either side whether the tax cuts were effective in achieving their goal of spurring business investment and making the US economy more competitive.
Our own examination of US non-residential investment indicates that the reduction in capital gains tax rates failed to spur US business investment and failed to improve US economic competitiveness.
The 2000s – that is, the period immediately following the Bush tax cuts – were the weakest decade in US postwar history for real non-residential capital investment.
Not only were the 2000s by far the weakest period, but the tax cuts did not even curtail the secular slowdown in the growth of business structures.
http://crooksandliars.com/ian-welsh/tax-cuts-rich-create-jobs-outside-us
The logic of this is simple enough. If you have money to invest, you're going to invest it where it'll return the most. Right now and in the past couple decades that is either in leveraged financial games, or it is in economies which are growing fast and have low costs. The US does not have high growth compared to China or Brazil or many other developing countries. It has high costs compared to those countries as well.
If you can build a factory overseas which produces the same goods for less, meaning more profit for you, why would you build it in the US?
Until that question is adequately answered, by which I mean "until it's worth investing in the US", most of the discretionary money of the rich will either go into useless speculative activities like the housing and credit bubbles, which don't create real growth in the US, or they will go overseas.
There are a number of ways this question can be answered.
- You could slap taxes on foreign capital flows;
- you could slap tariffs on foreign goods produced in low cost domiciles so that companies have to produce in the US to have access to the US market;
- you could push industries which are hard to outsource but don't actually decrease American competitiveness. The housing bubble increased the cost of doing real business in the US by inflating real estate costs. A massive buildout making every building in the US energy neutral or an energy producer would increase US competitiveness.
- you could try and do what America once did: have a tech boom. If the future is being produced in a country then everyone has to invest there and when things are changing fast you can't offshore production, because speed matters and offshoring is slow. This is why real wages increased during the tech boom of the 90s.
There are other answers as well, but the point is simpler: you must answer the question "why invest in the US instead of a low cost, high growth country?" Until you answer that question tax cuts will not only not do any good, but in a sense will do harm, by increasing the speed at which jobs are offshored out of America.
Last week, University of Chicago law professor Todd Henderson published a controversial post on Truth on the Market. Henderson revealed that he and his wife have a combined income of over $250,000, but argued that this doesn’t make them rich — certainly not rich enough to afford the new taxes Obama seeks to impose on married couples making $250K or more.
You can read the full post over at Brad DeLong’s blog, Grasping Reality with Both Hands. You cannot read the full post on Truth on the Market, because the post has been taken down. Henderson explains why:
The reason I took the very unusual step of deleting [the post and comments] is because my wife, who did not approve of my original post and disagrees vehemently with my opinion, did not consent to the publication of personal details about our family. In retrospect, it was a highly effective but incredibly stupid thing to do. The electronic lynch mob that has attacked and harassed me — you should see the emails sent to me personally! — has made my family feel threatened and insecure.
Well, Professor Henderson, I’ve got your back. We might fight to the death about the proper use of the government’s fiscal authority, but it should be beyond obvious that earning $250,000 a year in this country does not make you rich. That figure doesn’t even approach “wealth,” especially if you live in a major city.
I might have a little more experience with electronic lynch mobs then Professor Henderson, so bring it on if you must. But for all the moral outrage one can level at a person bitching about making “only” $250K, know that $250K per annum is much closer to the minimum starting point you need to bank in order to have a shot at “making it” in the expensive cities of America. Living the dream requires a whole hell of a lot more….
If you are starving and I give you a mayonnaise sandwich, you’re going to be pretty happy. You’ll probably say that you’ve eaten well that day. Due to your poverty and malnutrition, your “American Dream” might well be to simply get to the point where you can have three mayonnaise sandwiches a day, and perhaps provide additional sandwiches to your spouse and children. Similarly, if you are earning $50,000 a year, the prospect of earning $250,000 a year probably seems like a panacea. Think about it: you’d be earning five times as much! I’ve yet to meet the person who wouldn’t love to quintuple his or her salary. From the perspective of a person making $50,000 a year or less (the subset could also be called “most Americans”), the person or family making $250,000 a year is rich.
Except he’s not. Sorry to burst your bubble, but “zero money down” is a bad idea, ultra-feminine lesbian sexbots don’t really exist, and $250K doesn’t allow you to live in financial comfort. Mo’ Money, Mo’ Problems.
In fact, most people who make $250K aren’t even sitting there thinking: “Ooh, if I bust my ass and play my cards right, being ‘rich’ is just around the corner for me and my family.” If, God forbid, $250K also represents all you have, being truly rich is probably not even an option for you. You can’t “invest” in anything with the piddling savings you’ve stowed away. You can’t “buy” anything, other then maybe a family home and a some consumer assets that will start to depreciate the minute you breathe on them. And what you’re not spending on your day-to-day expenses had best go to retirement, unless you want to be 80 years old and confusing your grandkids with stories about “Social Security” and other entitlement programs they have never heard of.
No, if you are making $250K a year, what gets you out of bed every morning isn’t even the desire to become rich. Instead, you’re motivated by the white-knuckle fear that something will go wrong and you’ll be cast back down with the sodomites who struggle valiantly to eke out an existence on $50K or less. You are certainly not rich, but you are terrified of becoming poor.
When Professor Henderson broke down his expenses, included in them were things that make a person sound rich. He’s got a gardener. He’s got a cleaning lady. FAT CAT ALERT! Anybody who can afford to buy himself out of manual labor must be rich, right?
But hold on to your pitchforks for just a minute. I don’t think anybody wants to live in a country where the purchase of a luxury good or service defines people as “rich.” If that was the world we wanted, there would be an awful lot of people walking here with flat-screen televisions and fine automobiles, who would also be defined as “rich.” I’m looking at you, legal secretary with a $60,000-a-year job who somehow finds an extra $5,000 to take a vacation to Bermuda during non-hurricane season. I’m looking at you, $57,000-a-year paralegal who makes me feel bad about my “sales rack at Macy’s” wardrobe. Americans spend money on all kinds of “luxury” crap that they have no business buying. You know what makes you rich? When you can actually afford all that junk.
And at $250K, you simply can’t afford it. Take me. My wife and I are just under the $250K potential tax threshold — thanks honey! your law degree does not make your ass look fat! — and if things break right for us, we’ll be over it next year (click on these ads, click on them now, you damn freeloaders). But if you think that affords me anything more than a paycheck-to-paycheck monthly scramble, you’re out of your freaking mind.
I own nothing (mmm… judgment proof) — not a stock, a bond — and the only market for my “assets” is the “Cash for Gold” shop in Atlantic City. I pay a ridiculous premium to live in my 2-1-2 area code, and I live in a hovel so embarrassing that when non-New Yorkers come to visit, they assume I’ve just been robbed. As we shuffle by Park Avenue apartments that I can’t afford to even look at, my dog tries to break her leash and get herself adopted by someone who can afford her upkeep. I’m a professional blogger, yet my computer is so old I can’t even download decent porn off the internet anymore. Last night I got a text from my Manhattan bedbugs which read, “Dude, we can’t live like this no more, peace out loser.”
And I don’t even have kids. And I didn’t even bring up my debts.
Could we rework our expenses to pay new taxes or generally save more money? Of course. We’re middle-class. That’s what middle-class people do: live as far above their means as possible until it becomes impossible. And then we play the lotto like everyone else. Rich people don’t play the lotto, and they don’t live above their means. They worry about whether or not they can afford another plane, not whether they can afford to fly coach.
And those people, the real rich people, those people should be taxed. Tax the living hell out of them, I say (I’m a liberal, it’s in the handbook). Henderson points out that the truly rich are avoiding taxes by hiding money in the Caymans or by using complicated financial instruments, and I say Obama should be going after that money. Stop being afraid of being labeled as “anti-business,” and go get the money from the people who can afford to pay it.
And if Obama does get that money, if he does what is hard and actually closes offshore tax loopholes and raises the capital gains tax and executes all the policies that embody true fiscal restraint and make Republicans cry in the night, and then he comes back to me and says, “Yeah, and we still need to raise taxes on those making more than $250K,” I’ll say fine. I’m willing to pay my share, albeit begrudgingly. I absolutely recognize that at $250K I’m doing a hell of a lot better than my buddy who makes $62K, lives with four random roommates, and once told me that if you add frozen peas to a cup of ramen it’s a more nutritious and filling dinner because the peas pack extra protein at a cost-effective price. Yeah Obama, tax me, not that guy. I get it.
But don’t call me rich. Don’t insult me by putting my family and Michael Bloomberg’s family in the same freaking talking point. If you want to blow that “quarter of a million dollars a year” soundbite up the ass of a laid-off steelworker in Pittsburgh, fine. But you know damn well that $250K does not make one rich in this country.
We are the Super Rich [Grasping Reality with Both Hands]
Enslaved DLC detailed <b>News</b> - Page 1 | Eurogamer.net
Read our news of Enslaved DLC detailed. ... Enslaved developer diary #3 Monday. Enslaved - first 15 minutes 15 September, 2010. Latest News. Move demos flood PS Store . Enslaved UK pre-order deals detailed ...
Homosexual advocacy group not legitimately Catholic, military <b>...</b>
After receiving a letter from the group Catholics for Equality urging a change to the “Don't Ask, Don't Tell” policy, the Archbishop for Military Services responded, saying that the archdiocese's position is “clear.
Facebook Making Changes to <b>News</b> Feed, Requests, Bookmarks to <b>...</b>
After the changes take effect, people who do not play games will no longer see news feed stories from friends who do play games — same goes for any other third-party app. Because news feed stories were a main way that people found games ...
robert shumake
Enslaved DLC detailed <b>News</b> - Page 1 | Eurogamer.net
Read our news of Enslaved DLC detailed. ... Enslaved developer diary #3 Monday. Enslaved - first 15 minutes 15 September, 2010. Latest News. Move demos flood PS Store . Enslaved UK pre-order deals detailed ...
Homosexual advocacy group not legitimately Catholic, military <b>...</b>
After receiving a letter from the group Catholics for Equality urging a change to the “Don't Ask, Don't Tell” policy, the Archbishop for Military Services responded, saying that the archdiocese's position is “clear.
Facebook Making Changes to <b>News</b> Feed, Requests, Bookmarks to <b>...</b>
After the changes take effect, people who do not play games will no longer see news feed stories from friends who do play games — same goes for any other third-party app. Because news feed stories were a main way that people found games ...
A standard right wing talking point is that tax cuts for the rich and corporations create jobs.
This is, actually, true. They create jobs overseas.
The tax cuts’ two bills, in 2001 and 2003 – changed laws so that personal income tax rates were reduced, exemptions for the Alternative Minimum Tax increased, and dividend and capital gains taxes also cut.
Yet in the debate, it seems of no moment to either side whether the tax cuts were effective in achieving their goal of spurring business investment and making the US economy more competitive.
Our own examination of US non-residential investment indicates that the reduction in capital gains tax rates failed to spur US business investment and failed to improve US economic competitiveness.
The 2000s – that is, the period immediately following the Bush tax cuts – were the weakest decade in US postwar history for real non-residential capital investment.
Not only were the 2000s by far the weakest period, but the tax cuts did not even curtail the secular slowdown in the growth of business structures.
http://crooksandliars.com/ian-welsh/tax-cuts-rich-create-jobs-outside-us
The logic of this is simple enough. If you have money to invest, you're going to invest it where it'll return the most. Right now and in the past couple decades that is either in leveraged financial games, or it is in economies which are growing fast and have low costs. The US does not have high growth compared to China or Brazil or many other developing countries. It has high costs compared to those countries as well.
If you can build a factory overseas which produces the same goods for less, meaning more profit for you, why would you build it in the US?
Until that question is adequately answered, by which I mean "until it's worth investing in the US", most of the discretionary money of the rich will either go into useless speculative activities like the housing and credit bubbles, which don't create real growth in the US, or they will go overseas.
There are a number of ways this question can be answered.
- You could slap taxes on foreign capital flows;
- you could slap tariffs on foreign goods produced in low cost domiciles so that companies have to produce in the US to have access to the US market;
- you could push industries which are hard to outsource but don't actually decrease American competitiveness. The housing bubble increased the cost of doing real business in the US by inflating real estate costs. A massive buildout making every building in the US energy neutral or an energy producer would increase US competitiveness.
- you could try and do what America once did: have a tech boom. If the future is being produced in a country then everyone has to invest there and when things are changing fast you can't offshore production, because speed matters and offshoring is slow. This is why real wages increased during the tech boom of the 90s.
There are other answers as well, but the point is simpler: you must answer the question "why invest in the US instead of a low cost, high growth country?" Until you answer that question tax cuts will not only not do any good, but in a sense will do harm, by increasing the speed at which jobs are offshored out of America.
Last week, University of Chicago law professor Todd Henderson published a controversial post on Truth on the Market. Henderson revealed that he and his wife have a combined income of over $250,000, but argued that this doesn’t make them rich — certainly not rich enough to afford the new taxes Obama seeks to impose on married couples making $250K or more.
You can read the full post over at Brad DeLong’s blog, Grasping Reality with Both Hands. You cannot read the full post on Truth on the Market, because the post has been taken down. Henderson explains why:
The reason I took the very unusual step of deleting [the post and comments] is because my wife, who did not approve of my original post and disagrees vehemently with my opinion, did not consent to the publication of personal details about our family. In retrospect, it was a highly effective but incredibly stupid thing to do. The electronic lynch mob that has attacked and harassed me — you should see the emails sent to me personally! — has made my family feel threatened and insecure.
Well, Professor Henderson, I’ve got your back. We might fight to the death about the proper use of the government’s fiscal authority, but it should be beyond obvious that earning $250,000 a year in this country does not make you rich. That figure doesn’t even approach “wealth,” especially if you live in a major city.
I might have a little more experience with electronic lynch mobs then Professor Henderson, so bring it on if you must. But for all the moral outrage one can level at a person bitching about making “only” $250K, know that $250K per annum is much closer to the minimum starting point you need to bank in order to have a shot at “making it” in the expensive cities of America. Living the dream requires a whole hell of a lot more….
If you are starving and I give you a mayonnaise sandwich, you’re going to be pretty happy. You’ll probably say that you’ve eaten well that day. Due to your poverty and malnutrition, your “American Dream” might well be to simply get to the point where you can have three mayonnaise sandwiches a day, and perhaps provide additional sandwiches to your spouse and children. Similarly, if you are earning $50,000 a year, the prospect of earning $250,000 a year probably seems like a panacea. Think about it: you’d be earning five times as much! I’ve yet to meet the person who wouldn’t love to quintuple his or her salary. From the perspective of a person making $50,000 a year or less (the subset could also be called “most Americans”), the person or family making $250,000 a year is rich.
Except he’s not. Sorry to burst your bubble, but “zero money down” is a bad idea, ultra-feminine lesbian sexbots don’t really exist, and $250K doesn’t allow you to live in financial comfort. Mo’ Money, Mo’ Problems.
In fact, most people who make $250K aren’t even sitting there thinking: “Ooh, if I bust my ass and play my cards right, being ‘rich’ is just around the corner for me and my family.” If, God forbid, $250K also represents all you have, being truly rich is probably not even an option for you. You can’t “invest” in anything with the piddling savings you’ve stowed away. You can’t “buy” anything, other then maybe a family home and a some consumer assets that will start to depreciate the minute you breathe on them. And what you’re not spending on your day-to-day expenses had best go to retirement, unless you want to be 80 years old and confusing your grandkids with stories about “Social Security” and other entitlement programs they have never heard of.
No, if you are making $250K a year, what gets you out of bed every morning isn’t even the desire to become rich. Instead, you’re motivated by the white-knuckle fear that something will go wrong and you’ll be cast back down with the sodomites who struggle valiantly to eke out an existence on $50K or less. You are certainly not rich, but you are terrified of becoming poor.
When Professor Henderson broke down his expenses, included in them were things that make a person sound rich. He’s got a gardener. He’s got a cleaning lady. FAT CAT ALERT! Anybody who can afford to buy himself out of manual labor must be rich, right?
But hold on to your pitchforks for just a minute. I don’t think anybody wants to live in a country where the purchase of a luxury good or service defines people as “rich.” If that was the world we wanted, there would be an awful lot of people walking here with flat-screen televisions and fine automobiles, who would also be defined as “rich.” I’m looking at you, legal secretary with a $60,000-a-year job who somehow finds an extra $5,000 to take a vacation to Bermuda during non-hurricane season. I’m looking at you, $57,000-a-year paralegal who makes me feel bad about my “sales rack at Macy’s” wardrobe. Americans spend money on all kinds of “luxury” crap that they have no business buying. You know what makes you rich? When you can actually afford all that junk.
And at $250K, you simply can’t afford it. Take me. My wife and I are just under the $250K potential tax threshold — thanks honey! your law degree does not make your ass look fat! — and if things break right for us, we’ll be over it next year (click on these ads, click on them now, you damn freeloaders). But if you think that affords me anything more than a paycheck-to-paycheck monthly scramble, you’re out of your freaking mind.
I own nothing (mmm… judgment proof) — not a stock, a bond — and the only market for my “assets” is the “Cash for Gold” shop in Atlantic City. I pay a ridiculous premium to live in my 2-1-2 area code, and I live in a hovel so embarrassing that when non-New Yorkers come to visit, they assume I’ve just been robbed. As we shuffle by Park Avenue apartments that I can’t afford to even look at, my dog tries to break her leash and get herself adopted by someone who can afford her upkeep. I’m a professional blogger, yet my computer is so old I can’t even download decent porn off the internet anymore. Last night I got a text from my Manhattan bedbugs which read, “Dude, we can’t live like this no more, peace out loser.”
And I don’t even have kids. And I didn’t even bring up my debts.
Could we rework our expenses to pay new taxes or generally save more money? Of course. We’re middle-class. That’s what middle-class people do: live as far above their means as possible until it becomes impossible. And then we play the lotto like everyone else. Rich people don’t play the lotto, and they don’t live above their means. They worry about whether or not they can afford another plane, not whether they can afford to fly coach.
And those people, the real rich people, those people should be taxed. Tax the living hell out of them, I say (I’m a liberal, it’s in the handbook). Henderson points out that the truly rich are avoiding taxes by hiding money in the Caymans or by using complicated financial instruments, and I say Obama should be going after that money. Stop being afraid of being labeled as “anti-business,” and go get the money from the people who can afford to pay it.
And if Obama does get that money, if he does what is hard and actually closes offshore tax loopholes and raises the capital gains tax and executes all the policies that embody true fiscal restraint and make Republicans cry in the night, and then he comes back to me and says, “Yeah, and we still need to raise taxes on those making more than $250K,” I’ll say fine. I’m willing to pay my share, albeit begrudgingly. I absolutely recognize that at $250K I’m doing a hell of a lot better than my buddy who makes $62K, lives with four random roommates, and once told me that if you add frozen peas to a cup of ramen it’s a more nutritious and filling dinner because the peas pack extra protein at a cost-effective price. Yeah Obama, tax me, not that guy. I get it.
But don’t call me rich. Don’t insult me by putting my family and Michael Bloomberg’s family in the same freaking talking point. If you want to blow that “quarter of a million dollars a year” soundbite up the ass of a laid-off steelworker in Pittsburgh, fine. But you know damn well that $250K does not make one rich in this country.
We are the Super Rich [Grasping Reality with Both Hands]
robert shumake
Enslaved DLC detailed <b>News</b> - Page 1 | Eurogamer.net
Read our news of Enslaved DLC detailed. ... Enslaved developer diary #3 Monday. Enslaved - first 15 minutes 15 September, 2010. Latest News. Move demos flood PS Store . Enslaved UK pre-order deals detailed ...
Homosexual advocacy group not legitimately Catholic, military <b>...</b>
After receiving a letter from the group Catholics for Equality urging a change to the “Don't Ask, Don't Tell” policy, the Archbishop for Military Services responded, saying that the archdiocese's position is “clear.
Facebook Making Changes to <b>News</b> Feed, Requests, Bookmarks to <b>...</b>
After the changes take effect, people who do not play games will no longer see news feed stories from friends who do play games — same goes for any other third-party app. Because news feed stories were a main way that people found games ...
robert shumake
Enslaved DLC detailed <b>News</b> - Page 1 | Eurogamer.net
Read our news of Enslaved DLC detailed. ... Enslaved developer diary #3 Monday. Enslaved - first 15 minutes 15 September, 2010. Latest News. Move demos flood PS Store . Enslaved UK pre-order deals detailed ...
Homosexual advocacy group not legitimately Catholic, military <b>...</b>
After receiving a letter from the group Catholics for Equality urging a change to the “Don't Ask, Don't Tell” policy, the Archbishop for Military Services responded, saying that the archdiocese's position is “clear.
Facebook Making Changes to <b>News</b> Feed, Requests, Bookmarks to <b>...</b>
After the changes take effect, people who do not play games will no longer see news feed stories from friends who do play games — same goes for any other third-party app. Because news feed stories were a main way that people found games ...
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