Skip to content
December 8, 2011 / Political Fluency

Another Intellectual Street Fight

This one is really good because it gets to the heart of what the 2012 election is going to be about. It is a choice of maintaining a divided government that Americans’ typically prefer by keeping Obama as President, but that would solidify his agenda of moving America toward a more European social market economy. Or choose one-party rule again with a moderate Republican that is going to attempt to undo almost all of the Democrats’ policies of regulation, entitlements, and taxation.

But Mom! He started it!

Friend

Tax the .1%

[The back-and-forth over this article goes all over the place so I divided the two categories for clarity.]

Who Are the Job Creators?

“We’ve had it backward for the last 30 years. Rich businesspeople like me don’t create jobs. Middle-class consumers do, and when they thrive, U.S. businesses grow and profit. That’s why taxing the rich to pay for investments that benefit all is a great deal for both the middle class and the rich.

“So let’s give a break to the true job creators. Let’s tax the rich like we once did and use that money to spur growth by putting purchasing power back in the hands of the middle class. And let’s remember that capitalists without customers are out of business.”

Me

This is just wrong. 1982-2007 featured phenomenal growth even though there are issues with how inflated it was with housing and tech bubbles, etc. But it’s both middle class consumers and the rich people. What are the middle class consumers buying if Apple doesn’t invent the products for them to buy and the Apple employees to create and distribute them? You can’t just have the middle class with money; they need goods and services to purchase provided by business owners. That’s when jobs are created, not by middle class consumers, but by the suppliers of goods and services. The rich are the job creators.

But he is correct that people like HIM don’t create jobs. He does a little, but he’s one of these bean counters that are way overpaid, no wonder he feels guilty.

Friend

You say the rich are the job creators. I disagree. The rich might be the current job providers, but I think education and innovation are the job creators.

Me

You’re confusing Demand and Supply. The rich will always be the job creators – they are the Suppliers.

Almost every job interview is an interviewer who is richer than the job candidate. Stay anecdotal with that and think of your experience and all of your friends and families’ experience. You interview with a person making more than you.

India is educating their population… then they come to America to work as engineers. Why?

India educated people who then DEMANDED a job. India did not have the SUPPLY of jobs. America did because it is richer.

As for innovation, a person who invents a new process or widget needs capital to implement those innovations. Capital comes from the rich. Even when it’s the government and things like Solyndra. Solyndra created 1,100 jobs through capital of our rich government.

Education and innovation only create demand because they create a supply of workers that demand jobs.

How Should Taxes Work?

Me

This guy’s contention is that the middle class now has more money as they are taxed less, but what are the middle class consumers buying if Apple doesn’t invent the products for them to buy and the Apple employees to create and distribute them?

Friend

Come on, you can’t tell me that taxing the rich will lead to a collapse of innovation. Yes, make it easier for small businesses to be started and maintain benefits for corporations to stay in the US, but it’s bull that making sure the multi-millionaires pay what they are supposed to (~30%, instead of the 18% effective tax rate they are paying which is less than most Americans) will have this catastrophic effect on business.

Me

I answered the job creators question first because it tees up this response.
I made a mistake using Apple because Apple is synonymous with innovation and rightfully so. I wasn’t talking about innovation; I was talking about Apple being a Supplier.
Let’s make it XYZ Company that sells widgets. If you have a middle class with a bunch of money and a Demand for widgets, if XYZ Company doesn’t exist then the middle class buys nothing.

The whole thing with the tax code is as a conservative businessman (which is what Romney calls himself), I want as much money kept in the private sector as possible. Every dollar that the government gets is taken out of the private sector and used inefficiently compared to the private sector by several orders of magnitude.

Everything taxed is disincentive-ized to do – buying cigarettes and making more income and starting a business. Everything sheltered from taxes is incentive-ized – donating to charity and buying art in lieu of starting a business or funding one with capital.

But one thing I still don’t get is, besides this specific instance of trading off $1,000 each for the middle class completely offset by increasing taxes on the rich, how does taxing the rich give the middle class more purchasing power?

Friend

Well, if you make the rich pay their fair amount, that increases revenue for the government which can help you extend the tax relief for the lower and middle classes giving them more disposable income, hence increasing their purchase power. Not to mention, the increased revenue, along with decreases in spending, can help you begin to reduce the deficit.

Listen, I am not sure if I want to raise the taxes on the rich, I think I just want to have them pay what they are supposed to be paying in the first place. From articles I have seen by Warren Buffett, or others that I sent you, the unfortunate truth is those who make the most money also have access to the knowledge and resources to circumvent that system. So I say simply remove a great majority of the tax shelters and loopholes, especially those to which the rich have the greatest access – there is no need to help them find ways to keep more money. Then, once we see how that is working (i.e. they are not finding other loopholes), I would possibly be all for lowering the rich’s tax level. If you could make changes so that they pay what the tax brackets say they do, then maybe it should be lowered from 35% to 30% or 28%. I am not sure, I would need to see the math.

Me

“Well, if you make the rich pay their fair amount, that increases revenue for the government.”

You can stop there, because that’s all that will happen and the government needs the revenue.

“which can help you extend the tax relief for the lower and middle classes giving them more disposable income, hence increasing their purchase power.”

But that would be the government taxing the rich more and then not taking in what they usually do from the middle and lower classes. That means the government has little net gain in revenue because the rich are only going to be able to give so much more to the government who then take not as much in taxes from the vast majority of our population. You need to tax just the rich to increase government revenue a significant amount and let the government continue to take in what they normally do for lower and middle classes.

“Not to mention, the increased revenue, along with decreases in spending, can help you begin to reduce the deficit.”

Yes this desperately needs to get done. But it has to be done from the spending side first. The reason why is this chart: 

 

 

 

 

 

 

 

 

 

 

How can you ask anyone of any means in this country to give more money when they think half of what they give will be wasted? And people have thought about half of each dollar is wasted for 30 years!

If the government cuts spending by reforming entitlements and cutting the military, I think more people would be inclined to pay more in taxes. I really do because then it’s in the Zeitgeist that the government is serious about getting its budget in order.

“Listen, I am not sure if I want to raise the taxes on the rich, I think I just want to have them pay what they are supposed to be paying in the first place. From articles I have seen by Warren Buffett, or others that I sent you, the unfortunate truth is those who make the most money also have access to the knowledge and resources to circumvent that system.”

That’s why we need a tax code that is flatter, simpler, and lower. That’s the only way the rich will pay their “fair” share. That will be raising taxes on the rich, which is what I want. The method of doing so has to be simpler.

“So I say simply remove a great majority of the tax shelters and loopholes, especially those to which the rich have the greatest access – there is no need to help them find ways to keep more money. Then, once we see how that is working (i.e. they are not finding other loopholes), I would possibly be all for lowering the rich’s tax level. If you could make changes so that they pay what the tax brackets say they do, then maybe it should be lowered from 35% to 30% or 28%. I am not sure, I would need to see the math.”

I agree with all of this. I guess we can remain friends after all.

Advertisements

Leave a Reply

Fill in your details below or click an icon to log in:

WordPress.com Logo

You are commenting using your WordPress.com account. Log Out / Change )

Twitter picture

You are commenting using your Twitter account. Log Out / Change )

Facebook photo

You are commenting using your Facebook account. Log Out / Change )

Google+ photo

You are commenting using your Google+ account. Log Out / Change )

Connecting to %s

%d bloggers like this: