Everyone should be in favor of reducing taxes on the "rich"

[BaronVonBigmeat]

Anti-Obamanomics: Why Everyone Should Be in Favor of Reducing Taxes on the "Rich" - George Reisman - Mises Institute

The progressive personal income tax, the corporate income tax, the inheritance tax, and the capital-gains tax are all paid with funds that otherwise would have been saved and invested. All of them reduce the demand for labor by business firms in comparison with what it would otherwise have been, and thus either the wage rates or the volume of employment that business firms can offer. For they deprive business firms of the funds with which to pay wages.

Contrary to popular belief, high taxes are not passed along to consumers in the form of higher prices. Businesses are already charging as much as they can, on average. However, taxes will have a crippling effect on businesses' ability to invest in the future, hire more people, and expand.

In contrast, the view of redistributionists, such as Obama, founded in the most complete and utter ignorance, is that the only wealth from which an individual can benefit is his own. This is a view that was not unreasonable in the ages before the rise of capitalism and its market economy. Until then, the only people who could in fact benefit from a given piece of land or a given barn or plow, or whatever, was the family that owned them and used them to produce for its own consumption. This is the view that the redistributionists continue to hold, centuries after it has lost its applicability. They have not yet awakened to the modern world. And it is on this basis that they support the redistribution of wealth. The redistribution of wealth is allegedly necessary to enable an individual who does not own the wealth presently owned by others to benefit from that wealth. Only as and when their property passes to him can he benefit from it, the redistributors believe. This is the kind of "largesse" Obama intends to practice. It is taking funds from those most prodigious at accumulating capital, capital that would benefit all, and then giving the funds to others to consume. Meeting the needs of the poor with the consumption of capital is Obama's formula for prosperity.

Translation: don't eat your seed corn.

In considering, for example, whether the taxes of businessmen and capitalists as a class should be reduced by some large sum, such as $100 billion, or whether the taxes of wage earners as a class should be reduced by that sum, almost everyone mistakenly assumes that the interest of the individual wage earner lies with the tax reduction going to the wage earners, as though all wage earners shared a common class interest against all capitalists. This, however, is a fallacy, which becomes apparent as soon as one objectively analyses the situation from the perspective of the individual wage earner. Then it becomes clear that much more is involved than the matter of a reduction in the taxes of the rich or an equal reduction in the individual wage earner's own taxes. For example, while it is certainly true that I gain more from my own taxes being cut by $1,000 rather than the taxes of a Henry Ford or a Bill Gates, it is absolutely false to believe that I gain more from the taxes of my random fellow wage earners — call them Henry Smiths and Bill Joneses — being cut by $1,000 each rather than the taxes of Ford and Gates being cut by $1,000 each.

It is obvious that the individual wage earner benefits far more from tax reductions on businessmen and capitalists, the so-called rich, than from equivalent tax reductions on his fellow wage earners, and that this is true of each and every individual wage earner, for any wage earner could take the place of the particular individual we have focused on. A tax reduction on businessmen and capitalists will promote capital accumulation, far, far more than a tax reduction on the mass of the individual wage earner's fellow wage earners. The average businessman and capitalist will save and invest the taxes he no longer has to pay, in far greater proportion than would the average wage earner. He will be induced to introduce more improvements in products and methods of production, which are also a major cause of capital accumulation, and is a process in which wage earners qua wage earners play little or no role. (This is not to say that wage earners are never responsible for innovations. They often are. But as soon as they are, they typically become businessmen. Fundamentally, it is always the prospect of higher profits that stimulates innovations, not the earning of higher wages. It is the prospect of higher profits that leads employers to offer incentives to wage earners to make innovations.) And the greater saving of the businessmen and capitalists will promote innovation by virtue of making the economic system more capital intensive. Thus the individual wage earner has far more to gain from the taxes of businessmen and capitalists being reduced than from the taxes of his fellow wage earners being reduced.

The effect of this combination is continuing capital accumulation and thus a continually rising productivity of labor. The effect of this, in turn, is a continually growing supply of consumers' goods relative to the supply of labor, and thus prices of consumers' goods that are progressively lower relative to the wages of labor, which means progressively rising real wage rates, so that in not too many years the average wage earner is far ahead of where he would have been on the strength of a cut in his own taxes.

Translation: you can't have higher living standards without higher productivity! There is no way around this. The prices of things--manufactured goods at least--should be going down over time, if production output grows faster than the population.

Starting with tax cuts for the so-called rich — based on equivalent reductions in government spending — is the only hope for the resumption of significant economic progress, indeed, for the avoidance of economic retrogression and growing impoverishment. Because of this, it is actually the quickest and surest road to any major reduction in the tax burden of the average wage earner. It holds out the prospect of the average wage earner being able to double his standard of living in a generation or less. The average standard of living would double in a single generation if economic progress at a rate of just 3 percent a year could be achieved. Such economic progress would also mean a halving of the average wage earner's tax burden in the same period of time — if government spending per capita in real terms were held fixed, for then he would have double the real income out of which to pay his present level of taxes. And then, of course, once all the taxes that most stood in the way of capital accumulation and economic progress were eliminated, further reductions in government spending and taxation could and should take place that would be of corresponding direct benefit to wage earners, that is, show up in the reduction of the taxes paid by them.

Ironically, an aspect of this approach exists in, of all places, Sweden! What has enabled Sweden to have one of the world's highest burdens of taxation and, at the same time, to remain a modern country, more or less advancing, is the fact that the tax burden in Sweden falls far more heavily on the average Swedish wage earner than it does on Swedish business, whose tax burden is actually less than that of business in many other Western countries. (For example, when allowance is made for the fact that Swedish companies can automatically deduct 50 percent of their profits as a tax-free reserve for future investment, the effective corporate income tax rate in Sweden turns out to be below that in the United States: 26 percent versus 35 percent.) If Swedish business had had to bear the burden of taxation borne by Swedish wage earners, the Swedish economy would long since have been in ruins.

Several times, I've referred to tax reductions on the rich being accompanied by equivalent reductions in government spending. It should be clear that reducing taxes without reducing government spending cannot promote saving and capital formation, but must undermine them further, even if the funds no longer claimed by taxes are overwhelmingly saved. For in this case, the government must substitute a dollar of borrowing for a dollar of tax revenues. Each dollar borrowed by the government is a dollar less of savings available for the rest of the economic system.

Tax cuts to promote saving and capital formation which are financed by deficit increases are thus simply contrary to purpose. The fact that they are contrary to purpose remains if, instead of being financed by borrowing, the resulting deficits are financed by the more rapid creation of money. In this case, all of the destructive effects inflation has on capital formation come into play.

Supply-siders, pay attention. Tax cuts without spending cuts aren't really a cut. Instead of bleeding the economy dry via taxes, the government bleeds the economy dry by soaking up funds that could have been loaned to businesses.

The only way that these advocates of balanced budgets through tax increases could proceed consistently with the goal of capital formation would be by increasing the taxes of the very people they claim to be concerned about, namely, the poor and the mass of wage and salary earners, who save relatively little. Indeed, the only way that greater saving and capital formation is possible in the absence of decreases in government spending, is by means not only of increasing such taxes to the point of balancing the budget, but also increasing them still further, to compensate for decreases in the kind of taxes that land more heavily on saving and productive expenditure. In essence, if one advocates greater saving and capital formation and yet refuses to support reductions in government spending, one is logically obliged to advocate increasing the taxes of wage and salary earners and of the "poor" in order both to balance the budget and to compensate for reductions in taxes on profits and interest and on the "rich."

But there is absolutely no reason to advocate such a downright fascistic policy. (As I've shown, just such a policy has been pursued in Sweden, the model country of today's "liberals.") Instead of sacrificing anyone to anyone, the simple, obvious solution is sharply to reduce the sacrificing that is already going on — namely, sharply to reduce and ultimately altogether eliminate pressure-group plundering and the government spending that finances it at the sacrifice of everyone. (The ultimate, truly progressive long-range goal would be the elimination of virtually all government spending other than for defense against common criminals and foreign, aggressor governments. The first is the police function of state and local governments; the second is the national defense function of the federal government.)

Cliffs Notes: If governments want businesses to remain somewhat competitive, they'll have to avoid taxing them, just like Sweden did. If they refuse to cut spending, like Sweden, they will have to put big taxes on ordinary working people. Which is kind of pointless--taking money from John Q. Public only to turn around and give it right back to him (minus handling fees of course).

This analysis makes clear that an essential flaw of so-called supply-side economics — the policy both of the Reagan administration and of the present Bush administration — was the failure to face up to the need to reduce government spending. While the policy of reducing taxes by both administrations was perfectly correct, most of the potential benefit of the tax cuts was lost through the corresponding enlargement of federal budget deficits. Regrettably, both administrations and their supporters lacked the courage required to abolish government spending programs to make those tax cuts possible without deficits.

Their failure to have done so explains why the great mass of the American people have not benefitted from the tax cuts as they should have. The explanation is that, absent equivalent reductions in government spending, the tax cuts did not translate into increases in capital formation, but the opposite. Instead of there being more demand by business for labor and capital goods, there was less; instead of more rapid economic progress and rising real wages, there has been economic stagnation or outright decline, along with stagnant or falling real wages.

Finally, it must be mentioned that the Fed's inflation and credit expansion have also been responsible for a vast, artificial increase in economic inequality since the mid 1990s, just as they were during the 1920s. This economic inequality was built not on inequality of economic contribution, as is normally the case, but merely on new and additional money. This new and additional money created by the Fed and its client banking system, poured into the stock market and then the housing market. In the process, it created vast paper capital gains in terms of stock and housing prices — the same paper gains that brought about overconsumption. In the case of the stock market, the paper gains went overwhelmingly to the wealthy; they had the largest investments in stock and were more likely to be in a position to know how to take advantage of the rising market. At the same time, the artificially low interest rates caused by the infusions of new and additional money encouraged an artificial lengthening of what "Austrian" economists call the structure of production. Such artificial lengthenings create a corresponding artificial increase in the magnitude of profits in the economic system.

No wonder so many people have a distaste for "free" market economics.

George Reisman, Ph.D., is Pepperdine University Professor Emeritus of Economics. His web site is Capitalism: A Treatise on Economics. His blog is at George Reisman's Blog on Economics, Politics, Society, and Culture.

 

[editec]

Anti-Obamanomics: Why Everyone Should Be in Favor of Reducing Taxes on the "Rich" - George Reisman - Mises Institute



Contrary to popular belief, high taxes are not passed along to consumers in the form of higher prices. Businesses are already charging as much as they can, on average. However, taxes will have a crippling effect on businesses' ability to invest in the future, hire more people, and expand.

There's plenty of money in the monied classes to invest.

Translation: don't eat your seed corn.

Nice try , but I'm not buying it.

When we cut taxes on the very welathy, they have all sorts of money to invest and so they do...and then what happens?

financial Bubbles happen, that's what happens.

There's a whole LOT of investment capital chasing too few profits, that's what happens. In other words, all that spare capital ends up INFLATING THE COST OF INVESTMENTS beyond their potential worth.

Translation: you can't have higher living standards without higher productivity! There is no way around this. The prices of things--manufactured goods at least--should be going down over time, if production output grows faster than the population.

Yeah, we're aalready like the most productive society on earth precsiely because we are the most captialized nation on earth (more dollars invested per worker than anyplace I know of), we're awash with STUFF already and you really think that we need more capital investment chasing the same investments that aren't making enough money because the consumer class is going broke?

THIS is the best a Doctor of Economics can come up with...a rehash of the failed trickledown theory?

Does this clown not know his history? does he not know that trickle down economic keeps failing? It failed in the late 19th century, it failed in the early twentieth century, the late 20th century, and it wil fail again in the early 21st century, too.

Too much investment capital, taken from the consumer classes, inevitably leads to the same thing over and over and over again.

It causes bubbles in markets which pop!, and then we suffer a period of slowed economic activity.

The problem isn't that the rich don't have enough capital, it's that our economy is drive by consumerism, ye over educated but apparently not very well ninny!

Supply-siders, pay attention. Tax cuts without spending cuts aren't really a cut. Instead of bleeding the economy dry via taxes, the government bleeds the economy dry by soaking up funds that could have been loaned to businesses.

Finally, a glimmer of sense! Yes, cutting taxes without cutting expenses is ANOTHER EVEN WORSE KIND of mistake our Republican chumsn ahve been making for the last two decades.

Cliffs Notes: If governments want businesses to remain somewhat competitive, they'll have to avoid taxing them, just like Sweden did. If they refuse to cut spending, like Sweden, they will have to put big taxes on ordinary working people. Which is kind of pointless--taking money from John Q. Public only to turn around and give it right back to him (minus handling fees of course).

Partial credit. Given the idiocy of the way we do FREE TRADE, higher taxes DO drive industry out of the nation, I quite agree.

No wonder so many people have a distaste for "free" market economics.

None of us really have a clue what a free market cpaitalist society would look like.

I suspect it would look like a lot like Somalia, but hey, I could be wrong. It might look like utopia...for about three people or so.

George Reisman, Ph.D., is Pepperdine University Professor Emeritus of Economics. His web site is Capitalism: A Treatise on Economics. His blog is at George Reisman's Blog on Economics, Politics, Society, and Culture.[/quote]

 

[DiamondDave]

Try it simply like this....


Everyone should be at equal burden % taxation...


Taxation, like justice, should be blind... it is not up to the government to have 'feelings' and subjectivity in terms of taxation... everyone pays the same share of their income in a simplified system that has loopholes eliminated.... THAT is what I support... not trying to do it for one part of the population or the other part

 

[Shogun]

naw.. i think it's time to kick the upper class square in the balls. don't like it? Move to dubai.

 

[DiamondDave]

naw.. i think it's time to kick the upper class square in the balls. don't like it? Move to dubai.

Yeah... because a country based on equal rights and equal treatment needs to punish one economic class within their borders

 

[editec]

Try it simply like this....


Everyone should be at equal burden % taxation...

Sure, just as soon as everyone starts out with the same money, that's a capital idea.

Taxation, like justice, should be blind... it is not up to the government to have 'feelings' and subjectivity in terms of taxation... everyone pays the same share of their income in a simplified system that has loopholes eliminated.... THAT is what I support... not trying to do it for one part of the population or the other part

You aren't interested in Justice, you're interested in equality, but ONLY in the issue of taxation.

If you were really concerned with justice, then you'd ALSO be concerned about the injustice of enormous income disparity.

Are you?

I think not.

 

[Ravi]

When we cut taxes on the very welathy, they have all sorts of money to invest and so they do...and then what happens?

financial Bubbles happen, that's what happens.

This is an excellent point and exactly what happened with the mortgage crises. Lots of money in the IMF looking for a place to be invested got invested in American real estate. And that greed driven idiocy is hurting us now.

 

[DiamondDave]

Sure, just as soon as everyone starts out with the same money, that's a capital idea.




You aren't interested in Justice, you're interested in equality, but ONLY in the issue of taxation.

If you were really concerned with justice, then you'd ALSO be concerned about the injustice of enormous income disparity.

Are you?

I think not.

Noooooo.... no way.. .trying to bring in communist redistribution in??/ Guess again... All people are endowed with the same rights of life liberty and the PURSUIT of happiness... it is our decisions and our efforts that lead us where we are and lead us to a place where we decide what is left to our family when we leave.... it is not up to government to force equal handouts for unequal risk/effort/etc...


but nice try

And your second mistake... I am interested in equality in ALL aspects... equality on race, religion, sex, creed, etc... nobody has the right to be held higher, just as nobody else has the right to infringe on the individual rights of others.... the results of your labors are the results of YOUR labors... you have the RIGHT to succeed just as you have the RIGHT to fail.... with equal TREATMENT and equal application and adherence to law, does not come wealth redistribution....

We are created equal.... we do not all do the same things in our lives to 'deserve' equal compensation... we are not a goddamn hive

 

[Shogun]

Yeah... because a country based on equal rights and equal treatment needs to punish one economic class within their borders

indeed. When that class operates to the detriment of everyone else? hey, again, don't like it? I hear there is a shiek building an island just for you.

 

[DiamondDave]

indeed. When that class operates to the detriment of everyone else? hey, again, don't like it? I hear there is a shiek building an island just for you.

And when the other classes operate to the detriment of the concepts of freedom and equality, they should then be forced or asked to move?


Nope... I will still with trying to ensure and call for the return of equal treatment by government, not a punishment and redistribution system based on 'feelings' of appeasement and guilt...

With freedom comes risk... and with freedom comes the acceptance of the outcome that you have chosen... your freedom, your choice, your result....

Unlike those calling for this marxist crap who wish to sacrifice their freedom for big mommy government to come kiss the boo-boos and make it all better, by taking all those nasty wasty personal responsibilities, that are so hard, back from you so you don't have to really think and do for yourself anymore... someone else will always provide when you feel you can't or you feel that you don't want to....

 

[Shogun]

And when the other classes operate to the detriment of the concepts of freedom and equality, they should then be forced or asked to move?


Nope... I will still with trying to ensure and call for the return of equal treatment by government, not a punishment and redistribution system based on 'feelings' of appeasement and guilt...

With freedom comes risk... and with freedom comes the acceptance of the outcome that you have chosen... your freedom, your choice, your result....

Unlike those calling for this marxist crap who wish to sacrifice their freedom for big mommy government to come kiss the boo-boos and make it all better, by taking all those nasty wasty personal responsibilities, that are so hard, back from you so you don't have to really think and do for yourself anymore... someone else will always provide when you feel you can't or you feel that you don't want to....

Take your complaint to the shoulders of Bell Labs and every other robber baron class that functioned to the detriment of everyone else. Like I said, if you don't like it, take your ass to Dubai. Indeed, your complaint of "marxist crap" just doesn't ring too loudly while we live through the fruits of failed free market capitalism. Im all for personal responsibility... But I'm also for not allowing the wealthy class to use the rest of us like a vampire uses villagers in the night. Dont like it? vote. If you lose? Tough shit.

 

[DiamondDave]

Take your complaint to the shoulders of Bell Labs and every other robber baron class that functioned to the detriment of everyone else. Like I said, if you don't like it, take your ass to Dubai. Indeed, your complaint of "marxist crap" just doesn't ring too loudly while we live through the fruits of failed free market capitalism. Im all for personal responsibility... But I'm also for not allowing the wealthy class to use the rest of us like a vampire uses villagers in the night. Dont like it? vote. If you lose? Tough shit.

And if you can't take what I earn and pry it from my fingers... tough shit....

You walk up to me and tell me you are owed healthcare from the fruits of my labor, and try and take it from me... you best be prepared to outrun a rifle round

Again... freedom comes with the inherent risks... the risk of failure is right there with the risk of success.... just because some do better and some do worse, does not mean that those who do worse are owed something by those who do better.... is it great when those who succeed 'play nice' and give back VOLUNTARILY or their own free will? Yep... it is what I was taught... but such a belief does not include forced wealth redistribution by 'the state'... I.E. a socialist control government

There will be some who succeed more than me... there will be many who succeed less than me... it is life... life is not inherently fair where everyone is on the same path leading to the same outcome... there are winners and losers in life.... unlike what the 'everybody gets a trophy' pansies want you to think

 

[Shogun]

Hey, it's about to be a horrible rocky road for you here in the US of A, dude... Taxes WILL pry it from your grubby fucking fingers and, if you don't like it, then you can spend some time in a federal pen for tax evasion. Best get your passport ready, yo! I hear muslim fundies like to ignore SCIENCE in the classroom too!

 

[BaronVonBigmeat]

Nice try , but I'm not buying it.

When we cut taxes on the very welathy, they have all sorts of money to invest and so they do...and then what happens?

financial Bubbles happen, that's what happens.

There's a whole LOT of investment capital chasing too few profits, that's what happens. In other words, all that spare capital ends up INFLATING THE COST OF INVESTMENTS beyond their potential worth.

You're almost correct; the past several years have seen an investment bubble, certainly. But the real problem is the federal reserve, mentioned in the last section I quoted. They created new money out of thin air, and it found it's way into some investments.

The fundamental difference is, when the fed does it, it distorts the economy. Funds are directed towards malinvestments instead of sound investments. This is the foundation of austrian economics.

 

[BaronVonBigmeat]

THIS is the best a Doctor of Economics can come up with...a rehash of the failed trickledown theory?

There is no such thing as "trickle down economics". This is just plain old economics. Businesses need to invest in themselves to remain competitive. I work for a manufacturing company which could really stand to buy some better equipment and software. Management recognizes the benefit, but it's just not in the budget.

And as he said, we really didn't see the benefits of tax cuts in the last 25 years or so, because we didn't cut spending. We traded a tax burden for a borrowing/inflation burden, mainly in order to build up the military starting in the 80's, unfortunately.

Does this clown not know his history? does he not know that trickle down economic keeps failing? It failed in the late 19th century, it failed in the early twentieth century, the late 20th century, and it wil fail again in the early 21st century, too.

The latter half of the 19th century saw the biggest increase in living standards in human history. At least for liberal western economies. Britain and then america went from agrarian dirt farmers to industrialized nations. The early 20th century saw a depression which was caused by the federal reserve.

Too much investment capital, taken from the consumer classes, inevitably leads to the same thing over and over and over again.

It causes bubbles in markets which pop!, and then we suffer a period of slowed economic activity.

Again, it's the federal reserve. Central planning doesn't work for wheat production in the USSR, and it doesn't work well in determining interest rates. The result is the boom/bust cycle. Artificially low interest rates send a false economic signal to investors and businessmen.

 

[Chris]

Soak the rich.

 

[DiamondDave]

Soak the rich.

Eliminate lib trolls...


see how easy that is? Now how about the actual topic....

 

[steeliniraq]

Well I don't think we need to keep taxing the wealthy since they are already paying 85% of the taxes in this country. By taxing the wealthy more and more all we do is force companies to slow down hiring and spending therefore slowing our economy. The bigger problem is our country's spending. That is what needs to be contained!

 

[editec]

Noooooo.... no way.. .trying to bring in communist redistribution in??/

No, I'm merely trying to alert you to the reality that the people with the money are the only damned people capable of carring the weight of the government...the government they have bought lock stock and barrel in Congress.

You start out demanding something ridiculous, my response is we can have the ridiculous the moment we do something ridiculous to make it possible.

Demanding the same rate of taxes on each income earner is simple absurd.

Guess again... All people are endowed with the same rights of life liberty and the PURSUIT of happiness... it is our decisions and our efforts that lead us where we are and lead us to a place where we decide what is left to our family when we leave.... it is not up to government to force equal handouts for unequal risk/effort/etc...

Tell it to the Kennedies, the Rockefellers, and so forth. They might buy into your dream world delusions about making it in America, sport. Nobody gets to pick out where they start from, champ.

but nice try

I can't take credit, really. Reality based thinking is just a knack of mine. You should try it some time. It's easy if you take off those libertopian blinders you're wearing.

And your second mistake... I am interested in equality in ALL aspects... equality on race, religion, sex, creed, etc... nobody has the right to be held higher, just as nobody else has the right to infringe on the individual rights of others.... the results of your labors are the results of YOUR labors... you have the RIGHT to succeed just as you have the RIGHT to fail.... with equal TREATMENT and equal application and adherence to law, does not come wealth redistribution....

My mistake? What does any of the above have to do with anything I've written in this thread? Nothing.

Trying reading what I write instead of responding to the voices inside your libertopeian-adled brain.

We are created equal.... we do not all do the same things in our lives to 'deserve' equal compensation... we are not a goddamn hive

We are not created equal, don't be such a damned fool. Do you really think you're EQUAL to a drooling imbecile?

More to the point, are you trying to tell me that a kid starting out today with nothing, coming from a crappy school system, has the same opportunities to happiness as some well heeled scion graduating Choate with a legacy admission to Yale?

What planet do you live on, anyway?

 

[Zoomie1980]

Sure, just as soon as everyone starts out with the same money, that's a capital idea.

For the most part, they pretty much do. Almost ALL (over 90%) of household's with net worth's over $1,000,000 started life as middle class or lower. Less than 10% of the "wealthy" in this country is "old money".

You give ANY group of 10 people $1000 and give them three years to do something with it. And the difference will become pretty close to what happens in society. One or two will do amazingly well, 8 will neither increase nor decrease it much, and one or 2 will lose most or all of it.


If you are of sound mind and body and a citizen of the United States, and you are poor, it is because you have CHOSEN to be so....