We have a problem to solve. If you aren't aware, American Corporations just had their best year ever this year. That's right, while we are underemployed, the big players have set themselves up for a tidy 1.69 Trillion Dollars in profit. Depending on who you ask, the unemployment rate hit a low of 3.6% at the end of Clinton's presidency, hovered between 4 and 6% under most of Bush, and leaped to 10.6% under Obama at the worst. Now it's at 9.3%, but it's relevant to note that last month it was at 9%. Heading into the holiday retail rush, unemployment still rose. Graph
So how can this be? We have the best year ever for corps yet we have this highest unemployment rates in my lifetime. Wages to employ the middle class male hasn't moved in my 36 years of life (page 36 of this PDF). So how is it that a company can go from employing people, to losing them, to becoming profitable again yet not looking to employ people back at the same level? I'm suggesting that there is a tax incentive not to.
Corporations are ran by people whom make a very good living. Great news for them. They are also legally obligated to make the most money possible for their share holders. If you have a company that is being taxed at a low level, being ran by someone taxed at a low level (16% was the rate at which the highest earners were taxed on average) whom doesn't have to pay the income tax on services used while working (private jet, lavish dinners, Hotels, vacations) why would they rather hire someone? If they spend more on themselves, they can keep more of their own money and pay themselves in stock which gets taxed as Capital Gains at 15%.
Almost three-quarters of the highest earners’ income was in capital gains and dividends taxed at a 15 percent rate set as part of Bush-backed tax cuts in 2003 Link
An example... if you owned a corporation, or a dozen, and you had a 35 million dollar mansion with plenty of space, but you faced a tax burden, what would prevent you from purchasing another 15 million dollar home next door as your office? Thanks for the write off!
So we've reached a point where we have taxed too little. There is no incentive to hire people over spending the money on yourself. We have to go back and raise taxes on corporations in terms of closing loop holes. We have to raise the taxes on the wealthy because the income disparity has spun out of control in the last 30 years. Even in an economy like this, the rich have found a way to get a hold of our money directly in bailouts. Indirectly in write offs for their Bombadier Challengers. And indirectly by choosing to not hire people, but instead spend on themselves. This is a problem with a 30 year history to look at. Even with Bush tax cuts that supply-siders like claim increases revenues, didn't work. It was five years before revenues went up, hardly relate-able to the tax cut.
Raise taxes in a way that doesn't incentivize job growth at a cost to the people, but increase them in a way that it's a lose lose for the corporations if they don't hire. That million dollar remodel of the office, you can write off $15,000 of it and you are paying the rest on income tax. And if you try to skate, we're taking you and the CFO to jail. Spend a million on salaries and you can write the whole thing off. That's how you incentivize business properly.
Tell the rich that since you get all of your income from Capital Gains, that's now a progressive tax just like income. You have to go back 94 years to find tax rates as low as they are today. Our system of making sure that the rich have a pile of cash in hopes that we'll catch a nickel isn't working. Not for the people, the government, or even effective business.
Many of the rich get it. We have 371 Billionaires in the US. 57 of them are on the Giving Pledge. Stop with the claims that we get more jobs by taxing less. Stop with the claims of more revenues on less taxes. It's all bull.
So how would you raise taxes to create more jobs? I know that there are tons of ways. Let's brainstorm some areas that get abused that need to be addressed.
It's an interesting dynamic from 2002 to 2007. Lowered the rates and the Tax Revenues shot up. Of course the revenues overall were stagnant. It makes me wonder if the sudden growth had more to do with dirty business ethics or due to the tax rate changes?
I knew there was a reason why I keep coming back to Think Atheist year after year and it is because of posts like these.
I actually got into a debate with a co worker about the tax rate and I wish I had this information with me. But now I do! Knowledge is power!
Thanks Sophie. I hope that you sway to co workers opinion.
I know that tax law and economics throw me for a loop at times, but I find it frustrating that conservative friends, who I know do not understand it, use such lame parables fed to them by their party politics as arguments against taxing the rich or corporations.
Thank you sir
Holy Graphs doone! Thanks. I didn't know about the lowered top income rates during the Depression. I guess I've missed those three years in chart form. So it hasn't been 94, but 70 years since we've seen it this low. Dropping the rates from the 90% range during that time makes complete sense.
I posted a very good article on this a week or so back ...Economic Populist
Wow! You have some details there. Looking at the Securities graph... tell me if I go wrong here. The wealthy are the ones holding the securities. So the less they pay us, the more we need to use the credit, causing a second potential revenue stream of money on money derived from them to begin with. So they effectively get their money back that they paid in wages, in interest. And if their market collapses, it's such a large part of the economy, that we have to give them money from the government so that they'll give us money because we are dependent on them. It's a no lose for the securities holders, isn't it? Am I missing something?
Did Orwell write this script? Not sure that I wanted to learn that nugget today.
TIL: I'm even more of a mule for the rich than I thought.
Forbes breaks down the tax rates for the top earners and the richest.
Top earners in 2006:
an average federal income tax bite of 17%
The richest 400. Remember their wealth is in holdings and taxed as capital gains at 15%
In 2006, the top 400 realized $66 billion, or 63% of all their income, in net capital gains.
Nothing has fundamentally changed since then so it's reasonable to expect the same results if we looked into it again.
I'm glad that when push came to shove, you were able to walk away and leave it all behind.
We seem to be happy to find cheaper ways to ship jobs off-shore even with government funds. A personal example was the building of the 2nd Narrows Bridge in Tacoma. The decks were built in Asia and shipped over. These are well paying jobs that could have been done here. The catch phrase for pride in construction unions has always been "Building America", but sometimes it's just "Assembling America". Sigh.
I don't have the answers either. Let me throw out an idea that isn't thought through, but occurs to me. With the off-shore jobs in things like call centers, I don't know why we can't say to companies that have done this, when you chose to ship a job off-shores that can be, or has been done here, we are no longer going to let you write off those expenses. There is no reason for America to pay for jobs in India twice. I'm sure this violates a dozen trade treaties, but it's the type of encouragement of protectionism that I would choose.