“If lower taxes on the rich were going to create jobs, we would be drowning in jobs”

November 20, 2012 | Alex Stone

Top tax rates, ordinary wages (blue) and capital gains (red)

On Friday, KUOW’s Ross Reynolds discussed the potential expiration of the Bush tax cuts for income over $250,000 per year. He took calls from small several business owners, venture capitalist Nick Hanauer, and EOI Policy Director Dr. Marilyn Watkins (at 15:10).

The top rate, currently 35%, applies to income earned over $388,000. Repealing the Bush tax cuts for high earners would restore a rate of 39.6% for income above that level – the same top rate that existed during the Clinton years – to income earned over $250,000. And remember, that top rate only applies to income earned over $250,000.

Watkins pointed out that our economy boomed during the Clinton years when the top tax rate was higher, with record job growth and expansion in nearly every sector of the economy. “Compared to the entire period since the Bush tax cuts went into place, we’ve seen – even in the so-called good part of the economy in the Bush years – the economy wasn’t doing that well. The key thing that determines business investment… is consumer demand.”

Venture capitalist Nick Hanuer, who supports letting the Bush taxes for the rich expire, also had some thoughts about its potential impact on the economy:

The canard that higher taxes on the rich will reduce economic growth is one of the biggest lies ever told to the American public. And here’s how you know that’s true. If lower taxes on the rich or more income from the rich was going to create jobs, then today, given how much those tax rates have gone down over the last 20 years, we would be drowning in jobs.

Listen to the full segment here.

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Posted in Tax and Budget

Comments

  1. ML_EngAmer says:

    What people miss about the concept of unmodulated trickle-down economics is that it is innately paradoxical in a, free-market, capitalistic society. If investors have the opportunity to save money in order to reinvest it, it only makes sense that they will look for profitable investments. Given that, many may overlook benefits from reinvesting into their homestead.

    If one can invest a billion dollars in America and earn an additional thirty percent, but can invest into the same type of operation in another part of the world and earn fifty percent, what would you expect them to do?

    The only way that trickle-down economic policy can do the job it claims is if there are strict rules regarding the tax savings and how they are spent. This must be structured to keep the money flowing through the veins of America’s domestic economy. There must also be harsh penalties for those who try to abuse these benefits.

    Outside of such conditions, trickle-down economics will continue to sap our economy and feed its blood to those in other societies.

  2. David @ Engage America says:

    There are no better words than the ones written by Howard Gleckman at the truly non-partisan Tax Policy Center to explain why the $250,000 is an arbitrary bench mark.

    “The Census bureau reports that median household income in the U.S. was about $50,000 in 2011…Yet, Congress and the President have defined middle-income as married couples making five times the median…I get that in places like New York, LA, and Washington, $250,000 may seem middle-class. But get a grip: Folks in Toledo think this is nuts.” http://bit.ly/Trz7D8

    • EOI says:

      David,

      In 2010, the income threshold to be in the top 5% was $147,909. To be in the top 1% was $335,861. Perhaps it seems less arbitrary in that context?

      Don’t forget the “middle class” tax cut for income applies to ALL income under $250,000. Super-duper rich people get the same tax cut, it’s just limited to their first $250,000 of income. Here’s some perspective on income distribution in the U.S.: http://www.eoionline.org/state_economy/top-income-chart.htm

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