Tax cuts for the rich do not create jobs.

There's a big brouhaha over the possible expiration of the Bush tax cuts, and Republicans have especially criticized the Democrats for trying to let them expire. The most common argument that I have heard is one that has been repeated for decades as though it were a truism; if you cut taxes for the wealthy, they will create jobs. Well, with Obama trying to raise the highest marginal tax rate to 39.6% from its current 35%, I was curious to see how true this was. I compared the highest marginal tax rates between 1950 and 2010 to the unemployment figures for the same time period, to see whether a decrease in the taxes on the rich actually translated to an increase in jobs for the average American.

I've listed the different levels of the highest marginal tax rate across these years, and paired them with the highest and lowest unemployment numbers for the corresponding period of time.

Tax rates are sourced here, unemployment figures are sourced here.

1944-1963: Tax rate of 91%. Unemployment high of 6.8%, unemployment low of 1.2%.
1964: Tax rate of 77%. Unemployment rate of 5.2%.
1965-1981: Tax rate of 70%. Unemployment high of 7.7%, unemployment low of 3.6%.
1982-1986: Tax rate of 50%. Unemployment high of 9.7%, unemployment low of 7.0%.
1987: Tax rate of 38.5%. Unemployment rate of 6.2%.
1988-1990: Tax rate of 33%. Unemployment high of 5.6%, unemployment low of 5.3%.
1991-1992: Tax rate of 31%. Unemployment high of 7.5%, unemployment low of 6.8%.
1993-2000: Tax rate of 39.6%. Unemployment high of 6.9%, unemployment low of 4.0%.
2001: Tax rate of 39.1%. Unemployment rate of 4.7%.
2002: Tax rate of 38.6%. Unemployment rate of 5.8%.
2003-2010: Tax rate of 35%. Unemployment high of 10%, unemployment low of 4.6%.

This data shows that, even with drastic cuts to the income tax rates of the wealthiest Americans, the employment status of the average American is barely affected. The highest unemployment rates have hovered between 5% and 10% for almost seventy years, and the lowest unemployment rates have shifted from as low as 1.2% (during World War II) to as high as 7% (Reagan's 1986). Overall, the unemployment rate in the USA is relatively stable, and tends to stay within 4-6%, regardless of the tax cuts for the wealthy.

I suppose one could make an argument that corporate tax cuts would be better at creating new jobs, but the issue at hand is that some people (who shall remain nameless; those in the know do not need to be told) are protesting the increase in the highest marginal income tax rate because it will somehow raise unemployment. This data shows that this is plainly not the case, and that those nameless people should get in touch with reality!

That is pretty funny sounding to me...

Okay, lets raise taxes and see if that helps stimulate the economy...

hmm, nope that didn't work... darn...


Lets just raise taxes or not extend old tax cuts to the wealthy... maybe they won't notice less money in the bank and hire some new workers anyway...

hmm, darn, that certainly didn't work either...


You, nor anyone needs any fancy, sliced and diced data models to predict that when any group has less money, that they will be more inclined not to hire new workers, than if they had more money..

Reagan proved that tax cuts help the economy, especially when big businesses have more money to expand and invest... economics 101


The population was also growing quick... and still is.. I am sure that would dilute those statistics some

Every single time there has been tax increases when the economy was hurting, big companies would stop buying the big manufactured goods and the big rich companies would begin announcing wide sweeping layoffs of workers...

I have watched these cycles happen several times since the early '70's and what it is, is the exact same thing being done over and over and expecting a different result..

It is rediculous

reply to post by SmedleyBurlap


who defines who is wealthy?

small business and large business all employ people to work

raising taxes kills profit and profit lost equates to reduction of pay or letting people go thats a fact.......

taxes are the difference between profit and bankruptcy.................

businesses exist to make money and if your not making money your not going to exist and if you dont exist how can you hire people..................

a business generates revenue for the local,state and federal governments and all that revenue generated created jobs and those people in turn pay taxes and pay into the local and state economies

its the six degree of seperation effect what one does effects someone else and so on and so forth.............

and when you raise taxes you kill wealth alot of peoples wealth............


people can cite all the data and reports they want but if that have no common sense and have the ability to see it in practical application those studies are nothing more than a paperweight.................

and ask yourself how many jobs does someone living on entitlement create? how much taxes do they generate answer if you getting paid by tax revenue and your not paying any taxes how are you creating jobs.

Right now its not the tax increases or the tax cuts that is the problem its the indecision.

Plus in states like Calif when the feds cut tax rates the state sees the extra revenue and puts there own state tax on it to collect it.
So the rich never see a tax cut and that is why many of the rich and corporations leave Calif for states like Nevada or Texas.
this causes more job loss in Calif.

The whole point being,is that taxes TAKE your money. If you have less money you have less disposable income.Enough people with less disposable income cause recession. People lose jobs,beginning throws of depression. The only ones making out throughout this whole mess is the Government....go figure !!

Raise taxes for the wealthy, cut taxes for the wealthy, what does it matter? Who really pays those taxes? Look at your itemized phone bill, or your power bill, or your cable bill. Notice the lines where they are charging YOU for the taxes they have to pay? Like Leona Helmsley said, "Only the little people pay taxes." The "rich" just pass the taxes along.

The real question is, why does the government need more money than they are already getting? Why is government so expensive?

It's a little dishonest to quote the marginal rates without quoting the huge number of deductions available at the time.

reply to post by SmedleyBurlap

reply to post by SmedleyBurlap


Maybe you should raise taxes to the wealthy(heck you could probably lower their taxes too) and lower overall taxes for the majority of the population. Also, raise sales tax, but lower income tax and add a tax to money over a certain amount in the bank.

People tend to live at the edge of their means. If you put money in their pocket, the people are likely to spend it. The increase in purchases would put more money in the pockets of the wealthy (probably more-so than lower taxes) which would create an increase in jobs to meet demand. The rich people get their money anyway after it filters up to them, the government gets their tax revenue, and the masses get a shiny new plasma TV in their family room to make them happy.

I always felt that money would best be spent filtering upward. They should have given the bail-out money to the poor people. They would have kept their houses, the companies who "deserved" to be saved would have gotten paid anyway, and the government could have made a bunch of their investment back via taxes.

reply to post by alienreality


" who defines who is wealthy?

small business and large business all employ people to work

raising taxes kills profit and profit lost equates to reduction of pay or letting people go thats a fact.......

taxes are the difference between profit and bankruptcy.................

businesses exist to make money and if your not making money your not going to exist and if you dont exist how can you hire people..................

a business generates revenue for the local,state and federal governments and all that revenue generated created jobs and those people in turn pay taxes and pay into the local and state economies

its the six degree of seperation effect what one does effects someone else and so on and so forth.............

and when you raise taxes you kill wealth alot of peoples wealth............


people can cite all the data and reports they want but if that have no common sense and have the ability to see it in practical application those studies are nothing more than a paperweight.................

and ask yourself how many jobs does someone living on entitlement create? how much taxes do they generate answer if you getting paid by tax revenue and your not paying any taxes how are you creating jobs. "


Excellent Post ! Reasoned and Logical . Lets see someone TRY and refute it ............... .........

The problem with saying that we should cut rich people's taxes is that the argument "When they have more money they can hire more people" is a rational, logical argument with no emotions attached. People aren't rational and economics isn't dictated by what makes the most sense. If you give wealthy people more money (or, in this case, take away less) you know where the extra is going? Investments. Bank accounts. Houses. Stuff for themselves. It's silly to think that they will use the surplus to hire more workers and 'help the little guy.' In the real world, we either raise the taxes on the rich, or they screw us over. It's all there is to it.

There's the errant stigma that the top 10% of the tax bracket just sit up there and rake in $2M per year and, God Forbid, have to pay 1.2M of that to taxes.

The problem is that most of the extremes of the tax bracket (both the top 10% and lowest 10%) are transitional. My father died this year, and I am the only one of my brothers old enough to be named beneficiary on many of his assets. I am fairly certain that will cause me to jump a tax bracket or two, even though I'm splitting that up for my brothers.

This goes on year-in, year-out. People die and pass on their inheritance - someone sells their home and property after being offered a buy-out of a few million to put up a strip mall - those sorts of things.

Either way - the people with this extra money to spend are the ones who invest in new businesses (either creating them or subsidizing them as investors). If my father had left enough behind - I would put some of that away and plan to use that to start a business.... if starting businesses was allowed anymore. I wouldn't start a business in the U.S. - I'd go bankrupt having to print off all the damned paperwork involved in the first year of business and hire tax professionals to handle all of the dark arts of taxes because tax laws change every time the wind blows and could consume an entire three-story library.

That's not what this country was founded upon. It was founded upon the basis that people should be able to understand their rights and the function of government. One of these was the right to understand the methods and reasons for taxation, and yet another the rights to own and operate your own business without constant government interference.

I can't make you all do what is right. I can tell you, and I can laugh at you when you fail for not listening to me (and others like me). You can tax the living piss out of those evil wealthy people. That's fine. Those of us with money will exercise our right to go elsewhere, where people are more than willing to let us spend our money in their economies and create businesses and wealth for them. Then you'll go bankrupt and look like Pre-Nazi Germany or the USSR in the 90s. Have fun with that.

Originally posted by spacekc929
The problem with saying that we should cut rich people's taxes is that the argument "When they have more money they can hire more people" is a rational, logical argument with no emotions attached. People aren't rational and economics isn't dictated by what makes the most sense. If you give wealthy people more money (or, in this case, take away less) you know where the extra is going? Investments. Bank accounts. Houses. Stuff for themselves. It's silly to think that they will use the surplus to hire more workers and 'help the little guy.' In the real world, we either raise the taxes on the rich, or they screw us over. It's all there is to it.

So, how is a rich guy buying a yacht not helping out someone who builds yachts?

What about the people who work at the country club he is a member of?

I worked in a higher-class restaurant in town when I was in high school. It was not high-class pay, but we got to rub elbows with many of the bigger wigs in the community and the district Congressman (Ike Skelton).

Sure - they may buy things I could never afford. Why should this piss me off to the point where I feel I have the right to have the government take their paycheck away? I see it as an opportunity. What would these people be willing to pay money for? Something as absurd as fictional writing, perhaps? Only truly rich people can afford to purchase something that can only be enjoyed when they stop working, and - worst of all - it serves no purpose other than to talk about some non-existent realm of non-existent things.

Books - reading - was once a privilege reserved for nobility. Who else had time to read about nonsense? Everyone else was busy tending fields, building/fixing homes, etc. Someone got the idea to, instead of be angry at the nobility for having free time, to figure out what the nobility would be willing to spend their money on, and then make that.

Likewise - if the rich people of today have a lot of money - what could you make that they would be willing to buy?

Remember those "glue bookmark" things we used to make in school? Take some crayola marker, color in the "Space maker" logo on your pencil-box, then pour glue in it and let it harden? We had kids selling those things for a few bucks a piece. Some even made their lunch money off of that because their families had trouble coming up with money.

The only person you can be upset with when the rich hoard their money is yourself, because you're not applying yourself well enough to the task of creating something they will buy.

reply to post by Mayson


This is an excellent post, well-reasoned and original.

Giving money to the consumer in a society that encourages mass consumption is the key to reviving the economy. The vast majority of jobs are not created by private individuals, but by corporate bodies that need a large number of employees to run a large business operation. To encourage the creation of new jobs, we must encourage the growth of these business operations, and the best way to do that is to purchase their product or service en masse.

On the other hand, mass consumption is a fairly recent phenomenon pioneered by such men as Henry Ford and Edward Bernays. We should consider the possibility that mass production and mass consumption have always been means of creating new job opportunities, and that this is the reason that industry was so heavily favoured and subsidized by the State in the 19th and 20th Centuries. The Industrial Revolutions were such quantum leaps in technology that newly invented machines rendered many traditional occupations obsolete. New technology could manufacture more (and better) goods for a lower cost than the traditional forms of labour. Machine labour could have created a society in which the masses of people could spend their lives on leisure instead of labour.

On the other hand, the ancient, conservative christian governments of old found an idle populace to be an unsavoury thing, and capable of great mischief and wild, untamed behaviour. They found excuses to force idle subjects into labour, as they do to this day. Mass production was likely intended to keep an idle populace hard at work, to sublimate their devilish urges into labour. Of course, we favour the word 'labour' when we refer to industrial chores because laborem means suffering; in the eyes of a deeply Christian establishment, to suffer is to be penitent for the original sin of being conceived.

Perhaps this system of forced industrial labour is almost at an end. Perhaps the end of American Industry is not the death of America, but the precise opposite; for America to thrive, it must have liberty, it must be free from the iron shackles of industry. Perhaps the Green Movement is bringing America into a phase in its history that merges the urban and the rural, the pastoral and the technological societies. Perhaps the apparent 'atheist movement,' which champions Reason over Superstition, Enlightenment over Dogma, will finally overthrow the Christian establishment and free us all from the bondage of the Opus Dei. Perhaps all of these things that the Spirit of the Republican Party fears are interconnected, and part of a genuine libertarian revolution that attacks the real roots of tyranny, roots that are defended by the Republicans and Democrats alike.

the biggest tax there is inflation
it hurts the poor the most
its caused by the rich
its completely hidden from most people
it destroys wealth over the course of your life
you cant get away from it
unless there is no fed res

xploder

reply to post by SmedleyBurlap


www.bls.gov...

To quote:

Nearly half (49 percent) of recipients reported using the rebate mostly to pay off debt. Most other recipients reported either mostly spending the rebate (30 percent), or mostly saving the rebate (18 percent). The small remainder of those asked (3 percent) did not report this information (Chart). Although there is some variation, this pattern also generally holds true across income groups (Table 1).

Consumer units with at least one parent and qualifying child were about two to two-and-one-half times more likely to use the rebate to pay off debt than they were to spend it. However, single parents were much less likely to save the rebate than husband and wife families with children. Comparable consumer units without children (husband and wife only or single person 18 or older) were similar to each other in their propensities to allocate these funds: Less than one-third spent the rebate; less than one-fourth saved it; and most of the rest (well under one-half of the total) used it to pay off debt (Table 2).

Interestingly, in general, there was little difference in the average amount of the rebate received for those who mostly spent ($926) or saved ($936) it (Table 3). However, those who used it mostly to pay off debt had substantially larger rebates on average ($995) than the others.

So, statistically, about 50% of stimulus spending from the government will be dumped straight into debt. Another 20% will be dumped into savings, and only about 30% is used for spending - that means for every dollar you want to put into the economy, the government will have to spend three. Presuming the cycle continues, that will generate an inflation rate of 70%.

Great plan.

Originally posted by spacekc929
The problem with saying that we should cut rich people's taxes is that the argument "When they have more money they can hire more people" is a rational, logical argument with no emotions attached. People aren't rational and economics isn't dictated by what makes the most sense. If you give wealthy people more money (or, in this case, take away less) you know where the extra is going? Investments. Bank accounts. Houses. Stuff for themselves. It's silly to think that they will use the surplus to hire more workers and 'help the little guy.' In the real world, we either raise the taxes on the rich, or they screw us over. It's all there is to it.

You said it right, brother.

A man does not becomes rich by spending. He gets rich by saving ( hoarding )

The only thing he buys would only be necessary stuff, or stuff that can generate more money for his wealth, example - a gleaming new mercz to impress his clients. It would certainly help the car industry, but it will only be quality stuff that the rich will buy, not some china faked, defective or toxic filled product that only the poor will buy.

If he ever goes into manufacturing, it will be such products he will dump on the middle and poor classes to get even more richer. But rather than go into manafacturing where it involves too much risks, time and effort, they would rather gamble in the casinoes named as stock markets and politically correct termed as investments, which are nothing but gambling skewered in favour of the rich, unlike real casinoes where both rich or poor are subjected to the same favour of luck.

Look at the rich media representatives alone - are they spending their obscene amounts of money, more than they can ever spend in 5 lifetimes, into manufacturing and creating jobs? Nope, besides the odd bodyguard or personal assistant, they would rather hoard up their monies in 'casinoes' or spend frivioulously on 'quality' goods.

Where does that leave the many small time american entreprenuer? Answer - on their own to battle uselessly with cheap China quantity economies of scale policies provided by slave labour. And who are the american entreprenuer gonna blame? Answer - the govt for taxing them to the hilt, manevoured by the rich elites whom had been prospering from tax cuts thanks to the moron bush.

What's the solution then?
A. ) Tax the rich elites to the hilt, force them to release part of their hoarded uptheir more monies than they can spend in 5 lifetimes unconcionably

B.) Level the playing field of labour by setting up world wide minimum wages, enough for a human and family to live on working 6 days a week and save some for bad weather days.

C.) return to quality manufacturing.

D.) Source for newer tech that can replace current tech and improve lives, as the TV had, which replaced radio, as well as the mobile phones.

E.) Close down the casino stock market that had only robbed the middle classes of their hard earned monies.

F.) More regulation on banking class, that they be more socially responsible and not responsible only to self.

These are but some ideas which i am sure many more intelligent could think of than me.

reply to post by SeekerofTruth101


So, what is the authorized standard of living?

Do I get an HD TV?

Am I authorized use of a Mercedes? Or do we just have to make due with a Corolla?

Can I have one extra bedroom in my house for my hobbies, or do I have to fill that room with a child to be allowed to have it?

Or is my house not authorized and deemed excessive? To what accommodations shall I be relocated?

I'm really curious, who decides what is an acceptable amount of luxury?

Do you know anyone who makes over $50,000 a year? Have you ever taken an economics class? Do you even balance your own check book or handle your own finances?

The "rich" get "richer" by investing and taking part-ownership of a company. Amazon.com - a service you are likely very familiar with, started as a few teenagers with an idea who appealed to investors ("rich" people "hoarding" money). The investors evaluated the idea and decided to release some of their 'hoarded' money so that these teenagers could buy the things they needed to implement their idea. In exchange - the investor owns shares of the company and can sell those shares to those willing to buy.

This is a rather abstract concept you are not likely to comprehend - but as a company grows in net worth, its shares also increase in value both due to the raw liquidation value of assets to the market value of shares (what people are willing to pay to own part of this company - companies doing poorly or just starting up tend to have low stock values and companies growing or doing exceptionally well tend to have higher stock values - the values are all completely 'floating' depending entirely upon desirability). Investors look for good ideas in new companies and invest in them for the potential gains that come with subsidizing the development of an up-and-coming business.

But if you insist on taxing people to that degree - you can try. The only problem is that they will have enough money to purchase plane tickets and start a life in another country.

Have fun chasing your cash-cow off rather than actually forging a life for yourself.

reply to post by Aim64C


By all means, use the threat to leave. No one will be forced at the point of gun to stay. Go where you can find slaves or the corrupt to make you wealthy. May you enjoy the filth and wealth that comes in your way. Stay out and stay away while American rebuilds itself and the world.

One fine day, you will no longer have any where to flee to, when the masses realizes the extent of greed your classes had ben exploiting them to the hilt.

I'm like OH so sure that the reason these folks got to be millionaires or even billionaires is because they provided all these jobs anyway with the extra cash they had after taxes.

There's so many factors at work here- one I never hear anyone talk about is technology's impact on the labor market.
We now have international jobs - we can have work done in India that streamlines processes that allow more workers in the US to be laid off, and even a few in India.

Ok the thing is - only the rich have really benefited from the reduction in labor needed to perform work that technology has given us. The average grunt now does his own secretarial work, works like crazy in his spare time to get new computer skills needed to stay competitive, ect.

My husband's company - just for example. A smaller company, to be sure. He got trained to do price quotes for jobs last week- he had a couple of days of software training. OK, so then they fire the people that used to price the jobs and now he doesn't have time to take a break hardly. He's doing the same job he did 2 years ago for 20% more, because with the layoffs came the wage cuts. There's NO jobs here, so there's no one quitting because of it, that would be financial suicide for most of these folks.

Owner of the company was complaining that his wife is upset because he told her she couldn't take all her friends to India for a month again this year. Yeah, they need tax breaks.

I think the real debate is the "Capital Gains Taxes". Most wealthy people(Top 1%) make their money on "Non-inventory" asset sales. Also set to expire at the end of 2010 is the 0% rate for the Long Term Capital Gains rate. That will put a dent in their total income. It looks like a 10% increase plus another 4.5% on income. So in total the Top 1% will have a 15% increase for 2011 and it's not going to hurt them any. I'm sure they'll find another way to cheat their share of the taxes.