Tax increases on the rich hurt job creation? Tax cuts incentivize job growth?

[ChillbertKChesterton]

I think at this time, it is appropriate to let the right-wingers have this argument.

We know that extremely high tax rates could impede job growth, but we also know that our tax rates today are at near-historic lows, and the greatest periods of economic expansion and middle class growth occured when tax rates were FAR higher.

Nonetheless, right-wingers will never cede ground on this argument, they insist that tax cuts are the only way to encourage job creation (even if a decade of tax cuts hasn't worked, they insist they just need more, and longer).

So, I suggest trying this new approach, something I've seen floating around on the internet: Conditional Tax Cuts.

Take the right wingers at their word, and let's use tax cuts as an incentive for job creation, but let's give the tax cuts AFTER the jobs are created, rather than cutting taxes for a decade and just hoping.

Here is what I mean: Raise the top income tax rate significantly, say 15%, also raise the Corporate tax rate significantly. However, add a conditional tax cut: if a business owner or corporation grows their company through job creation (for example, if they expand their employee base by 5%), then they can qualify for a significant tax cut, effectively keeping them at their low rate.

The result of this will be companies will know that if they hire people they can keep their low tax rates, and wealthy people who are hoarding wealth will have to pay higher taxes on it. This way, the right-wingers can keep their 'low tax rates for job creators' argument, but we just make sure that only actual job creators are getting those tax cuts.

I think this would be brilliant for today's political climate.

[droidamus2]

1. Absolutely agree

I remember this idea being used back in the 1960's. To cut taxes just hoping that somebody will create jobs is idiotic as the last 30 years have shown us. If you create jobs get a tax cut not the other way around.

[av8rdave]

2. Interesting....

It would also be interesting to see the real results of such legislation.

I have long believed that the whole supply side argument is a load of snake oil. Back when the marginal tax rate on the wealthy was over 90%, unemployment didn't seem to be a significant problem. Tag onto that your point that a decade of historically low tax rates on the top earners has failed to yield a significant increase in jobs, and the argument is all but ironclad.

The other aspect to all of this is corporate vs. individual tax rates. I would guess that the majority of high income people who have employees are incorporated in some way for tax purposes and asset protection. That being the case, individual tax rates should have little bearing on employment. It's what the hiring entity (the corporation/LLC/limited partnership) pays in taxes that should affect jobs. And it would seem to follow that if their tax rate became high enough to threaten the survival of the entity, they may have to let people go. However, businesses deduct their expenses BEFORE taxes. They are taxed only on their net earnings, meaning there is no tax liability for paying employees!

All of that being said, I firmly believe that nobody hires until a demand for their goods/services requires it. Even in a low tax environment, any business strives to minimize their expenses. If they are selling X number of widgets per month and they have enough workers to produce X, there is no need to hire more. Conversely, even at a 0% tax rate, if they aren't selling X widgets, they will lay off employees. No responsible business is going to pay employees to do nothing.

[ChillbertKChesterton]

4. I agree that what is truley needed is demand-side economics

Stimulating demand by offering jobs, benefits, and tax cuts to working-class people (who spend a far greater percentage of their wealth on goods/services) will increase business for companies all over. This increase in demand will necessitate hiring to keep up with business.

The supply side argument assumes that employers are always wanting to hire people, if only their taxes were lower. Right wingers imagine that all employers are just itching to hire as many people as possible, under any given situation (as long as taxes are low).

Cutting taxes on the wealthy and assuming this will make them want to hire people is nonsense, but the part of the argument that really sticks in the conservative mindset is that higher taxes will prevent job creation. This is based on a simple line of flawed logic: more taxes -> less money to spend -> less money for payroll

I think a conditional tax cut plan would be a way to raise taxes on corporations and wealthy individuals while cutting off the legs of the right-wing argument. With this plan, "job creators" still get tax cuts, so the one argument that the right has against tax increases falls flat on it's face.

[av8rdave]

5. I think you're right - a conditional plan would accomplish a couple of things

It would raise much needed tax revenue, and like you said, would hurt the right wing argument.

[Fresh_Start]

3. I'd also add that its net job growth not just new job creation

so if you cut 500 jobs in CA and create 500 jobs in TX...there is no job growth.

[truedelphi]

6. The biggest need in terms of American job growth

Would have been to put Universal Sinlgle Payer HC into existence, and not the phoney baloney HC "Reform" package... One of the major reasons for companies to move their manufacturing base elsewhere is the cost of Health Care Insurance Premiums.

GM even stated at the time that it first started manufacturing outside this country that it simply could not continue to absorb those costs.

The problem with what you are suggesting is that there is already legislation, enacted some time ago, that does what you are suggesting. And anyone creating jobs inside certain very dismal areas of American life, such as inner cities with high crime rates, gets even additional perks for creating jobs.

No one with real money, I'm talking of billions, seems interested in job growth in this country. It is far more profitable to "bet" on the price of commodities, than to create a real business. To bet on business mergers going through. To "shortt" one item and "go long" on another.

However there are efforts in the House this week to keep some jobs going, jobs that were creaed by the first stimulus package that Obama intitated.

Garamendi (Dem-Calif.) was talking about the "America Works" program on C Span yesterday, and I am sure you can catch some of what he is saying by visiting the C Span video section on the internet. My household wrote him a letter of thanks.

[Kat45]

7. I like your idea but see one major problem:

There is no f'ing way that the legislature would vote for tax rates to be increased, no matter what.

[zippytheplatypus]

8. abandon the growth model

Growth as a concept is fatally flawed. The Earth and its resources are finite. The only things which are infinite are renewable energy and the human spirit. Until we adapt a model of sustainability and abandon all these ridiculous unsustainable things how much does the rest even matter?

[golfguru]

9. All rich are not created equal

Some are just consumers.
Others are entrepreneurs.
The former should pay more taxes.
The latter should get tax incentives for hiring.