Yesterday I talked about how much it pisses me off when conservatives complain that only 47% of Americans pay income tax. For some reason, they’re always complaining about how the poor and destitute aren’t paying their fair share, instead of wondering why there are rich people who don’t pay any share. I promised that today I would discuss why their reasoning for this willful blind spot also pisses me off. So here we go—
#4- “The rich create jobs”
When I hear someone say this, it makes me want to smack them upside the head. I promise that I’m not a violent person by nature, but this one really pushes my buttons. Unlike yesterday’s post, where I admitted that the statistic is true, it’s just the way conservatives use it that’s anger-invoking, this time I’m going to go ahead and call them liars. Now, to be clear, not everyone who says this is lying…on purpose. There are people who know this statement is false, and use it to promote their own self-interest. That, of course, would be the rich people who want everyone to believe that we need them. Even though I know they are lying liars when they say this, I can at least understand why they do. However, when I hear someone toss this out as the reason why rich people shouldn’t have to pay more tax, about nine times out of ten it’s a working class joe who is working against their own self-interest because the rich have been so damn convincing with this one.
Now, far be it from me to accuse someone of lying without providing some evidence. I’m a liberal, after all, and my world is fact-based, not faith-based. Let’s think for a moment what the world would look like if it were true that rich people create jobs, and furthermore that they are more likely to do so if they are allowed to “keep more of their own money,” also known as not paying the taxes the rest of us have to pay. To begin with, I would hypothesize that if these two things were true, the number of jobs in America would go up, and the unemployment rate would go down, any time one of two things happened. First, if rich people create jobs, then any time rich people got richer, I would expect them to create more jobs. Second, if they are more likely to do so when they pay less lax, I would expect to see unemployment fall when rich people pay less tax. Now, let’s look at the real world. First, have rich people gotten richer or poorer in the past twenty or thirty years? Well over a third of all income growth went to the top 1% of the population between 1979-2007. (source) What does this mean? Well, to begin with, that top 1% of earners now makes 24% of all income in the United States, compared to 9% in 1979. (source) Now, I’m willing to grant that while the top 1% has statistically gotten richer, that does not mean that we’re talking about the same people getting richer over time. People do fall out of this group or rise into it. However, the fact remains that there is a group of people at the top who are richer, compared to the rest of us, than rich people have ever been before.
And the taxes they’re paying? Much is made of the fact that the amount of tax paid by the top 1% is growing as a percentage of all tax paid, to imply that their tax burden is heavier than anyone else’s. This is simply explained when you look at the income growth data. The top 1% now takes in so much of the income that the rest of the population has less and less available to contribute each year. But let’s look at the actual tax rates paid by the superwealthy. From 1940 to 1963, America’s glory years for many conservatives, the top tax rate varied, but never fell below 81%. It rose as high as 92% in 1952-53. From 1964-1980, it ranged between 70% to 77%. (tax rate source) What did unemployment look like during these years? From 1948-1963 unemployment varied from a low of 2.9 in 1953 (a year the tax rate was at its highest) to a high of 6.8 in 1958 (when taxes had gone from 92% to 91% in the top bracket). Unemployment never went above 7% until 1975, when the highest tax rate had fallen to 70%. (unemployment rate source) In 1982, unemployment had climbed to 9.7%, and the highest tax rate was slashed to 50%, thanks to Reaganomics. In 1983, unemployment fell to 9.6%, and continued to fall until 1989, when it hit a low of 5.3%. 1988-89 was also the all-time low tax rate for the top bracket, at 28%. Since then, taxes rose to a high of 39.6% for America’s richest from 1993-2000, a period when unemployment dropped each year from 6.9% to 4%. The top tax rate has since fallen to a low of 35% since 2004, and our unemployment rate has, as we all know, risen to the highest levels since the depression. What does this say about tax rates and job creation? It’s a complicated story, and there are economists on both sides with compelling data. It seems pretty clear, though, that rich people were actually creating more jobs in the fifties, when the highest tax rate was over 90%, than they are now, when they are only paying, at the most, 35%. If rich people create jobs, and they do it most when their taxes are low, then they should be creating jobs right now like crazy, since they’re richer than ever and paying pretty close to the lowest taxes of modern times. This must mean that rich people don’t create jobs, despite all the PR to the contrary. So what does create jobs?
To answer this question, let’s think about a business owner. Let’s make him the owner of a large car dealership. Let’s make him a millionaire, too, and a fiscally responsible man. Let’s assume that business is terrible right now, as it is for many business owners all over the country. No one is coming in to buy any cars, and he is struggling, although thanks to his savings he is still doing well personally. Now let’s imagine that the government gives him and his business a tax break, whether through a lower rate, a special subsidy, or a new tax exemption, which allows his business to effectively take in $120K more than he expected. What should he do with this money? Should he hire a new worker or two, or expand his inventory? Of course not, since we’ve established that he’s not an idiot. Why would he hire new employees to stand around his empty showroom? Why would he increase his inventory if he’s already not selling the cars he’s got? He’s going to put that money in savings and wait for the economy to turn around. He may invest it, but he may need liquidity right now. Rich people don’t create jobs, no matter how rich we make them. What would make this business owner hire some new workers? Demand for new cars that is so great he can’t handle it with his existing work staff. If so many people are coming in to buy cars that some of them are walking away before his salespeople can make a pitch, then a smart businessman will hire a few more salespeople. It may be the millionaire doing the hiring and signing the paycheck, but it’s demand that creates jobs. I will say this one more time, in case anyone missed the anger the first time. Rich people do not create jobs; demand creates jobs. Please, everyone in the working class, stop thinking that being nice to rich people will make them like you more and let you in their club. Billionaires can take care of themselves, and they don’t need you to negotiate a lower tax rate for them, although I’m sure they will laugh all the way to the bank with the money they won’t be using to create new jobs.
No comments:
Post a Comment