Just raise the damn taxes already!

Okay, I’ve had it. I’m at my wit’s end. The credit downgrade, the economic cataclysm, DOW, FOX, Mitch and John and Eric, Cut Cap and Balance, all of it. I’m sick and tired of listening to how the stimulus was a failure for reasons other than that it was so neutered that it was unable to make a dent in the problem, and how raising taxes will kill jobs. I’m sick to death of “Taxed Enough Already?” Teabag billboards littered all over town.

More than anything, I’m tired of dishonest Congressmen exploiting easily-misled constituents into accepting measures that do nothing but swell up wealthy bank accounts in the short term at the expense of America’s long-term sustainability.

First things first. This Bloomberg article entitled “No-Tax Stand Unsupported by History” should be mandatory reading. Consider it a cheat-sheet for every argument at the bar or dinner table you’ll ever have against a Dittohead who insists that Americans are being choked to death by taxes and raising taxes will destroy jobs, not to mention put a nice splinter into that Reagan myth by pointing out one of the few great things he did do: raised taxes in a recession and helped save the economy.

America is at its lowest tax point in history, and at one of its worst recessions (if not the worst, depending on who you ask). The actions that got us here are the exact same as what Republicans are suggesting to do to get us out, the economic equivalent of trying to reach into a tar pit to pull your feet out of it.

I found myself chatting with Will about this the other day, and we basically came to the conclusion that there’s no actual logic behind the “tax cuts create jobs” claim. On the surface, yes, it makes a bit of sense to say that if you give business owners extra money, they’ll have the ability to hire more people.

Problem: why would they?

Remember that a business is driven by the profit motive. Growth is dictated by the ol’ supply and demand notion. If demand goes up, the business needs to grow to meet demand. Sales go up, profits rise, more people are hired and more equipment ordered to increase production, the business grows. It’s the most basic of models. The reason a business will grow is that in order to maximize profits, they’ll need to be able to increase productivity.

Tax cuts are basically free money. An increase of revenue that requires no extra expenditure. Normally if you want to raise profits by 50% in a given year, you’ll need to find some way to sell 50% more product or cut costs by 50% (or some combination thereof). In either case, it’s going to end up costing time or money. Give a tax cut, though, and now there’s extra cash in the coffers with no work needed.

Yes, it’s true, an extra million in the bank would allow a business owner to hire  more people and buy more equipment, but why? He’s getting an extra million per year in tax cuts and doesn’t need to spend any extra. Take a gamble that spending his tax cut million would generate more than a million in profits? If the demand for the product isn’t there, it won’t justify the expenses.

What the talking heads on TV and the radio don’t want to say is that the top 1% aren’t the job creators, we are. Jobs are created when the consumers spend more, demand more, and make more money flow. Jobs are created through spending money, not saving it, and that’s what happens with tax cuts for already wealthy people. The money will get squirreled away and saved because the market is in such an abysmal state that most people are cutting back on their shopping, vacations, and bidding on dildos on eBay.

Distill everything to a small example. You have a guy owning a corner store that pulls in $1000 per week. Suddenly half of the people in his little area lose their jobs at the big steel mill because the CEO outsourced the jobs for 1/4 price to Indonesia. Now he only pulls in $500 a week. As a result, he fires one of the two kids he has working there because he can’t afford to keep both on.

Suddenly he gets a tax cut. He can afford to hire that kid back. Why would he? Having that kid on board isn’t going to make business increase. He has more money in his pocket and doesn’t need an extra kid on the payroll. There’s no reason to keep him on. Unless having that kid working at his store is going to bring in more money than he costs, he doesn’t need to be there, and with consumer spending in the area at an all time low, he doesn’t need to be there.

Ideology is trumping good sense, and to be honest I don’t know what it’s going to take to turn it around. The Tea Party and right-wing media have everyone frothed up in a frenzy supporting the exact same misguided policies that caused the collapse as a remedy to fix it, and even as they fail the solution always becomes “do more of it!”

 

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3 responses to “Just raise the damn taxes already!

  1. Great post, IMO, and one that really, REALLY needs to be shoved down the throats of the idiots in hopes they finally get it, even if it’s futile.

  2. Can you please walk me through the logic of “So raised taxes in a recession and helped save the economy.” I am having a hard time believing that raising taxes in such a troubled economic environment would help save the economy, especially since consumer sentiment is incredibly low.

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