Sunday, March 13, 2011

Mini-Rant: The Myth Of Tax Cuts For the Rich

There is this persistent myth that tax cuts for the rich create jobs, and I would like to take a moment to explode this myth with a few common sense points.

1) Not all rich people own businesses. Many inherit their wealth, are investors, or are movie/rock stars. Giving these people a tax break does not stimulate job growth, because they have no businesses with which to create jobs.

2) Rich people already have a surplus of wealth (kind of goes with the territory of being rich). The surplus they have has not stimulated job growth. The Bush tax cuts for the rich have been in effect for years; where are the jobs they were supposed to create? How many times will we subsidize wealthy who already have a surplus of wealth and disposable income before we figure out that this equation doesn't work?

3) Tax incentives may lift business and corporate profits in the short term, but since there is no concurrent increase in the amount of sales or customers or demand to go along with this profit, there is no reason in the world for any company or business to add jobs as a result.

4) When companies feel the economy is expanding and there are new opportunities, that is when they add jobs. It's not because they're nice. They have to do it in order to go after new business opportunities and compete with rival firms. Tax cuts for the rich do not expand the economy enough to cause this because there are too few rich people for their increased spending to make any difference outside of a few minuscule luxury categories.

5) The economy expands when people - lower, middle class, and upper middle class people - buy stuff. When masses of people are buying, companies sell more products and services. When companies sell more products and services, their suppliers sell more supplies. This is how the economy expands to create jobs.

It's not rocket science folks.

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