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July 30, 2008

Tax Cuts

-- by Dave Johnson

John McCain says that giving tax breaks to rich people means we will have more jobs, and taxes cost jobs.

Can someone explain that to me? Why would taxes on profits cost jobs? Wouldn't a company have exactly as many employees as they need? And if they are making a profit - which is the only time a company pays taxes - why would they lay people off?

And how would taxes on really rich people cost jobs? Taxing the rich would mean a lower budget deficit, which would mean lower interest rates and a stronger dollar which would mean lower gas prices...

Posted by Dave Johnson at July 30, 2008 6:13 PM

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Comments

That was true in the 50's. I doubt that very few factories with meaningful American jobs will be built inside America - the so-called job building. Trickle down was the reluctant acceptance, transferring the so-called plus economic activity to the service economy.
The original theory that McCain pushes has been dead since the late 60's.
But some things NEVER die : McCains top economic advisors, Forbes and Gramm,want a flat tax. I heard McCain list it in his priorities in early June, and no one said anything. He has since switched to "fair and simple" but he means "flat."

And another thing : Mitt Romney made his money by slinging other peoples' money, and scraping off hefty percentages. How many factories has Mitt built? He represents a lot of what's wrong with America's economic health.

Posted by: Richard W. Crews at July 31, 2008 3:24 AM

That was true in the 50's. I doubt that very few factories with meaningful American jobs will be built inside America - the so-called job building. Trickle down was the reluctant acceptance, transferring the so-called plus economic activity to the service economy.
The original theory that McCain pushes has been dead since the late 60's.
But some things NEVER die : McCains top economic advisors, Forbes and Gramm,want a flat tax. I heard McCain list it in his priorities in early June, and no one said anything. He has since switched to "fair and simple" but he means "flat."

And another thing : Mitt Romney made his money by slinging other peoples' money, and scraping off hefty percentages. How many factories has Mitt built? He represents a lot of what's wrong with America's economic health.

Posted by: Richard W. Crews at July 31, 2008 3:27 AM

The theory is that when rich people have more money, they invest it in things that create jobs (ie, they fund new business ventures or expand existing ones). The reality is that even if they do invest their excess money, they invest it in stocks and bonds. Bonds represent money that is already being spent. And unless you are buying IPOs, the money spent on stocks goes to a previous investor, not the company.

In reality, when you reduce taxes on the poor, they spend it. And that not only makes them better off, it stimulates the economy.

Posted by: ShortWoman at July 31, 2008 9:43 AM

This has been one of my major gripes. At least in profit-making activities, the costs including the wages paid to workers are deducted. That means that one does not pay taxes on the amount spent on labor.

Any money that is available to be spent on labor is still available no matter what the tax rates. When the marginal tax rate is less than 100 percent, anything maximizing pretax profits will also maximize post-tax profits. Therefore, the amount spent on labor will be determined by what maximizes profits, independent of the tax rate.

Posted by: John at July 31, 2008 6:30 PM

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