This Capitalist Gets It. Capitalists without Consumers are Out of Business
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BoatShoesNick Hanauer, a very successful entrepreneur and venture capitalist understands that the concept that raising taxes on rich people will hurt job creation is a myth. He says it better than I ever could.
http://www.bloomberg.com/news/2011-12-01/raise-taxes-on-the-rich-to-reward-job-creators-commentary-by-nick-hanauer.html
It is a tenet of American economic beliefs, and an article of faith for Republicans that is seldom contested by Democrats: If taxes are raised on the rich, job creation will stop.Trouble is, sometimes the things that we know to be true are dead wrong. For the larger part of human history, for example, people were sure that the sun circles the Earth and that we are at the center of the universe. It doesn’t, and we aren’t. The conventional wisdom that the rich and businesses are our nation’s “job creators” is every bit as false.
I’m a very rich person. As an entrepreneur and venture capitalist, I’ve started or helped get off the ground dozens of companies in industries including manufacturing, retail, medical services, the Internet and software. I founded the Internet media company aQuantive Inc., which was acquired by Microsoft Corp. (MSFT) in 2007 for $6.4 billion. I was also the first non-family investor in Amazon.com Inc. (AMZN)Even so, I’ve never been a “job creator.” I can start a business based on a great idea, and initially hire dozens or hundreds of people. But if no one can afford to buy what I have to sell, my business will soon fail and all those jobs will evaporate.
That’s why I can say with confidence that rich people don’t create jobs, nor do businesses, large or small. What does lead to more employment is the feedback loop between customers and businesses. And only consumers can set in motion a virtuous cycle that allows companies to survive and thrive and business owners to hire. An ordinary middle-class consumer is far more of a job creator than I ever have been or ever will be.
[h=2]Theory of Evolution[/h]When businesspeople take credit for creating jobs, it is like squirrels taking credit for creating evolution. In fact, it’s the other way around.
It is unquestionably true that without entrepreneurs and investors, you can’t have a dynamic and growing capitalist economy. But it’s equally true that without consumers, you can’t have entrepreneurs and investors. And the more we have happy customers with lots of disposable income, the better our businesses will do.
That’s why our current policies are so upside down. When the American middle class defends a tax system in which the lion’s share of benefits accrues to the richest, all in the name of job creation, all that happens is that the rich get richer.
And that’s what has been happening in the U.S. for the last 30 years.
Since 1980, the share of the nation’s income for fat cats like me in the top 0.1 percent has increased a shocking 400 percent, while the share for the bottom 50 percent of Americans has declined 33 percent. At the same time, effective tax rates on the superwealthy fell to 16.6 percent in 2007, from 42 percent at the peak of U.S. productivity in the early 1960s, and about 30 percent during the expansion of the 1990s. In my case, that means that this year, I paid an 11 percent rate on an eight-figure income.
One reason this policy is so wrong-headed is that there can never be enough superrich Americans to power a great economy. The annual earnings of people like me are hundreds, if not thousands, of times greater than those of the average American, but we don’t buy hundreds or thousands of times more stuff. My family owns three cars, not 3,000. I buy a few pairs of pants and a few shirts a year, just like most American men. Like everyone else, I go out to eat with friends and family only occasionally.
It’s true that we do spend a lot more than the average family. Yet the one truly expensive line item in our budget is our airplane (which, by the way, was manufactured in France by Dassault Aviation SA (AM)), and those annual costs are mostly for fuel (from the Middle East). It’s just crazy to believe that any of this is more beneficial to our economy than hiring more teachers or police officers or investing in our infrastructure.
[h=2]More Shoppers Needed[/h]I can’t buy enough of anything to make up for the fact that millions of unemployed andunderemployed Americans can’t buy any new clothes or enjoy any meals out. Or to make up for the decreasing consumption of the tens of millions of middle-class families that are barely squeaking by, buried by spiraling costs and trapped by stagnant or declining wages.
If the average American family still got the same share of income they earned in 1980, they would have an astounding $13,000 more in their pockets a year. It’s worth pausing to consider what our economy would be like today if middle-class consumers had that additional income to spend.
It is mathematically impossible to invest enough in our economy and our country to sustain the middle class (our customers) without taxing the top 1 percent at reasonable levels again. Shifting the burden from the 99 percent to the 1 percent is the surest and best way to get our consumer-based economy rolling again.
Significant tax increases on the about $1.5 trillion in collective income of those of us in the top 1 percent could create hundreds of billions of dollars to invest in our economy, rather than letting it pile up in a few bank accounts like a huge clot in our nation’s economic circulatory system.
Consider, for example, that a puny 3 percent surtax on incomes above $1 million would be enough to maintain and expand the current payroll tax cut beyond December, preventing a $1,000 increase on the average worker’s taxes at the worst possible time for the economy. With a few more pennies on the dollar, we could invest in rebuilding schools and infrastructure. And even if we imposed a millionaires’ surtax and rolled back the Bush- era tax cuts for those at the top, the taxes on the richest Americans would still be historically low, and their incomes would still be astronomically high.
We’ve had it backward for the last 30 years. Rich businesspeople like me don’t create jobs. Middle-class consumers do, and when they thrive, U.S. businesses grow and profit. That’s whytaxing the rich to pay for investments that benefit all is a great deal for both the middle class and the rich.
So let’s give a break to the true job creators. Let’s tax the rich like we once did and use that money to spur growth by putting purchasing power back in the hands of the middle class. And let’s remember that capitalists without customers are out of business.
(Nick Hanauer is a founder of Second Avenue Partners, a venture capital company in Seattlespecializing in early state startups and emerging technology. He has helped launch more than 20 companies, including aQuantive Inc. and Amazon.com, and is the co-author of two books, “The True Patriot” and “The Gardens of Democracy.” The opinions expressed are his own.) -
FootwedgeHenry Ford was one of the first venture capitalists to understand this concept. When he did, he just about doubled the hourly wage of his employess and voilla.....his sales went through the roof...because the rank and file could now afford to buy a car.
People who arhue against a minimum wage also need their head examined...for the very same reason. -
sleeper
If this guy is genuine, why doesn't he just donate all of his money to the federal government?
Look, I don't want to live in a country that taxes success and subsidizes unemployment(read: failure). That is the end of America. If anything we need to be lowering taxes on EVERYONE and reducing the size and scope of the federal government to pay for the reduced revenues. Slim down the entitlement programs to cover people that really hit hard times, not to make everyone equal. -
QuakerOatsJust take all the money the rich have and give it to the middle class and the poor.
Then we can all move on to other pressing issues.
Next. -
dwccrew
Raising taxes will never benefit the country because the politicians will just find new ways to spend it instead of paying down what they owe already. -
I Wear Pants
Like what the Republicans are having happen on the 1st?dwccrew;1024158 wrote:Raising taxes will never benefit the country because the politicians will just find new ways to spend it instead of paying down what they owe already. -
BGFalcons82
Get your head out of your posterior and pay attention. The D's in the Senate want only a 2 MONTH payroll tax cut extension. Boehner and the Tea-ites want a 12 MONTH extension. Which number is more? When you figger it out, please let the Harvard man in the WH know, OK?I Wear Pants;1024227 wrote:Like what the Republicans are having happen on the 1st? -
IggyPride00
They both want a year extension, problem is they can't agree on how to pay for it. The 2 months was meant to be a stop-gap effort while they continued negotiations.BGFalcons82;1024243 wrote:Get your head out of your posterior and pay attention. The D's in the Senate want only a 2 MONTH payroll tax cut extension. Boehner and the Tea-ites want a 12 MONTH extension. Which number is more? When you figger it out, please let the Harvard man in the WH know, OK?
As Erick Ericson pointed out on Red State today though, since when did tax cuts have to become paid for? A central tenant of conservative political philosophy is that tax cuts pay for themselves, and trying to attach spending cuts to their extension is buying into Democrat party talking points.
When the Bush tax cuts are up at the end of 2012, will there need to be spending offsets to continue them? The House right now is playing the Democrats games for them and hurting the party as a whole. -
BGFalcons82
Nope, sorry to disagree, but the Senate has already passed a 2 month extension and is crying a river that Boehner won't put it up for a vote. Boehner wants to pass a 12 month payroll tax cut extension and has stated that 2012 would be the last year for it.IggyPride00;1024252 wrote:They both want a year extension, problem is they can't agree on how to pay for it. The 2 months was meant to be a stop-gap effort while they continued negotiations.
As Erick Ericson pointed out on Red State today though, since when did tax cuts have to become paid for? A central tenant of conservative political philosophy is that tax cuts pay for themselves, and trying to attach spending cuts to their extension is buying into Democrat party talking points.
When the Bush tax cuts are up at the end of 2012, will there need to be spending offsets to continue them? The House right now is playing the Democrats games for them and hurting the party as a whole.
Did you say, "spending offsets"? HAHAHAhahahahahaa Name the last time THAT happened? And don't try the time-tested parlor trick of naming a "reduction in the amount of baseline budget increase" as a spending cut please. You see, that's not a cut per Webster. -
Cleveland Buck
There are always consumers. Businesses will sell all they want if it is at the right price. -
QuakerOatsSince when was a reduction in the amount an employee directed to their retirement trust fund called a "tax cut"? Oh that's right, when democrats want to look like the party in favor of cutting taxes.
There could have been two ways to resolve this, up front: by gradually having the rate go back, say up 1% in '12, and up the other 1% in '13; or, finally acknowledging that SS is the greatest Ponzi scheme ever perpetrated, and eliminating the payroll tax altogether and allow people to instead direct their deferrals into THEIR OWN PRIVATE ACCOUNTS, safe from the spendocrats. -
majorspark
You are making a hell of a case against it with Henry Ford.Footwedge;1024081 wrote:Henry Ford was one of the first venture capitalists to understand this concept. When he did, he just about doubled the hourly wage of his employess and voilla.....his sales went through the roof...because the rank and file could now afford to buy a car.
People who arhue against a minimum wage also need their head examined...for the very same reason. -
BoatShoes
Now this is some impressive spin. payroll taxes/wage taxes/taxes on labor income...whatever you want to call them no longer count as taxes and reducing their rate does not count as a tax cut. Touche' sir.QuakerOats;1024336 wrote:Since when was a reduction in the amount an employee directed to their retirement trust fund called a "tax cut"? Oh that's right, when democrats want to look like the party in favor of cutting taxes. -
BoatShoes
At the beginning of the Bush Presidency Alan Greenspan testified before Congress saying, "the emerging key policy need is to address the implications of maintaining surpluses beyond the point at which publicly held debt is effectively eliminated." We were paying down what we owed and on our way to paying off our debt but Republicans decided it was time to slash revenue to ensure that we did not pay down what we owe.dwccrew;1024158 wrote:Raising taxes will never benefit the country because the politicians will just find new ways to spend it instead of paying down what they owe already.
Thus, The Republicans used this fear that we would actually pay off our national debt to justify the Bush tax cuts which, as we can see, the Republicans will not give up despite being a huge culprit of our deficit situation. In fact, major spending programs on the other hand have been phased out. All of Obama's fiscal stimulus programs have been phased out. Your intuition that Congress just finds "new ways to spend tax money" is not really supported by recent events. -
BoatShoes
Nice deflection. Nobody is saying anything close to that. All anyone is saying is raising 35% to 39.6%QuakerOats;1024141 wrote:Just take all the money the rich have and give it to the middle class and the poor.
Then we can all move on to other pressing issues.
Next.
This is what Obama proposes our marginal tax rates to be:
10%
15%
25%
28%
36%
39.6%
This is what the Marginal tax rates were during most of Ronald Reagan's two terms:
0.0% $0 $3,670
11.0% $3,670 $5,940
12.0% $5,940 $8,200
14.0% $8,200 $12,840
16.0% $12,840 $17,270
18.0% $17,270 $21,800
22.0% $21,800 $26,550
25.0% $26,550 $32,270
28.0% $32,270 $37,980
33.0% $37,980 $49,420
38.0% $49,420 $64,750
42.0% $64,750 $92,370
45.0% $92,370 $118,050
49.0% $118,050 $175,250
50.0% $175,250 -
He also made nearly identical statements about rich people "paying their fair share" during the deficit debates of the day.
I suppose you also believe Ronald Reagan wanted to steal all of the money from the rich and give it to the middle class and the poor. -
fish82
Link some quotes from Reagan saying that...in that context, if you would be so kind.BoatShoes;1024762 wrote:Nice deflection. Nobody is saying anything close to that. All anyone is saying is raising 35% to 39.6%
This is what Obama proposes our marginal tax rates to be:
10%
15%
25%
28%
36%
39.6%
This is what the Marginal tax rates were during most of Ronald Reagan's two terms:
0.0% $0 $3,670
11.0% $3,670 $5,940
12.0% $5,940 $8,200
14.0% $8,200 $12,840
16.0% $12,840 $17,270
18.0% $17,270 $21,800
22.0% $21,800 $26,550
25.0% $26,550 $32,270
28.0% $32,270 $37,980
33.0% $37,980 $49,420
38.0% $49,420 $64,750
42.0% $64,750 $92,370
45.0% $92,370 $118,050
49.0% $118,050 $175,250
50.0% $175,250 -
He also made nearly identical statements about rich people "paying their fair share" during the deficit debates of the day.
I suppose you also believe Ronald Reagan wanted to steal all of the money from the rich and give it to the middle class and the poor.
And while your at it, convert those numbers to 2011 dollars please.
Take "job creation" out of the mix, because it really doesn't matter anyway. The bottom line is its their fucking money. Using today's rates, they already pay a higher percentage of income than any other group, an equal to higher percentage of wealth than any other group, and by far the greatest share of the nation's total income tax bill.
There's no way you can spin any increase on them as anything but Robin Hood/Class Warfare or whatever name you want for it. The government already takes in roughly the same amount of money they did in 2008, and the deficit has gone from 400 billion to 1.4 trillion. If you want to continue humping the idea that tax rates are the problem, knock yourself out. I'll be the one in the corner laughing my ass off at you. -
QuakerOats
So increasing that groups' taxes by over 13% is the answer ---- wow. And, while that group gets dented by a substantial 13% tax increase wallop, it will do almost nothing to dent the annual deficit, let alone the debt. In fact, given the spendocrats penchant for spending 40% more than they take in, it will simply be billions more they can spend and then some! The idea of giving more to the government -- the MOST INEFFICIENT AND WASTEFUL HELL HOLE ON THE PLANET is simply bizarre.BoatShoes;1024762 wrote:Nice deflection. Nobody is saying anything close to that. All anyone is saying is raising 35% to 39.6%
I say TO HELL with giving the federal government one more dime. The theft from the taxpayers has been stunning, and the MASSIVE debt they have burdened future generations with is simply unforgiveable. I hope they go broke, and we can then start over again. -
BoatShoes
And yet tax plans put forward by the Republican presidential candidates would make most Americans pay more taxes!QuakerOats;1024973 wrote: I say TO HELL with giving the federal government one more dime. The theft from the taxpayers has been stunning, and the MASSIVE debt they have burdened future generations with is simply unforgiveable. I hope they go broke, and we can then start over again. -
BoatShoes
And it is laughable that you blame this on democrats...it was Republicans and Alan Greenspan in the early 2000's arguing that we have to slash revenue so that we would​ run deficits so we wouldn't pay off our debt!!!!QuakerOats;1024973 wrote:So increasing that groups' taxes by over 13% is the answer ---- wow. And, while that group gets dented by a substantial 13% tax increase wallop, it will do almost nothing to dent the annual deficit, let alone the debt. In fact, given the spendocrats penchant for spending 40% more than they take in, it will simply be billions more they can spend and then some! -
BoatShoes
At the time Reagan was lobbying for the Tax Reform Act of 1986fish82;1024882 wrote:Link some quotes from Reagan saying that...in that context, if you would be so kind.
[video=youtube;cgbJ-Fs1ikA][/video]
And he said this later that summer in Illinois;
"Just a few moments ago, I told some people inside the building here of a letter that I just received the day before yesterday. It's a letter from a man out here in the country, an executive who's earning in six figures -- well above $100,000 a year. He wrote me in support of the tax plan because he said, “I am legally able to take advantage of the present tax code -- nothing dishonest, doing what the law prescribes -- and wind up paying a smaller salary than my secretary gets -- or I mean, paying a smaller -- I'm sorry, paying a smaller tax than my secretary pays.” And he wrote me the letter to tell me he'd like to come to Washington and testify before Congress as to how that's possible for him to do and why it is wrong."
http://www.reagan.utexas.edu/archives/speeches/1985/62885a.htm
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BoatShoes
Well we've already had this debate and I provided sources for the Tax Policy Center that indicate that a great percentage of high income earners can manage to pay lower effective rates than many middle income taxpayers. Mitt Romney for instance may pay as low an effective rate as 14%. It's hard to say given his limited financial disclosures. And, as has been covered, Warren Buffet claims his effective rate to be 17%. There is no doubt. NO DOUBT that at least some middle income earners pay a higher effective rate than some millionaires.fish82;1024882 wrote:Link some quotes from Reagan saying that...in that context, if you would be so kind.
And while your at it, convert those numbers to 2011 dollars please.
Take "job creation" out of the mix, because it really doesn't matter anyway. The bottom line is its their fucking money. Using today's rates, they already pay a higher percentage of income than any other group, an equal to higher percentage of wealth than any other group, and by far the greatest share of the nation's total income tax bill.
Also of course, considering how essentially all of the income gains and wealth have gone to the very top for 30 years and their tax rates have actually fallen within that same period, appealing to the fact that the group pays the highest share of income taxes is moot. Middle income earners would gladly pay taxes if they could have received some of the income gains from their productivity over the last 30 years. If you get all of the income for 30 years, wouldn't you expect to pay most of the taxes?
And also you say it's their fucking money. But don't middle income earners share the same moral claim to their labor income as well? Paul Ryan's plan, Herman Cain's plan, Rick Perry's plan, Jon Huntsman's plan (which closely mirrors simpson-bowles and I could get behind), etc. etc. all would raise taxes on middle and lower income earners and yet they of course likely would not see any increase in their incomes. Under any plan that eliminates tax expenditures, taxes will increase on middle and lower income groups. Period. Is it not their fucking money too? Why should only they have to bear the burden of paying more taxes?
And you point in that the deficit has gone up since 2008...well that's of course because of the recession and at the very least automatic stabilizers go up during downturns. And, as I've said before, this is more harmful for our budget picture than anything else.
And also, I've always said that to fix our long and medium term budget picture it's going to require spending cuts AND revenue increases. Your claim that we're bringing in the "same as 2008" in revenue of course isn't taking into account revenue as a percentage as gdp...the same mistake Quaker has made in a previous thread. We're taking in far less than the historical average and that cannot continue if we're to solve our budget woes.
The fact is that it is amazing what Republicans will do to defend 35% from going to 39.6% considering Barack Obama was willing to put $4 trillion of spending cuts on the table back in July whereas now, many House Republicans were perfectly willing to go home and let most Americans get a tax increase. -
BoatShoes
According to the Bureau of Labor Statistic's inflation calculator, $250,000 today has the same buying power as $118,905.54 had in 1985. Today, President Obama wants to tax people earning $250k at a 39.6% marginal rate. In 1985, President Reagan's Treasury Department taxed people earning $118k at a 49% marginal rate.fish82;1024882 wrote:And while your at it, convert those numbers to 2011 dollars please.
So, if we were to transfer that same Reagan to present times, all things being equal, he would be ok with people earning $250k per year paying 49% at the margin.
http://data.bls.gov/cgi-bin/cpicalc.pl?cost1=250%2C000.00&year1=2011&year2=1985
fwiw I have Fox news on today and I can't get enough of Jenna Lee
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BGFalcons82
Your analogy works as long as the tax code hasn't changed by one word in 26 years. Even if only 100 pages were added per year (a very LOW estimate), then there would be 2,600 new pages of tax code since your magical growth tax rate was in effect.BoatShoes;1025058 wrote:According to the Bureau of Labor Statistic's inflation calculator, $250,000 today has the same buying power as $118,905.54 had in 1985. Today, President Obama wants to tax people earning $250k at a 39.6% marginal rate. In 1985, President Reagan's Treasury Department taxed people earning $118k at a 49% marginal rate.
So, if we were to transfer that same Reagan to present times, all things being equal, he would be ok with people earning $250k per year paying 49% at the margin.
Comparing tax rates from different eras with completely different tax rules is like comparing gingerbread men to fruitcake. But I have a feeling it won't stop y'all. -
Footwedge
Hooo boy....what a Fishy beatdown. People should be very careful when they ask for links. Yes indeed, we have had collectively the lowest marginal tax rates over the last 10 years, and yet, with all that money in the pocket of Americans, the exonomy continues to sput, sput, sputter.BoatShoes;1024997 wrote:At the time Reagan was lobbying for the Tax Reform Act of 1986
[video=youtube;cgbJ-Fs1ikA][/video]
And he said this later that summer in Illinois;
"Just a few moments ago, I told some people inside the building here of a letter that I just received the day before yesterday. It's a letter from a man out here in the country, an executive who's earning in six figures -- well above $100,000 a year. He wrote me in support of the tax plan because he said, “I am legally able to take advantage of the present tax code -- nothing dishonest, doing what the law prescribes -- and wind up paying a smaller salary than my secretary gets -- or I mean, paying a smaller -- I'm sorry, paying a smaller tax than my secretary pays.” And he wrote me the letter to tell me he'd like to come to Washington and testify before Congress as to how that's possible for him to do and why it is wrong."
http://www.reagan.utexas.edu/archives/speeches/1985/62885a.htm
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BGFalcons82
fish82;1024882 wrote:The bottom line is its their fucking money. Using today's rates, they already pay a higher percentage of income than any other group, an equal to higher percentage of wealth than any other group, and by far the greatest share of the nation's total income tax bill.
No No No, Fish. Ultimately, it's the government's money and they ALLOW people to keep some of what they earn. Just like how they allow "homeowners" to stay in their houses as long as they pay their property tax. Try not paying this tax and find out whom owns whom, eh?!
They have lots of smart Harvard-educated people running around the streets of DC whom know exactly where their money should be "invested":
Like Solyndra.
Like furnishing automatic weapons for known drug lords.
Like investing $50,000 to $250,000 PER CHEVY VOLT in order to force us to buy them (http://jalopnik.com/5870507/report-every-chevy-volt-has-over-250000-in-government-subsidies)
Like "investing" $60,000,000,000 in car companies that will only repay around $40,000,000,000 to the taxpayers.
Like telling you which types of healthcare insurance you must have, not which ones you'd like to pick.
How can you argue with such intelligence? These people need MORE taxpayer dollars to spend, not less.