Lowering Taxes On Capital Formation DOES NOT CREATE JOBS!!!!

[Yavin4]

This big lie is the very crux of the conservative movement because this lie drags independents into the conservative movement. This is the old Trickle Down argument, and yet it still plays.

Tax cuts have ZERO effect on job creation and GDP. The real reason why the conservatives love tax cuts is that they hamper the government's ability to expand social spending like governments do in other nations. Social spending on health care and education is extremely popular in the U.S. There's a national consensus on universal health care, increased educational spending, and social security and medicare are considered the "third rail" of American politics. In sum, the people want MORE social spending.

To counter the will of the people, conservatives need something to stop or hamper social spending, and they use tax cuts to keep in the government in deficits. Voila! We can't have more social spending because the government does not have the money to pay for it.
Giving multi-millionaires a $200,000 tax break is not going to get them to build factories in Michigan and Ohio nor start IT corporations in Penn. It only deprives the government of revenue.

So, what does create jobs? New markets. New industries. New technologies. The creation of the Information Technology age starting with the personal computer is what pulled us out of the economic doldrums of the 70s, not Reagan's tax cuts. The networking age, where computers talk to each other (the Internet), pulled us out of Bush I's economic malaise. The IT age created millions of jobs from hardware, to network admins, programmers, dbas, trainers, e-commerce, web designers, etc. etc. etc. The information age wasn't started by rich people who were looking to create jobs with their Reagan tax cuts. It was started by working class computer hobbyists in the 1970s who nurtured it into a mature industry.

The next great job creation wave will come from energy. Re-engineering our plants, factories, and products to use alternative forms of energy is what will build plants in Ohio and Michigan, not giving Paris Hilton a tax cut.

[Richardo]

1. I've never understood why a cut in personal taxes is supposed to increase jobs.

A cut in corporate taxes, maybe, but PERSONAL taxes? Why would anyone believe that?

[Yavin4]

2. Taxes and Job Creation Are Two Very Different and Separate Things

You can cut Microsoft's taxes to zero, and they will still create more jobs in India than the U.S. Why? Because taxes are only a small consideration when it comes to creating jobs. There are other factors such as employee benefits costs which are the highest in the world due to health care costs.

Lowering the health care costs of the American worker through a national health care plan would do far more to create jobs.

[AdHocSolver]

15. What you say is true. However there is a greater downside to lowering taxes on the rich.

Giving the rich tax cuts (and lowering taxes on corporations) is akin to them winning the lottery. It is found money that they don't really need to live a luxurious life style.

This implies that if they lose it, they won't really suffer for it. So the impulse is to gamble with it. They can build a factory in China or Mexico, which entails some risk, but therefore promises higher returns. They can use it to speculate in the stock market. They can invest in the oil futures market. They can buy into hedge funds. Finally, they can speculate in sub-prime mortgages.

Moreover, the super profits they can make will be taxed at the new lower rate. Put this together with artificially low interest rates, courtesy of the Fed, and no-money-down financing, and the rich person and the corporations have achieved economic nirvana.

The downside is that, when they all take advantage of this state of affairs, you bring on economic collapse.

Parenthetically, none of these problems will be alleviated until the government reregulates the corporations, and NAFTA, the WTO, the Fed, the World Bank, etc., which are collusive corporate agreements, are reformulated or abolished.

It is imperative to do whatever it takes to bring jobs, especially manufacturing jobs, back to America. Currently, the corporations are selling off America's assets to foreigners to cover the debt created by massive imports. This has got to stop.

[On the Road]

4. When Personal Tax Savings are Spent on Domestic Goods,

they do create jobs. It depends, however, on how the money is spent. Imports don't have much of an effect, except for the margins in retail and shipping.

That effect is much more pronounced among lower and middle class taxpayers who are more likely to spend extra money. Upper class taxpayers are more likely to save the money, which is not stimulative.

[Richardo]

14. That's a stretch, and as you say, does not apply to the top1% we're told must have their tax breaks

I've always heard from the GOP that the mega-rich must have their tax breaks so they can create jobs. Directly, not through increased spending which they don't do anyway. And this has never made any sense to me.

[On the Road]

19. It's Not a Stretch -- It's Basic Economics

Nothing in economics is simple and direct, but in general:

More disposable income = more spending = more demand = more economic activity.

That does not mean that it is a good long-term plan, especially the way McCain's and his predecessor's tax cuts are structured.

[Lydia Leftcoast]

3. The Republicans get away with this lie because

most people don't know how businesses are taxed.

They assume that businesses are taxed like individuals, with everything except a couple of deductions subject to taxation. A person may hear the Republican line about taxes destroying jobs and think, "Yeah, that's like the time I couldn't buy a new TV because I had to pay my income tax."

Businesses are taxed on a different basis.

A business's income tax is levied on its PROFITS: what is left over after all the costs of doing business (raw materials, rent or mortgage payments for plants and office buildings, purchases or leasing of equipment, shipping of products, advertising, payments to subcontractors, utilities, R&D expenses for new products, travel expenses for sales personnel, and yes, among countless other things, employee wages and benefits). That is, hiring more people or building a new plant actually LOWERS a company's state and federal income taxes.

The only downside is that dividends to shareholders decrease. I suppose that this is a compelling reason for trust fund babies to campaign for lower taxes. If dividends fall too far, they may have to choose between their ski lodge in Colorado and their seaside mansion in Hawaii, poor things.

[annabanana]

5. NOBODY hires ANYBODY unless they have more business than they

can handle themselves.

Why is this so damn hard to fight? Every "small businessman" in the Country gets this.

The entire "supply side" meme is a big steaming load. There is no reason that they should get away with this crap.

[AdHocSolver]

12. The average American knows nothing about economics & the media & the politicians are owned by...

the corporations.

The "average" person (most Americans) are unable to reason for themselves. They will accept the words of "authority" figures over their own sensory data or logic.

The media understands this, which is why every time a political candidate, for example, makes a speech or takes part in a debate, they have a coven of idiot pundits spout on the "meaning" of what the candidate said. The audience is not allowed to "replay" what the candidate said in their own minds. If that were allowed to happen, then the public might form an independent opinion based on what the candidate actually said.

The corporations essentially run our elections so that most of our politicians are owned by them.

The economy is DEMAND driven. Nobody produces a good or service unless they can sell it, which is possible only if there is someone with money willing to buy it. This is Economics 101. However, this is not what the media, the pundits, or the "experts" tell them.

This is why corporations spend billions of dollars on advertising. "They wouldn't advertise it on TV if it weren't true." is the mentality of most Americans.

The Republicans lie about everything. The average person refuses to believe that anyone would lie so much, because the average person couldn't lie so much and get away with it. Moreover, the average person doesn't feel qualified to figure out which are the lies and which the truths (which is an accurate assessment). So they take the easy way and just assume there is some truth in everything the Republicans say, and don't question it.

To better understand the mechanism at work here read up on the authoritarian personality.

We have reached this sorry state because the advertising industry and the education system in this country assume that the mind is an empty vessel in which "authority" figures merely pour into it whatever is needed to make "good" citizens, good "consumers" and good "employees". Most Americans buy this rationale as well and accept that this is the way things should be.

[TheFarseer]

6. yes, only demand can create jobs

No one opens a shoe factory simply because they have the money to do so. They open a shoe factory because there is a demand for shoes. Similarly, no one will build bio-diesel plants or wind turbine factories simply because they have extra money thanks to a tax cut. They will do it because consumers demand less expensive alternatives to fossil fuels. If no single person has the money to build such a factory (impossible in this country, but just to cover all the bases), then a few people will pool their money or get investors. This is so common sense and yet I've never heard anyone say this.

Every boom we've had in this country has come from a new product or service was just invented or was coming into prominence. We have NEVER had a boom because of a tax cut. What we need is new ideas, not that same old idiotic idea called Reaganomics.

[Yavin4]

7. Here's The Best Counter Argument To The Republican Tax Cut Meme

Clinton raised taxes on the wealthy.

Bush lowered taxes twice on the wealthy.

Each had 8 years as president.

Which president had the higher job creation rate?

[two gun sid]

8. Excellent post. Recommended.

[fasttense]

9. The rich horde money the middle class and poor spend it.

If you give cuts to the uber wealthy what are they going to do with their extra money? Save it. There are only so many houses, so many cars, so many vacations one person can use. Even the uber wealthy and idle rich don't want to waste most of their money. So when you give them more money they horde it.

The middle class and poor spend it because they don't have everything they want or need.

The trickle down theory was lie used by republicans to con Americans. And it worked. Now we've got the economy they built.

[Hannah Bell]

16. when you give themmore money they play financial games with it.

as we are relearning, to our sorrow.

[Dr.Phool]

10. Studies show that when you cut taxes on large corporations,

More than likely, they'll use the money to buy out their competitors, and instead of creating jobs, actually consolidate and cut jobs.

[ihavenobias]

11. That sounds about right

Do you have links along those lines?

Oh and K & R for this thread.

[roamer65]

13. I favor extremely heavy taxes on the flight of capital outside the US...

...and targeted tax breaks for those who spend it right here in the US creating jobs.

[annabanana]

17. Let's rec this to the "greatest". . . Fight the Bullshit!!. . . .

Everytime some damn yo-yo spouts "tax cuts create jobs" baloney we can counter it.

[Igel]

18. "Re-engineering our plants, factories, and products"

That takes money. Where does it come from?

Upthread it was pointed out that without demand, investors have no reason to invest. They're right, but that's only looking at the demand side of the equation. There's also a supply side to the equation.

Business owners also need to have money to invest. That typically comes from investors, not from people living hand to mouth. If there's sufficient demand so high prices are guaranteed, you get investment because the payback's high enough to pull money from other, competing investments. If the payback's not going to be high, it won't attract investment: Then you either need government to invest, or you need to increase the pool of money so that money's cheap to borrow.

If investors see no point in investing in factories, they'll find elsewhere to invest. If corporations have money and see no point in upgrading infrastructure or technology, they'll also do the expedient thing and buy back stock (making outstanding shares more valuable, so stockholders are happy and more likely to reward the CEO and board).

[Progressive_In_NC]

20. Non mega corporations are taxed out of their minds as it is....

We just closed the books on a 50 person company and the profit was 1.2 million dollars. The day the profit was realized, a check for 28% went to the federal gov't and 10% to the state gov't. Property Taxes were then paid to the tune of about 3% of the realized profit.

At the end of the day 42% of all profit went out the door. I guarantee you IBM didn't pay 42% of their realized profit to any combination of government entities. I'd bet they didn't pay 4.2% of their realized profit to anyone.

Go figure.

[TexasObserver]

21. cutting taxes to lower to middle income folks can help an economy, however

Because they are going to spend every extra dime they get, and most of that spending will take place in their own communities, where the dollars will roll over many times, benefitting area businesses and governments.

Making people who make under $50K pay income taxes makes no sense at all.