Taxing the Rich Does Not Hurt Jobs Posted on March 11, 2012 by Yves Smith This Real News Network interview with professor of economics Jeffrey Thompson debunks the notion that increasing taxes on the well off is a negative for employment. More at The Real News Post navigation ← Links 3/10/12 Michael Olenick: Beware of Housing Market Cheerleading → Subscribe to Post Comments 75 comments LucyLulu March 11, 2012 at 1:38 am Yves: “increasing taxes on the well off is not a negative for employment” Need to edit out “not” to avoid double negative Feel free to delete this post after reading. Yves Smith Post authorMarch 11, 2012 at 3:02 am No, it’s correct as written. Double negatives are not ungrammatical. LucyLulu March 11, 2012 at 3:19 am I meant meaning, not grammar. The video debunks that taxing the rich is negative on employment. Jim Sterling March 11, 2012 at 5:22 am “debunks the notion that it is not a negative” read all wrong to me too, as soon as I saw it. Julia Versau March 11, 2012 at 7:19 am You guys are right. The way it’s written: Notion: Taxing rich does not hurt jobs. Headline: What I link here debunks it. craazyman March 11, 2012 at 1:02 pm how about “debunks the notion that taxing the assets off folks with big assets is bad for employment of skinny hungry poor people.” or “debunks the notion that taxing the well off will cause a 50-mile wide asterioid to smash into the earth at 500,000 miles per hour simultaneously destroying Earth, Mars and Venus (allowing for the delay in gravity wave propagation due to relativity).” craazyman March 11, 2012 at 6:36 pm I know it’s probly too late, but how about: “debunks the notion that scraping chunks of uneaten ravioli in porcini mushroom sauce from neglected plates of multi-millionaire private equity partners feasting in Chelsea bistros and then feeding them in buckets to hungry homless feral street urchins with BA degrees in sociology and history who gave up looking for jobs in 2010 and have since gone insane will cause a violent collapse of the entire economy instantly starving and killing everybody within 55 light years of earth including all the very people who need help the most?” Is that over the top? Maybe. I could understand if somebody thinks it is. But it is Illustrative! :) ebear March 11, 2012 at 4:15 pm You are SO not right! LucyLulu March 11, 2012 at 1:57 am Quelle surprise. Studies back up what history has demonstrated over the last few decades. Cutting taxes doesn’t create jobs or stimulate the economy. Will somebody please send Republicans the memo? propertius March 11, 2012 at 4:30 am And while you’re at it, send a copy to self-proclaimed Democrats like Obama – since a lot of the laughably-named “stimulus” bill was in the form of tax breaks. Rodger Malcolm Mitchell March 11, 2012 at 11:08 am Oh, really? I’d love to see the research that demonstrates how adding dollars to the economy does not stimulate the economy, and taking dollars out of the economy benefits the economy. While you’re searching for that non-existent research, here’s some real data: http://rodgermmitchell.wordpress.com/2009/09/07/introduction/ Rodger Malcolm Mitchell Jim Sterling March 11, 2012 at 12:20 pm The previous poster refers to cutting taxes, and you refer to adding money to the economy. I don’t think cutting taxes on the rich adds money to the economy. craazyman March 11, 2012 at 2:52 pm Fatty and the Hole let’s say you had a 5000 pound fat man with 88% of the economy’s wealth, and everybody else had 12%. The 12% were sad and depressed and looked at the fat man and cried because they felt that he proved that God was dead. And then somehow the 5,000 pound fat man received a big tax bill, and the tax money was taken to a big hole and dumped into it, and everybody else got to watch. They were amazed and euphoric. They were so happy they started dancing and singing and crying tears of joy. Their depression dissolved like fog in the sun and Then they went home and started making things and doing things and cooperating with each other — instead of sitting at home alone crying. The economy boomed and new money was created by the new forms of cooperation, which came before the boom and the money, and which caused both and the growth itself. QED RepubAnon March 11, 2012 at 7:41 pm Slightly modified: Originally, the fat man needed to telephone the local store, and the store would deliver his food by truck. However, the fax man received more and more tax cuts, and eventually found that he could have his food flown in by helicopter from another country. So, the fat man called his pet Congresscritters, who gave the fat man still more tax cuts – and also cut funding for education and road repair. The store went broke, the roads became so full of potholes that the asphalt was torn out and replaced with gravel. The fat man didn’t care, because his taxes remained quite low. Of course, everyone else was starving. The fat man called them lazy, and told them to get jobs working at the store or fixing the roads. When told there were no such jobs, the fat man called them socialists. Eventually, enough of the rest of the population decided to vote for congresscritters that would raise the fat man’s taxes and use the money to repair the roads and give the store a loan to re-open. The fat man bemoaned this evil communist conspiracy, but was ignored. Soon, everyone was back to work – and the fat man still had enough money to have his food flown in by helicopter. Rick Caird March 11, 2012 at 5:30 pm Mitchell, once again, tries to sell the free lunch theory of economics. F. Beard March 11, 2012 at 8:06 pm There is a difference between a “free lunch” and preventing the destruction of many lunches already paid for with hard work. Examples: Milk dumped on the ground in GD I when the formerly employed were hungry and houses allowed to rot in the present Depression while many formerly employed are homeless. RepubAnon March 11, 2012 at 7:50 pm Wow, a Keynesian! The answer, of course, is that it depends upon where the money is spent. If the money is spent on income tax cuts, and the income tax system is progressive, the benefits of the tax cuts are regressive. Thus, those most in need get the least benefit. Money dispensed via food stamps, or public works projects, gets spent in the US. Tax cuts for the rich make it easier for the Wall Streeters to buy another Ferrari. Admittedly, the Italian economy could use a boost just now… Glen March 11, 2012 at 3:06 am Well, duh! As an engineer in the aerospace industry, I have to admit that I find the “science” of economics laughable. (If we engineered airplanes this way the amount of dead people would be dreadful.) I had a rather long diatribe here about what a complete failure people like Summers, Greenspan, Rubin, etc, are but edited it out because even comparing what these people do and have done to real science is a joke. Summers is no more of a scientist than a witch doctor is an MD (and that actually may be demeaning to witch doctors that are more rigorous in there application of study, observation and critical reasoning with the tools available.) Glen March 11, 2012 at 3:23 am OK, I realized I’m guilty of digression, straw men, (and using “there” instead of “their”), but can you economists either clean your own house or at least change your profession name back to political economy so the rest of us can understand that the profession exists to wrap a thin veneer of science around your beliefs? craazyman March 11, 2012 at 12:43 pm cleaning their own house would be a negative for employment. housecleaning jobs aren’t great, but they are better than no jobs, if you are a housecleaner. if you increase taxes on rich economists, it may lead to loss of housecleaning jobs, on the margin, depending on the demand curve, but it may lead to an increase in local sales of retail cleaning products, which may boost employment for retail workers and cleaning product producers. / it gets complicated. / and we haven’t even figured in the impact on golf course utilization, which may impact sales of golf balls and shoes, which may impact retail sales at golf supply stores, which may need more cleaning products if customer counts go up. / everything shifts around but god knows where it ends up. / I say raise their taxes if they’re rich, tax their assets off, just because it seems reasonable (forgetting about any “logic”. I don’t think logic is logical anyway, it’s just a form of perception), but don’t raise may taxes, because even though I’m rich compared to a housecleaner, I’m not rich compared to an economist or anyone else in the 1% & I live in New Yaawk. I’m ready to leave my state any week now but I just don’t know where to go, that’s the problem. Everywhere you are, you’re there. So here I am. Rex March 11, 2012 at 7:24 am (If we engineered airplanes this way the amount of dead people would be dreadful.) But then there might be some job openings. Rodger Malcolm Mitchell March 11, 2012 at 11:14 am Economics is a social science. All social sciences are subject to the same criticism: inexactitude. The physical sciences love to huff and puff about that. And then we get to the physical sciences of quantum mechanics and cosmology — as inexact as one can get. Rodger Malcolm Mitchell craazyman March 11, 2012 at 12:45 pm exactly! Glen March 11, 2012 at 7:08 pm What Lambert says below. Let’s try to put a number on the dead and dying because of economics and on quantum mechanics and cosmology and see which is more dangerous. I’m even willing to pile on people killed by the bomb on the quantum mechanics side. At least the scientists that developed the bomb were willing to debate the morality of their actions – I have never seen that discussed by economists. Lambert Strether March 11, 2012 at 2:10 pm The number of dead created by our current political economy is certainly a large one. scraping_by March 11, 2012 at 8:25 pm When I hear the phrase “the collapse of America” I often wonder if the problem is really the Collapse of the American Empire. That there will simply no longer be the resources to wage pointless wars in Muslim nations. Some Muslims, that is. The elite of the Arabian Penninsula is still doing well out of American warmongering. It pays them both with cash and by destroying their enemies… phone verification March 11, 2012 at 5:19 am isn’t this old news? polistra March 11, 2012 at 7:35 am There’s an interesting point toward the end of the piece. Everyone pays sales and property tax, but businesses don’t pay income tax until they show a profit. So: if you want to encourage startups, you should put more of the tax burden on income and less on sales and property. Makes very good sense. Birch March 11, 2012 at 9:17 am You should ckeck out Henry George and the single taxers. Mason Gaffney has a good page with lots of essays. http://www.masongaffney.org Income might seem like a good tax on the surface, that’s certainly what they try to sell it as; but we should tax bads, not goods, and/or tax away the retier fees of land and money from the rentiers. paulie46 March 11, 2012 at 9:57 am Trouble is, workers don’t earn “profits”. They earn what they earn or more. I would go so far as to say workers in the aggregate earn “negative profits” (sustain a loss) because part of their would-be gains accrue to the employer. John Merryman March 11, 2012 at 8:06 am But if they don’t have all that extra capital, what will they lend everyone else to buy the stuff to keep the economy running? Very Serious Sam March 11, 2012 at 9:16 am There was never a ‘trickle down effect’ thanks to making the rich even richer, for instance by extremely favourable taxing rules. Because of course the main things trickling down would naturally have to be: jobs. So consequently there possibly can’t be a corresponding negative effect on jobs if the real tax rates for the top are set to a more decent and fair level. F. Beard March 11, 2012 at 9:29 am Why high taxes on people if they acquired their money fairly? And if they did not acquire their money fairly then why isn’t the means they used illegal? Look, in a just society the rich are either fortunate, deserving or criminals. We certainly should not wish to punish the deserving by definition. I would argue we should not punish the fortunate either. As for criminals, they should be fined of ALL their ill-gotten gains PLUS a generous amount for restitution and sent to a correctional institute if warranted. In addition, according to MMT, taxes are only needed if price inflation is a problem in the government’s money otherwise they are bad for the economy. Also, Rodger Malcolm Mitchell writes extensively about the folly of removing money from an economy. Very Serious Sam March 11, 2012 at 9:41 am There is something to what you write, however, the increasing incme gap is a huge danger for societey as such, no matter how fairly or not the top earners got their income. Besides, there is simply no fair way that one person, for instance a hedgefund manager, reaps 2 billion a year, while the person cleaning his palace gets just 20.000. It might be ok to acccept if one at the top earns say 50 times what one far down has, but not 10.000 times. In a fair and decent society and system, there would be rules which limit the income gap. And I mean limit in percental and/or absolute value, whichever brake catches first. F. Beard March 11, 2012 at 7:24 pm I am not opposed to a one-time wealth tax to strip grossly over-compensated people of their billions. Jackson Bane March 11, 2012 at 9:49 am “Look, in a just society the rich are either fortunate, deserving or criminals.” Well maybe it’s just down right destructive to be rich. Maybe it’s a celebrated vestige of sociopathy in the human condition. We’d all like to be “rich” or a rockstar but at what cost? F. Beard March 11, 2012 at 10:10 am Well maybe it’s just down right destructive to be rich. Jackson Bane That would depend on the individual. As for of sociopathy, our money system (a government enforced usury for counterfeit money -“credit” – cartel) rewards it. We’d all like to be “rich” … but at what cost? Jackson Bane Why should honestly acquired wealth be destructive? Wealth = power so why shouldn’t the honest have it? Bonanno Derivatives March 11, 2012 at 10:36 am Jesus warned: “do not store up for yourselves treasures on earth” I’m with you, people should honestly get what they need. Hugh March 11, 2012 at 10:08 am “Why high taxes on people if they acquired their money fairly?” Because it is ultimately about resources, and in a fair society the distribution of those resources will be fair. And in our society, distribution is mediated through money and effected through taxes. F. Beard March 11, 2012 at 10:20 am And in our society, distribution is mediated through money and effected through taxes. Hugh Two wrongs don’t make a right. If some (the so-called “credit-worthy”) were not allowed to legally steal in the first place then there would be far less need for redistribution. Hugh March 11, 2012 at 11:11 am Not sure which two wrongs you are talking about. All economies change over time and need reworking. No economy has been shown to be inherently stable or produce consistently fair results. Economies are how we meet the basic living conditions we want for our societies. So distribution and redistribution are going on all the time. There is no invisible hand or equilibrium. We can strive to create “fair” conditions but there is no guarantee that these won’t in time create unfair results, and so need modification. And when there are distortions, taxation is a useful means of addressing them. F. Beard March 11, 2012 at 11:32 am And when there are distortions, taxation is a useful means of addressing them. Hugh No, that is equivalent to maiming the healthy instead of healing the lame. If society needs re-leveling (and it does) then we should just hand out new fiat to the entire population equally. That would not make the rich poorer but it would greatly reduce relative wealth disparity. Example: Imagine A with $1,000 and B with $100. A has 10 times the money B has. Now give both A and B $100. Now A has only 5.5 times as much money as B and A can’t complain that he was treated unfairly! Federal taxes, unless they are needed to control price inflation in the government’s money, are a poor policy tool. wunsacon March 11, 2012 at 10:33 am >> Why high taxes on people if they acquired their money fairly? The more standard deviations away the income, the more it has to do with “skimming” from a position of privilege and less from “contributing”. Many generations built up our society to where it is today. This sunken investment into *technology*, laws, infrastructure keeps giving. As a consequence, our economic system as a whole yields profits greater than the sum of the contributions from individuals contributing to it today. (We stand on the shoulders of giants.) But, unfortunately, because “ownership” of this societal inheritance is largely privatized and because labor is always hired at a discount to its contribution (and there’s really no other way run a business), the excess profits inure to the benefit of a small group that either inherits or fanagles their way into controlling positions. Progressive taxation — either on income or on wealth itself — is the only force we can employ to oppose concentration of wealth. F. Beard March 11, 2012 at 11:02 am A universal and equal bailout PLUS fundamental reform would greatly reduce existing wealth disparity and prevent the problem of unjust wealth and power concentration from reoccurring. Look. Our money system is fundamentally dishonest. Taxing the beneficiaries of it is not the proper solution; that is just loot sharing. Instead, the money system should be reformed so that it is fundamentally ethical. wunsacon March 11, 2012 at 1:42 pm >> Taxing the beneficiaries of it is not the proper solution; Yes, taxing the over-benefited beneficiaries is a large part of the solution. Progressive income and/or wealth taxation is the most straightforward way to inhibit concentration of income/wealth. Benefits are not linearly proportional to contribution. I dare you to show me any “fundamental reform” that will change that. “Honest money” alone will not nearly suffice, because you still have things like “network effects” and anti-competitive business practices leading people/companies to buy Microsoft products for years “just because”. F. Beard March 11, 2012 at 7:13 pm Well, I also propose a metered, universal bailout till ALL US private debt is paid off. That could continue as a Guaranteed Income or “Social Credit”. LifelongLib March 11, 2012 at 4:18 pm wunscacon, the big reason distribution of income/wealth is so lopsided is that our economy primarily pays people for having (e.g. dividends, capital gains, rents) rather than for working (e.g. wages, profits). If people were paid for work but capital and its returns were socialized incomes would still not be equal (some people work harder/more skillfully than others) but would be far more equitable than they are now. proximity1 March 12, 2012 at 7:27 pm And all this is done with which or with what political party? or movement? or revolution? or rebellion? Currently, the American public versus the world’s financial elite–which own and control or ( in many cases in U.S. high political office) are in practical terms indistinguishable from the political elite–is akin to a nursery-school class versus an NFL footbal team playing a football game. It calls to mind the saying, “If we had some eggs, we could have ham and eggs–if we just had some ham.” After the political/financial reform, what does the U.S. look like? And, for an encore, why not urge that the Confederate States of America defeat Lincoln’s Army of the Republic, too? I’d also like it if everyone knew that Shakespeare was in fact Edward DeVere, the 17th Earl of Oxford, a rennaissance mind with everything that a real person would obviously have required to have in fact produced the work we refer to by Shakespeare. And, once this is generally accepted over the absurd current conventional view, everyone could make Shakepeare’s genius a standard by which to measure his own intellectual effort. But, the latter has proved very far out of reach. C. Wright Mills, who, in his own day was far ahead of his time is now even farther ahead of our time. And, with that as back-drop, we’re going to remake the political and economic order?– a people who know next-to-nothing about the present realities of their own political and economic order? I think we shall have to start with something much, much, much more modest. My suggestion is that people reduce their television viewing to no more than five minutes per week; that they spend the time they’d have wasted on television on reading and that their reading have large doses of the writing of Bertrand Russell, C. Wright Mills, the history of Charles and Mary Beard for starters. What are the chances? Aren’t they infinitely better than expecting from our (and others’) technology-besotted mass publics a world makeover worthy of geniuses before our technophile habits bring general doom and destruction of our devolving species? kurringai March 11, 2012 at 8:08 pm “And if they did not acquire their money fairly then why isn’t the means they used illegal?” Because the wealthy organise the legislative framework for property rights and executive control of corporations. It’s not illegal because we don’t live in democracies, but oligarchies where there are elements of democratic control. Those elements fall well short of providing a fair framework for the division of capital. The idea that people deserve or earn much higher pay than most others issues from this deceptive structure. How does anyone deserve vast wealth? It’s just a notion imposed by the framework. The framework and the indoctrination machine behind it are definitely not controlled by citizens. And yes, progressive taxation is a highly attenuated system of clawing back some of that wealth – not earned but ringfenced through the application of the executive- and shareholder- controlled framework. Tom Crowl March 11, 2012 at 9:48 am Absolutely correct! (re taxing the rich)… Now, I’m sure this will tie a few pairs of underwear into knots… but the only smart alternative to that is to literally print money and pass it out to the rest of us on some graduated basis. This is based on a realization (which some may debate but I consider clearly true)… That its more the distribution of a currency (and related money velocity) that determines the health of a society… rather than merely the total number of dollars in circulation. Decision Technologies: Currencies and the Social Contract Wealth concentration destroys wealth! And its the Altruism Dilemma that underlies that concentration… Issues in Scaling Civilization: The Altruism Problem As well as the ridiculous pay on Wall Street and Corporate managements. Compensation and the Social Network Jack Lohman March 11, 2012 at 10:57 am I am a supporter of ZERO taxes to corporations that manufacture in the US, and increasing taxes on the rich to compenstate. But none of this will happen until we get rid of the campaign bribes and political corruption. THEN we’ll see politicians start making good-sense laws. scraping_by March 11, 2012 at 11:58 am While a good theory, treating corporations as invisible pass-throughs is not a practical truth. Elites will use it as a source of direct benefits defined away from income by the usual lame legalisms. It’s amazing what the top management needs to have to do its job (fine art, large houses, private jets, etc.) while living paycheck-to-paycheck is creeping up the company personnel chart. The “tax-shelter” corporation is alive and well. If shaving a few points off the tax rate makes a multi-million dollar legal specialty, what would 100% advantage do? A corporation is not a cooperative; stockholders are pigeons, not partners. Jack Lohman March 11, 2012 at 12:18 pm Taxes on corporations are simply passed on to consumers, in a very regressive way after adding all their CPA and legal avoidance costs. We’ve got to be smarter than this, and would be if it were not for all of the political payola. wunsacon March 11, 2012 at 1:54 pm Let’s cut the Gordian Knot about “the right level of taxation for corporations” and force them to convert to MLP’s. The “corporation” transfers long-tail risk from insiders to the public. We’ve seen this play out time and time again with Wall Street insiders selling out their firms and miners/manufacturers leaving ecological disasters behind. The whole limited-liability idea has been a bust and should simply be unlegalized, removed from the statutes. Corporations — managed overwhelmingly by wealthy shareholders with a controlling share — have also become a force-multiplier for the wealthy to control the political process and our lives. MLP’s are traded on exchanges. Business will be able to raise capital just as they do now. Jack Lohman March 11, 2012 at 2:31 pm Yea, here’s another corporate option… http://moneyedpoliticians.net/2010/12/06/wisconsin-should-take-the-lead/ scraping_by March 11, 2012 at 8:19 pm The consumer price is the market maximum in a free market, the whim of the elite in a monopoly. Any costs–taxes, labor, executive bonuses, etc.–aren’t passed on, they’re taken out of profit.* Enough expenses, and the offering collapses. That said, there are expenses that help and those that hinder the final consumer offer. Taxes are neutral, in a larger scheme of things, because the social goods they pay for are necessary for the corporation to survive and thrive. Right now, the “tragedy of the commons” isn’t private individuals overusing commonly held resources. It’s private elites, through corporations, acting as free riders, as subsidized riders, to the destruction of the rest of us. The real people, not the super citizen legal fictions. *Multimillion dollar salaries for athletes don’t raise ticket prices. The team owners are going to charge whatever they can get. Sauron March 11, 2012 at 9:09 pm Why are corporations always agitating for lower taxes then? Why should they care? Rodger Malcolm Mitchell March 11, 2012 at 11:21 am The article ignores one fundamental fact: A Monetarily Sovereign government neither needs nor uses tax money. If all U.S. federal taxes fell to $0 or rose to $100 trillion, neither event would affect the federal government’s ability to pay its bills. For example, even were FICA to be eliminated, Social Security benefits could be tripled, and Medicare could be given to every man, woman and child in America. The article makes the tacit assumption federal taxes are necessary. For a Monetarily Sovereign government, they are not. When the basic assumption is wrong, the whole article is suspect. Rodger Malcolm Mitchell F. Beard March 11, 2012 at 11:34 am Amen! Septeus7 March 11, 2012 at 12:41 pm What about demand push inflation and ‘Cantillion‘ effects caused by the rich spending? Here’s post that is somewhat relevant… http://unlearningeconomics.wordpress.com/2012/01/06/cutting-taxes-on-the-rich-causes-inflation/. I cannot find the article but I the New York Times had a article about some empirical research that linked tax cuts to the kind of spending that drive up prices and often on things people generally need. Isn’t logical to think that if the rich are keeping more money and having reduced taxation costs then that means they will put more money into bidding up commodity cost via speculation now that they have more money to speculate with? Bill Mitchell has several post on his blog about how little tax cutting does in terms of payback versus direct spending. Given that highest payback is the payroll tax cuts with about 1.5 return on every dollar spent and if it could be argued that the inflationary effects offset any gains of any kind of tax cuts entirely for most people. Roger, if you don’t think Federal Taxes are necessary then aren’t you saying that we shouldn’t have a national policy regarding inflation and that the state government should manage the demand for dollars? Isn’t that unconstitutional given that Congress is given the power to “regulate the value thereof” of the currency? I think even within the MMT framework there is powerful case for heavy taxes on the wealthy. Michael Hudson has explained the reason for high taxation to keep spending on physical capital investment high and financial speculation low. Jamie Galbraith and others studying the empirical effect of inequality I don’t think would so quick to dismiss the idea that higher taxes on the rich if they bring about more equality would have very positive economic effects in real terms. F. Beard March 11, 2012 at 7:00 pm Isn’t logical to think that if the rich are keeping more money and having reduced taxation costs then that means they will put more money into bidding up commodity cost via speculation now that they have more money to speculate with? Septeus7 I suppose so but note that I also propose a ban on further credit creation or at least every government subsidy for it such as a lender of last resort, Federal Government borrowing (and implicit guarantees) and government deposit insurance. That would eliminate (or greatly reduce) speculation with credit. Also note that I approve of Federal Taxes to control price inflation so by all means target commodity speculators should taxes be necessary. wunsacon March 11, 2012 at 1:57 pm >> taxes are necessary. Taxes are necessary. Otherwise money loses its meaning. F. Beard March 11, 2012 at 7:03 pm Otherwise money loses its meaning. wunsacon Not necessarily. Saddam Husein’s money retained value even after he was deposed. One reason was that people knew the supply of it could never increase. Ron March 11, 2012 at 2:43 pm You’ll like this I trust: Henry Ford and Thomas Edison explained the potential for savings at the inauguration of the Muscle Shoals Dam in Alabama. “see what a spectacle we have. Army engineers say it will take $40,000,000 to complete the big dam. But Congress is economical just now and not in a mood to raise the money by taxation. The customary alternative is thirty-year bonds at 4 per cent. The United States, the greatest Government in the world, wishing $40,000,000 to complete a great public benefit is forced to go to the money sellers to buy its own money. At the end of thirty years the Government not only has to pay back the $40,000,000 but it has to pay 120 per cent interest, literally has to pay $88,000,000 for the use of $40,000,000 for thirty years… Think of it. Could anything be more childish, more unbusinesslike!” Thomas Edison went on to say: “People who will not turn a shovel full of dirt nor contribute to a pound of material, will collect more money from the United States than will the people who supply the material and do the work. That is the terrible thing about interest. In all our great bond issues, the interest is always greater than the principal.” and If the Nation can issue a dollar bond it can issue a dollar bill. The element that makes the bond good makes the bill good also. The difference between the bond and the bill is that the bond lets the money broker collect twice the amount of the bond and an additional 20%. Whereas the currency, the honest sort provided by the Constitution pays nobody but those who contribute in some useful way. It is absurd to say our Country can issue bonds and cannot issue currency. Both are promises to pay, but one fattens the usurer and the other helps the People.” Thomas Edison from http://quotes.liberty-tree.ca/quote_blog/Thomas.Edison.Quote.6991 F. Beard March 11, 2012 at 7:08 pm Also amen! The Federal Government has NO BUSINESS giving anyone a risk-free return on their money. Alexander Hamilton as much as admitted that the purpose of the US National Debt was to buy the support of the rich for the new nation. That need is long past! Dan Lynch March 11, 2012 at 11:21 am MMT reminds us that if you go to your local IRS office and hand them your tax payment in cash, the IRS will put your cash into a shredder. Why then, are we so obsessed with taxation ? Since local and state governments cannot print money, I suggest that the discussion of taxation would be more usefully centered around reforming regressive taxation at the state and local level, perhaps replacing transaction taxes and the income tax with a progressive property tax. F. Beard March 11, 2012 at 11:34 am And amen! Jim Sterling March 11, 2012 at 11:41 am Because taxation performs the important task of putting rich people’s money in the shredder. Peter Pan March 11, 2012 at 1:18 pm What have here in the USA is way too few people with way too much money. We desperately need to raise taxes on the wealthy job destroyers in the USA. The Bush tax cuts for the wealthy was a huge failure in the creation of jobs. Can you say capital flight and job destruction? http://www.rba-llc.com/pdf/TheBushTaxCuts.pdf proximity1 March 11, 2012 at 3:03 pm ABOUT: ” F. Beard says: March 11, 2012 at 11:32 am (Citing Hugh,) “And when there are distortions, taxation is a useful means of addressing them.” Hugh (F. Beard writes,) ” No, that is equivalent to maiming the healthy instead of healing the lame. ” If society needs re-leveling (and it does) then we should just hand out new fiat to the entire population equally. That would not make the rich poorer but it would greatly reduce relative wealth disparity. Example: Imagine A with $1,000 and B with $100. A has 10 times the money B has. Now give both A and B $100. Now A has only 5.5 times as much money as B and A can’t complain that he was treated unfairly! “Federal taxes, unless they are needed to control price inflation in the government’s money, are a poor policy tool. ” ——————– “Federal taxes, unless they are needed to control price inflation in the government’s money, are a poor policy tool. ” That’s your assertion but we only have your word for this. Why,? Upon what evidence?, do you base that assertion? Here’s a thought: as we’re (generally speaking and, in my opinion, fortunately,) not professional/academic economists, there is nothing to stop us from remaining realistic in our examples. Unlike “real” economists, we don’t have to restrict ourselves to absurdly simplistic examples such as “Imagine A with $1,000 and B with $100. A has 10 times the money B has. Now give both A and B $100. Now A has only 5.5 times as much money as B and A can’t complain that he was treated unfairly!” Instead, imagine a real-world disparity in wealth rather than a Person “A” with $1000 and “B” with $100–especially since current policies are systematically destroying the middle-class. Use, instead, household wealth in a family of four (not annual income) of $8M or more versus a family of four (two hourly wage earning adults) in the same town or city with total wealth of, say, a two bedroom house, mortgage and $10K (combined) in the bank. Now, how much do you propose to distribute “equally” to these people? $100? $1000? The absurdity of such “equal” distributions resulting in some meaningful reduction in the present disparity in wealth distribution becomes much more obvious when we deal with examples which are realistic. Given a “bonus” of $1000, the less fortunate family has $11,000 —but still lives in a two bedroom home on a two-wage earner income while the $8M family also gets $1000—so that we can call it “fair” and “equal”, right? F. Beard March 11, 2012 at 6:41 pm Now, how much do you propose to distribute “equally” to these people? $100? $1000? proximity1 No, it would more likely be around $100,000 or whatever it takes to pay off ALL US PRIVATE DEBT on average. But if we wish the bailout to not increase the total money supply (reserves + credit) then in addition to a ban on further credit creation, the bailout should be metered to just replace existing credit as it is paid off. I roughly estimate that to be $500/mo* for every man and woman in the US initially. The payments would taper off as existing credit debt was paid off, however. * Just mortgage repayments alone would allow $304/mo initially but I don’t have the figures on student loan, credit card, and auto loan repayment. Anyone care to help with those figures? If I have to do all the work, well I won’t! F. Beard March 11, 2012 at 9:43 pm Let’s do the new math with a $100,000 universal (every adult) bailout: $8,000,000 / $10,000 = 800 to 1 $8,200,000 / $210,000 = 39.05 to 1 39.05/800 = .05 = 5% So it appears that a $100,000 universal bailout would reduce the above wealth disparity by 95%. F. Beard March 11, 2012 at 8:44 pm Also, why all this emphasis on jobs? What people need is an adequate income – not jobs per se. One day, robots will be able to do all non-creative work. What then? Starve all the non-creative people? mtnplover March 11, 2012 at 11:48 pm Another thread hijacked by the monetary obsessives. Taxation policy is an important issue – and a subject that doesn’t get enough thought and analysis. It’s unfortunate the comments follow the common pattern of “MMT solves everything.” Humans have been around for over 200,000 years, most of that time without a very sophisticated money system. Not every economic issue is solved by changes to monetary policy, which is far down the list of the most critical economic issues tht help determine a society’s wealth and prosperity. Taxes have been a part of society from the first day humans banded together. The type of tax system chosen helps determine who are the winners and losers. Is it tax on wealth? Personal income? Business income? Land? Natural resources? Head-tax? Consumption tax? Rents tax? It’s not a coincidence that governments use the most regressive taxes such as VAT (sales tax) and payroll taxes to raise most of the revenue since these taxes greatly benefit the wealthy capital owners, the biggest bondholders and largest landlords/land speculators. Since most “modern” governments were formed by wealthy land owners, bondholders and largest business interests – it’s not surprising that the tax system greatly favors these groups. F. Beard March 12, 2012 at 12:08 am Not every economic issue is solved by changes to monetary policy, which is far down the list of the most critical economic issues tht help determine a society’s wealth and prosperity. mtnplover Baloney. Nearly every economic problem can be traced to the government enforced usury for counterfeit money cartel – the banking system. You want wealth and general prosperity? Then reform the money system and bailout the current victims of it – the entire population. But yes, if Federal taxes are needed to control price inflation in government money then levy them on the rich. Comments are closed. Tip Jar Please Donate or Subscribe!