Mark McHugh

Posts Tagged ‘Debt Ceiling’

Raising Taxes Absolutely Promotes Job Growth

In Open Thread on Wednesday, July 13, 2011 at 11:53 am

Disclaimer: I’ll admit the title is a tad misleading. 

I am astounded how many people DON’T get this. 

The idea that raising taxes kills growth stems from the realm of pure fantasy.  It’s idiotic. 

Consider this:

You run any small to medium size business (good for you).  We’ll say you run a good little trucking company, OK?  You’re not Lebron James.  You’ve got no extraordinary skills, but you’re still OK.  You should make a nice living and I don’t begrudge you that for one second.  Here’s the problem, if the tax law says you can keep as much money as you can make and your tax rate won’t change,  people act differently.  They pay their workers as little as possible, they won’t hire, they won’t maintain or replace the trucks.  In short, they will take, take, take expecting the world to cower in fear of them because they represent “jobs.”   It’s the sweatshop mentality.

That’s exactly where we are now.  The rich get richer and the poor get food stamps.

Let’s change Joe Trucker’s landscape.  Once his income exceeds $500,000 (just as an example), Joe will pay a 75% tax rate on every dollar above $500,000.  Greedy Joe made $2 million last year, so if he does the same this year, he only gets to keep $375,000 of the second $1.5 million.  Joe’s gonna keep and scream “it’s not fair”, “you’re killing small business you fools!”, “I’m a JOB CREATOR GODDAMMIT!  WITHOUT ME YOU CAN”T EXIST!!!”

You get the picture….

If you simply say, “shut the fuck up, Joe.  All you do is truck stuff around….big fuckin’ deal.”  Joe will pout.  So what?  After the hissy fit, Joe will realize that no matter what he does, he can’t keep all the marbles.  If he continues treating his employees like shit and letting his fleet deteriorate, while his competitors adapt to the new policy by buying new trucks, hiring and providing better service, Joe will lose everything.  He’ll become a walking, talking joke without a friend in the world…..

And Joe knows this (he’s pretty smart, remember?)

Joe’s not going to start paying Uncle Sam a million a year in taxes (don’t be stupid).  Joe will act in his own best interest given the circumstances.  He will build value in his business, instead of trying to wring every last nickel he can out of it.  He’ll buy new trucks, he’ll hire….

In short, he’ll do exactly what everybody wants him to do.

So raising taxes, doesn’t help the government’s spending problem, because changing tax policy doesn’t raise revenues.  It does however change behaviors.  The government has no choice but to cut spending, and that’s a good thing.  Total government spending (Federal state & local) is now over 40% of US GDP.  The notion that the private sector can support that much weight is insane.

The government’s role in “job creation” is not to hire more people.  It is to create an enviroment to make others hire.  Their approach has been ass-backwards and is destroying the country.  Tax policy is the stick that moves the horse.  Use the fucking stick, you morons.

Seriously, how can it be that nobody gets that?

***

I just gotta add this: 

Horses, Carrots and Sticks

Everybody (even politicians and Ivy-league economists) knows that making horses do what you want involves carrots and sticks.  Most of us on this side of the rainbow understand how they should be employed, but Wall Street has brainwashed Washington.  They’re stuffing the horse full of carrots, using the stick to beat anyone who questions them and wondering why the horse won’t move.

Think we should give them more carrots?