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What Conservatives Won’t Tell You: Higher Taxes Equal Reinvestment And Jobs
The debate over whether or not to raise taxes on corporate America is about to get a little tense. President Obama laid down his proposal in a steadfast speech yesterday at the White House. He called out Speaker John Boehner by name regarding his inability to compromise even though he called for compromise.
Also we had Congressman John Flemming (R-LA) complaining that he only had four hundred thousand dollars left over after using two hundred thousand to feed his family.
What the conservatives do not know or don’t reveal is, higher taxes make businesses re-invest most of their profits into the corporation. Let’s take Congressman Flemming for example, the 400K dollars he has after feeding his family. If he buys another building to expand, or buys a new stove to cook his sandwiches, that 400k is no longer taxable.
His reinvestment creates more jobs. It puts construction guys on the job, or stove manufacturers back on the line etc.
What conservatives never tell you is the only reason a business like Congressman Flemming owns hires a person to make sandwiches or work in his UPS store is if there are customers. If there aren’t any customers, he doesn’t hire, and if his business realizes a drop in customers he may even get rid of some of his employees.
This is one of the reasons President Clinton had a booming economy. He raised taxes on the wealthy. Rather than pay the higher tax rate by extracting profits for personal use and having it sit on the sidelines, they re-invested it, creating a chain reaction of jobs.
What we are seeing today is lower taxes leading to owners extracting money rather than reinvesting it. The cash sits on the sidelines in bank accounts, or in their wallets. So let’s raise taxes, and “force” this idle cash back into businesses for reinvestment and create the jobs this country needs.
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23 Responses to What Conservatives Won’t Tell You: Higher Taxes Equal Reinvestment And Jobs
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NefariousNewt
Sep. 20th, 2011 at 12:39 pm
The only hitch in this is productivity. As we are seeing, if a business can get by with fewer workers because of increased productivity, even higher taxes may not be enough incentive to hire, when the tax increase can be offset by layoffs. In other words, even though the boost in taxes might normally force their hands and promote investment, there’s a longer curve there, while companies pare down payroll and push their remaining workers harder. I think we’re in the midst of that cycle right now, and until that cracks, even higher taxes may not be enough of a shove.
Teresa
Sep. 20th, 2011 at 3:32 pm
“As we are seeing, if a business can get by with fewer workers because of increased productivity, even higher taxes may not be enough incentive to hire, when the tax increase can be offset by layoffs.”
Good point, but I am thinking that at this point, almost all productivity has been squeezed out of the workers.
Mr. Peabody
Sep. 20th, 2011 at 12:52 pm
Money never “sits on the sidelines” unless you stuff it in a mattress. It’s all available as investment. But what’s lacking is business people wanting to invest in a bad economy, because there’s few customers (yes; round and round it goes).
drklassen
Sep. 20th, 2011 at 2:20 pm
Except that many business *are* sitting on cash reserves; yes they are not entirely idle because they are in savings accounts, but since banks aren’t lending, everyone is just buying up more and more T-bonds. And since the government is “evil”, that money isn’t being spent either.
Sally
Sep. 20th, 2011 at 1:13 pm
Since everything the GOP has tried has been an abject failure, Obama’s plan deserves a chance. I realize the GOP plan is to ‘make Obama fail,’ but the country is now realizing the fallacy of that plan: the country is failing and the GOP is the cause.
A Walkaway
Sep. 20th, 2011 at 1:20 pm
We also need to force them to invest INSIDE this country.
No more money going overseas. No more jobs shipped overseas. I’ve seen too many businesses closed in order to take advantage of penurious wages and non-existent safety rules to ever agree with “Free Trade”.
If they aren’t willing to hire Americans in America, they can pay enough in taxes to make up the difference. That kills the business? Well, I would say to those damned rich a similar thing to what I’ve heard them say to workers (actually present when shops were closed): “Tough sh*t”.
old apache
Sep. 20th, 2011 at 7:40 pm
Interesting! FORCE them to do what we want. Sounds more like a rallying cry to rebellion than an open conversation on the subject. Last time I checked, forcing someone to do something they don’t WANT to do has the exact opposite effect. If you want businesses to invest in this economy and country, why not make it easy to do so? Remove all the regulation on businesses that strangles them and keeps them holding capital close to the vest. Open up markets so business can thrive by selling their goods. The only real reason that business hasn’t moved in that direction is because the government hasn’t made it a favorable climate for them to release their hard earned monies for reinvestment. So to cry “Force them to do it!” will just do more harm than good.
Ray Medeiros
Sep. 20th, 2011 at 8:46 pm
apache, FORCE is a relative term. by raising taxes they will see the benefits of reinvesting rather than extracting cash
Ray Medeiros
Sep. 20th, 2011 at 8:48 pm
as for deregulation, unless you want to replicate China, America will never be as competitive on that front, also look at wages.
Wages are increasing in China and low end manufacturing is leaving there also, to places like Vietnam and the Philippines.
craig threlkeld
Sep. 21st, 2011 at 10:50 am
Yeah, “force” is such a loaded word. How about “incentivize?”
Yourself
Sep. 20th, 2011 at 9:39 pm
You can thank the democrat party for “Free Trade”; NAFTA and CAFTA was Clinton’s baby. And you can see where that got us… from 1994 to 2010, 682,000 jobs of textile, manufacturing, and other U.S. jobs lost (only an estimated 116,400 lost after 2007, read: 2008 financial crisis)
And the original author is wrong; if a does not re-invest “profits” it re-invests after-tax “profits.” Which do you think will be the larger of the two sums? Net Income whether re-invested or not, is taxed.
And as to the customer argument, If I’m a customer and the government taxes me, I’m no longer someones customer because that income is no longer at my disposal to spend.
Shiva (Moderator)
Sep. 20th, 2011 at 9:47 pm
Do you know anything about NAFTA and CAFTA? Anything at all?
The United States Senate approved the CAFTA on June 30, 2005 by a vote of 54–45. Of course since GWB never took responsibility for anything, Clinton was still in office in 2005.
NAFTA was a republican brainchild, first thought up by Gerry Ford. Bush 39 negotiated it, had it signed with all the country’s involved and it was approved by the congress. By the time Clinton came along all that was left was for him to sign it. He signed it and Im not happy with it, but to say it was his baby is one step past hilarious
kim
Sep. 20th, 2011 at 10:18 pm
Never trust anyone who doesn’t know that it’s Democratic not Democrat Party.
Jesus, I wonder when the Republicans will grow up and call Democrats by their real name. The elected officials do this, can you imagine Speaker Pelosi saying “The Cons” or “The Repubs”
So small time.
Ray Medeiros
Sep. 21st, 2011 at 6:55 am
gross profits, before taxes will be reinvested. As the video portrays. If that congressman only kept 200K out for to feed his family and reinvested the 400K into his business, he would only be taxed on the 200K
Dave Butcher
Sep. 20th, 2011 at 1:36 pm
What is the source of the graph? It would be nice to document it for letters to the editor, etc.
Larry W.
Sep. 20th, 2011 at 2:02 pm
There is so much artificial value in so many products and services I wonder why consumers spend at all.
Mr. Peabody
Sep. 20th, 2011 at 3:16 pm
Good point! I’ve cut way back on my spending mainly because there’s just not much I want to buy. It seems living a simple, non-materialistic lifestyle is a detriment to a thriving modern economy.
Brian
Sep. 20th, 2011 at 3:45 pm
Mr. Peabody, I think you’ve identified the flaw in modern capitalism – at least as implemented in our current environment. “If you’re not growing, you’re dying”, etc etc. Our economy flat *requires* pointless consumption to move. Problem is, that’s not sustainable; at least, I suspect it is not infinitely so. I think we – as a society – need to re-evaluate things. Adjust priorities.
Shiva (Moderator)
Sep. 21st, 2011 at 12:36 am
For those whiners about the 50% of people who do not pay taxes, you might want to read this then slink away
www.cbpp.org/cms/index.cf...
Robert Boyd
Sep. 21st, 2011 at 9:32 am
Why wont you post my response author that you are WRONG? That clinton CUT taxes.
He cut capital gains from 28% to 20% and slashed taxes on 90% of businesses. He only increased taxes on 1.2% of the wealthiest americans to offset the cuts above.
Afraid to debate facts?
Shiva (Moderator)
Sep. 21st, 2011 at 9:57 am
I can tell you why Robert. It’s because you cannot post anything without being a jerk. If you want to debate, work on your delivery. It has nothing to do with your content that simply the fact that you have a complete inability to communicate
TB
Sep. 21st, 2011 at 12:32 pm
Given the premise that tax increases encourage business to invest or engage in other deductable activities, what do we say about the current Democratic effort to eliminate a large number of business deductions?
occamskiss
Sep. 24th, 2011 at 7:14 pm
We say “What deductions are being eliminated. Are they the golf course membership, or the capital investment expenses.” Without detail, your rant is meaningless.