A Philosopher's Blog

Taxes and Job Creators

Posted in Business, Law, Philosophy, Politics by Michael LaBossiere on July 26, 2011
Republican Party (United States)

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One of the key Republican talking points is that taxes should not be raised on those they call the “job creators.” Most other people refer to these “job creators” as the “rich.” However, it is somewhat wise of the Republicans to use this euphemism. After all, saying “taxes should not be raised on the rich” has far less rhetorical bite with middle and lower America than saying “taxes should not be raised on the job creators.” After all, middle and lower America are facing the consequences of these tax cuts, such as a sustained attack on the education of America’s children and the social services aimed at aiding the poor and needy.

The use of rhetoric is, of course, no substitute for actual arguments. After all, calling the wealthy “job creators” does not prove that taxes on the wealthy should not be restored to what they were before the Bush era tax cuts. However, an argument (or no doubt many) can be made in favor of leaving the tax cuts in place. Obviously enough, such an argument can also be countered.

Taking the Republican rhetoric at face value, the argument could be that restoring the old tax rate would result in the job creators not creating as many jobs. This would, obviously enough, be harmful to middle and lower America because these Americans need to work in order to pay for the necessities of life. After all, they are not rich.

Obviously enough, this sort of argument makes some critical assumptions. The first is that the job creators are, in fact, job creators. It is clearly the case that some of the wealthy do, in fact, create jobs. However, it is also clearly the case that not all of them should be lauded as job creators in a meaningful and significant sense. Of course, it could be argued that the wealthy are all job creators-after all, they create jobs via spending large sums of money on goods and services provided by other American. On this view, however, anyone who spends money would thus be a job creator, which would seem to render the classification somewhat empty of significance.

The second is that the job creators would create less jobs if they had to pay more in taxes (either because the tax cuts were removed or the entitlements for the job creators were reduced). This can also be seen in a positive way: less taxes means more jobs. However, there are two obvious replies here. One is that the economy was doing much better during the Clinton era-which was before the Bush era tax cuts. Second, tax rates are currently very low and many companies are flush with cash, yet the unemployment rate is rather high. As such, it surely cannot be the taxes that are the main factor in job creation. One plausible explanation is that the American approach to profits tends towards cutting employees. After all, the math is obvious: making the same amount of money while paying fewer employees (and/or paying them less) means a decrease in costs. This would nicely explain both the high unemployment rate and the substantial profits of many companies. As such, keeping the tax cuts in place would not seem to create jobs-it merely allows the job creators to maintain their substantial profits without creating any jobs.

A reasonable case can, however, be made for providing actual job creators with tax benefits-benefits linked specifically with creating jobs for middle and lower America. After all, the employees will be paying income tax on their pay, thus generating tax revenue that indirectly comes from the job creators. Linking these tax incentives to actual job creation would transform the Republican rhetoric to something meaningful.

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37 Responses

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  1. T. J. Babson said, on July 26, 2011 at 8:11 am

    “The use of rhetoric is, of course, no substitute for actual arguments.”

    On the Democratic side we hear talk about “millionaires and billionaires” and “corporate jet owners,” but when numbers come out it suddenly dawns that they are talking about ordinary people who are comfortable, but hardly rich.

  2. frk said, on July 26, 2011 at 9:57 am

    ” . . .they are talking about ordinary people who are comfortable, but hardly rich. . .”
    Actually it’s a tad more nuanced than that.

    http://www.nytimes.com/2011/05/15/weekinreview/15tax250copy.html

    This is a longish article that contains a tiny gem or two for both sides. One takeaway : It seems intelligent economists could sit down and craft a lean tax code that accounts for the differences between the wealthy and ordinary people. The result would not raise enough taxes to solve our fiscal problems, but It would make a contribution that should not be blithely rejected under the “no tax increase” banner.
    My main objection is that the author makes no clear attempt to distinguish between gross income, adjusted gross income, and taxable income, which those of us who do our own taxes know are often three wildly different figures which generally determine our eventual tax burden.

    On the negative side, for conservatives who generalize way too much: The article comes from the nytimes.com site. Please read it anyway.
    On the positive side: There’s no video.

  3. [...] Taxes and Job Creators (aphilosopher.wordpress.com) [...]

  4. WTP said, on July 26, 2011 at 11:48 am

    And he continues to potificate about things he knows nothing about. Mike, you don’t understand wealth. You don’t understand where it comes from or who creates it. The Dunning-Kruger effect is strong in this one…

    • WTP said, on July 26, 2011 at 2:43 pm

      And here’s a hint, Mike. You can’t understand it by reading a book or learning from instructors at even ivy league universities. You’ll find that many, many of the “experts” disagree to various extremes. Especially those who are “popular”. You have to look at the world and understand why over-managed, centrally planned economies consistently fail to create wealth relative to open and free societies over the long run. You have to spend years studying the subject, getting it wrong, and finally understanding the connection between failure and success.

      • frk said, on July 26, 2011 at 3:40 pm

        “. . .the connection between failure and success..”

        Warren Buffett, an Ivy League fellow probably learned nothing at Columbia Business School. He gave away ^a bit of money^ , because he didn’t want his children to be “members of the lucky sperm club.”

        The connection between failure and success is, occasionally, luck (what mental assets one was born with, when/where/to whom one was born, making the right decision just before or after shockingly unpredictable events–Black Swans) *# Not belittling hard effort, focusing on a goal, etc. l here. . .just trying to add a different perspective.

        http://www.theatlantic.com/business/archive/2009/05/is-warren-buffett-brilliant-or-lucky/17227/

        *# He thinks there’s a lot of luck involved in Buffett’s success.

        Given the tone of your comment , I’m led to believe you’ve spent years studying the subject, sans books, sans instructors—and you’ve gotten your hands dirty. Now you know that your “look at the world”, is the correct one, not subject to differences of opinion coming from those who “disagree to various extremes.”

      • Paul said, on July 26, 2011 at 6:27 pm

        Maybe he does know nothing as you say, but it sounds like you’re saying that your lessons from limited personal experience can be applied to our economy as a whole. He’s making some sensible arguments so maybe you could respond to them directly since you’re the expert after all.

        • WTP said, on July 26, 2011 at 8:07 pm

          “It sounds like you’re saying…” Well that’s what you’re hearing. Where did I reference my limited personal experience? But I’ll give you that in the context that we all have limited personal experience.

          First of all, I am not the expert. Experts who think they know everything are an annoyance to those of us who know how much there is to know and how it is not as all-knowable as experts would lead you to believe. See Dunning-Kruger for further edification.

          Mike’s argument here (what little there is between the escape clauses) is simply class warfare. Wealthy people, those that is who create the wealth, spend very little of that wealth that they create. They skim some off and re-invest the rest. That re-investment is what creates the vast majority of the jobs and more wealth. This simplistic deference to moral perceptions such as “greed” misses the point. It’s not as some socialist putting words in a fictional Wall Street character would say, “good”. It’s something that is human. It’s beyond human, it’s evolutionary. You can see it in the animal kingdom as well. The key is to control it and harness it. It drives government as well as business. What makes the industrialized world more successful is the limiting of government’s greed. Government is, within it’s domain, by definition, a monopoly. I think we can all agree that monopolies are bad, yes?

          What we have here is a failure to understand the true value of freedom. Economic freedom that rewards people who create wealth with the ability to produce more wealth. As for luck, the harder you work, the more you learn from your failures, the greater the opportunity to “get lucky” so to speak. Belief in pure luck is for losers who give up. There’s the story of Edison trying something like 100 different filaments before he hit on the right one. He could have quit after a couple dozen. Perhaps someone before him tried and decided it was impossible. Edison succeeded because he refused to give up. Experts would criticize the waste of money, and if I was one of those experts and it was my money, I think I would have agreed with them. But it was Edison working with his own money. He was already fairly well off. He had the ideas and how to make them real. It is economic freedom that allows for such repeated failure, by individuals taking personal responsibility for how to spend their wealth, that eventually leads to success.

          There is also a failure to understand the difference between adding value and creating wealth, but that’s a whole other topic.

          • frk said, on July 26, 2011 at 11:01 pm

            “Government is, within it’s domain, by definition, a monopoly.”

            Certain portions of our government are monopolies Ex: The postal service and public utilities.
            But our constitutional government is a government of “We the people”. That would seem to argue that monopolies maintained to achieve the goals simply and clearly presented in the Preamble to our government’s founding document just may ^not^ be “bad”. . . Now, of course, viewing that magnificent first sentence through the eyes of someone who believes that the Preamble should begin “We the people of the United States–specificaly those who agree with me. . . ” might be easily convinced that our government is a bad monopoly.

            “I think we can all agree that monopolies are bad, yes”
            “All”? Some businesses might not agree. Google, for ex. is virtually a monopoly, and some people view Google as a good thing. Businesses that achieve monopolistic status would have some major advantages over competing businesses.

            “Economic freedom that rewards people who create wealth” would create space for monopolies instead of preventing their existence would it not? Would monopolies be bad then?

            Last half of your 4th paragraph: It would seem only those who are independently well-off can afford to take the chance of failure.The poor simply cannot afford failing 100 times to achieve success.
            The government (:within its domain. . .a monopoly”) provides research grants to many educational institutions. Have none of the ideas developed in university laboratories benefited mankind and often made a tidy profit for pharmaceutical companies , tech firms, etc?

      • Michael LaBossiere said, on July 27, 2011 at 4:10 pm

        One can learn a lot from books and instructors. Not everything, of course.

        True, experts do disagree. However, experts have more knowledge than non-experts, at least in their fields. Sure, centrally planned economies have tended to fail. However, this seems more of a flaw in those implementing the plans than an inherent fault in having a central command structure. After all, even the most capitalist of corporations is centralized.

        • WTP said, on July 27, 2011 at 7:48 pm

          Dunning-Kruger my friend. It’s all about you.

          “One can learn a lot from books and instructors.” Depends on what books and what instructors. Sometimes you learn the wrong things. I can think of quite a few books and instructors that I learned from who turned out to be seriously wrong. One statistics professor was even mathematically wrong. But he was the “expert” until he came up against the smartest woman in the world. And even then he couldn’t admit he was wrong. Stunning. But I digress…

          “Sure, centrally planned economies have tended to fail. However, this seems more of a flaw in those implementing the plans” “Tended”, that’s cute. And you blame the implementers based on what? Seems to you perhaps. That’s a laughable cop-out that just doesn’t fly out here in the real world. Again, you have no idea what you are talking about.

          “After all, even the most capitalist of corporations is centralized.” Another example of your obtuseness. Your observation simply does not scale. And many corporations succeed with less centralized planning. One corporation is such a tiny fraction of even the more isolated, modest economies that comparing it to an entire economy is absurd. As corporations grow, the less nimble they become. If you understood the difference between the number of interfaces that take place in just one company, say IBM or Citibank, in relation to the number of interfaces in the US economy, you’d be embarrassed to collect your next paycheck.

          • T. J. Babson said, on July 27, 2011 at 8:57 pm

            I would disappoint frk if I didn’t find a suitable video, so here it is:

            • frk said, on July 27, 2011 at 11:27 pm

              Gotta love it.
              Article to article to article on this blog, who asks the most questions–usually in an effort to get the most “cocksure” to examine the bases of his/her/its generalizations,leaps of faith, labelinlg/name calling, quality of information, etc.?

              Who here is most willing to admit his agnosticism, admit that he’s uncertain about the existence of God?
              Bertrand Russell “One of the painful things about our time is that those who feel certainty are stupid, and those with any imagination and understanding are filled with doubt and indecision.”
              See “Bertrand Russel on God”– recently available at YouTube if you click on at the end of your vid.

              From the wiki article on D-K:
              “Although the Dunning–Kruger effect addresses erroneous perceptions of skill in general, not intelligence (and the lack thereof) in particular, casual commentary on it tends to dwell on that particular axis” Now get this.First, the study was aimed at “perceptions of ^skill ^, not intelligence (and the lack thereof)”. Nowhere in that statement is ideology factored in. So let’s say one is so certain of his ideology, and what his ideology has convinced him is true, that he claims anyone who has differing beliefs is suffering from Dunning-Kruger and therefore must be unskilled or stupid? Could we come up with a name for that effect?

            • WTP said, on July 28, 2011 at 12:59 pm

              Interesting, TJ. I’ve observed that they seem to share one…no actually several of the characteristics commonly associated with vampires. Perhaps a better name would be the Dunning-Kruger-Stoker effect.

            • frk said, on July 28, 2011 at 3:39 pm

              Zombies.

            • WTP said, on July 28, 2011 at 7:09 pm

              Actually, TJ, I’ve got an even better vid. Philosophically speaking, that is…

              [http://www.youtube.com/watch?v=iO50yMNvJyo&feature=player_embedded]

            • WTP said, on July 28, 2011 at 7:18 pm

            • T. J. Babson said, on July 28, 2011 at 9:02 pm

              Great scene.

            • frk said, on July 28, 2011 at 10:21 pm

              And the authors of this piece? Of lines like “You’re just a kid”? One was the kid Williams is talking to. (Matt Damon) His co-writer was Ben Affleck,. They were, respectively, 20 and 25 when they wrote this insightful monologue.

              Affleck, from, about seven years ago:

              http://www.foxnews.com/story/0,2933,127324,00.html

              Afflect didn’t finish college. He started his acting career early.

              Damon went to Haahvuhd. He’s disliked by many on the far right, probably as much for his liberal beliefs as for his education and his ill-gotten riches (acting– pshaw!). As we all know, actors do nothing and get paid big money. Damon’s net worth is only $65 million. How can you like a guy like that?

              As you know, they both also acted in “Good Will . . . ” As part of the Hollywood acting bunch, they’re automatically ^assumed ” by some to be liberal sympathizers. Ron R would be an exception to that assumption–I assume.

              But where did these young fellows from Boston acquire the sensitivity and understanding to write Williams’ lines ? From reading a book by someone who has looked at the Sistine Chapel ceiling and smelled the tourists? Possible. From carefully studying the people around them? It doesn’t necessarily take years. It might include a lot of book study From the experiences of their youth? Possible. I definitely took creativity. Perhaps not creative genius at the
              Shakespeare level, but the kind of creativity that moves audiences and critics to bestow an Academy Award on the work of two guys in their early twenties.

            • WTP said, on July 31, 2011 at 8:20 pm

              Different topic, but somewhat similar philosophical observation:

              “The closer scientists come to applying their favorite abstractions to real-world problems,” the article concludes, “the harder it becomes to keep track of the inevitably numerous variables and to resist premature closure on desired conclusions.”

              http://www.msnbc.msn.com/id/43939899/ns/health-the_new_york_times/

          • T. J. Babson said, on July 28, 2011 at 10:45 pm

            I see you caught on to the whole video thing, frk…

            • frk said, on July 29, 2011 at 8:21 am

              Scwew dat cwazy wabbit. Elmer rules! :)

        • magus71 said, on July 28, 2011 at 12:40 am

          Mike,

          A corporation is considerably smaller than a nation. The efficiency of central planning degrades geometrically when size increases.

          Also, there are different levels of central planning. The boss can merely tell us what time to show up to work and what he wants done at the end of the week, or he can look over our shoulders as we type emails, commenting on sentence structure, rant about what time we go to lunch, decide what we eat for lunch, and then decide that everyone in the office gets paid the same low wage regardless of seniority, ability, or job title.

          I think we know which boss we’d rather work for.

          • Michael LaBossiere said, on July 28, 2011 at 7:18 pm

            True, scale could be a factor. However, some multinationals are larger than some countries. Do they suffer from the woes of centralized planning?

            • T. J. Babson said, on July 28, 2011 at 9:01 pm

              Apples and oranges, Mike. Plus some sophistry.

            • Michael LaBossiere said, on July 29, 2011 at 4:54 pm

              Sounds like a good drink mix.

        • T. J. Babson said, on July 28, 2011 at 8:07 am

          “However, this seems more of a flaw in those implementing the plans than an inherent fault in having a central command structure.”

          This is what I would call the “Fundamental Error.” It is out there, now.

  5. [...] Taxes and Job Creators (aphilosopher.wordpress.com) [...]

  6. magus71 said, on July 27, 2011 at 1:30 am

    I truly despise class warfare. I had this debate with some libs while deployed, and when I let them know that I grew up poor as dirt, they actually got mad at me. They had no more arguments. They pretty much viewed me as Clarence Thomas after that.

    I can honestly say, that after I turned 18, almost all of the bad things that happened to me occured at least in some part because of my bad choices. When I did the same things that successful people did ie college and staying out of trouble, not surprisingly I succeeded.

    Who are these poor and needy? I believe I have great perspective on this issue. As a police officer, I never once met a starving person who was starving because he couldn’t find food. Not once. Not in America. They were “starving” because they couldn’t find time to eat between drinks of alcohol. Everyone I met had the exact same opportunities as everyone else; get and education and don’t get arrested. If they didn’t follow that formula, they had a good chance of failing at life.

    Mike speaks of the education of our children. They can barely read. I hardly think that’s because we don’t spend enough.

    We need to look at what truly causes poverty. There are some legitimate problems, and most of those have to do with single-parent families or families whose sole provider dies. But most poverty in America is caused by bad personal choices.

    • frk said, on July 27, 2011 at 10:44 am

      Magus, I’m not surprised that when you were a police officer, you “never once met a starving person who was starving because he couldn’t find food.” My impression is that you worked in a city. There are plenty of dumpsters in cities. Dumpster-diving is a skill learned early in urban areas I’ve seen it even in the smallish town where I live.

      But the US is exceptional. We hear it all the time. We don’t live in the Third World. Well, poverty, for us, should be something special, as well. It should be a rare condition that our exceptional society works to abolish. To that end we have absolute and relative poverty guidelines. From wiki, “Poverty in the United States”.

      “Since the 1960s, the United States Government has defined poverty in absolute terms. When the Johnson administration declared “war on poverty” in 1964, it chose an absolute measure. The “absolute poverty line” is the threshold below which families or individuals are considered to be lacking the resources to meet the basic needs for healthy living; having insufficient income to provide the food, shelter and clothing needed to preserve health. And ,
      millions of people fall below that line every year.”
      Thirty to forty million these days. A single parent with one child: falls below the poverty line at $14787. That’s “dirt poor”. And it’s no secret that the gap between the dirt poor and the filthy rich grows greater every day.

      We shouldn’t define poverty simply as starvation. Not all people on the other side of the war on poverty are simply starving They lack shelter.Clothing. Basic security. They lack a living level sufficient “to preserve health” and promote “healthy living”. Very basic, but, to many, too much to provide for others.

      It’s clear who’s always going to be the loser in “class warfare”. The robust rich guy with the arms cache doesn’t face much of a challenge from the spaghetti-covered dumpster-diver.

      There are legitimate reasons for aiding “single-parent families or families whose sole provider dies.” Social Security is aimed at survivors, and the disabled., and the elderly poor, not all of whom, surprisingly, are drunken wastrels.

      I’d recommend we keep Social Security.

    • frk said, on July 29, 2011 at 5:23 pm

      Magus: I wish I had had this when I posted @ 7:27 10:44– I happened on it today as while reading comments from another blog. It’s a pre-recession article– 2006.

      http://www.nytimes.com/2006/11/26/business/yourmoney/26every.html?adxnnl=1&adxnnlx=1311973586-2hwHmVaJwDurvrb1gwF8MQ

      The parts about Buffett are particularly interesting.

  7. frk said, on August 1, 2011 at 8:57 am

    It’s refreshing to read the views of a slightly right of center right conservative. So many are so far right these days.

    We should note that this essay is written by an honest conservative under the gun of a possible national default. I’d like to believe Mr. Peters was writing essays from this point of view on this subject back in 2010, trying mightily to talk sense to the Tea Party crowd. But I don’t follow his blog so I don’t know for sure. Give me a good link if it’s there.

    There’s a lot of good stuff in here. He writes that “. . . all human behavior needs supervision.” He comes up just short of using the word “regulation”, but in the context of corporations and Wall Street and “greed”, that’s surely what he meant. He writes,”But paying my income tax is, to me, a small thing for the many benefits I receive—from highways and public order to the national defense”. Then he mentions fair taxes, but never quite gets around to explaining what a truly fair tax would be for big corporations that benefit from “highways and public order and the national defense”

    He may be right that if I stop smoking, drinking, eating junk food, and start exercising I could save the government a lot of money. But, between congenital problems, air-born diseases, accidents–on road and off– that’s not guaranteed. Jack Lalanne proved him right; Jim Fixx proved him wrong. And as an example of how to fairly tax potentially harmful food and drink, may I suggest 50% on a bottle of cheap wine and 200% on a bottle of Chateau Lafite Rothchild. . .

    He’s clearly, honestly, passionate about his subject. But I’d like him to admit that “Justice, fairness, personal responsibility, and intellectual, personal and financial integrity” are “old fashioned values “of ^patriotic Americans , conservative and liberal alike^. In an essay packed with sensible insights how Palinesque that seems!

    Mr. Peters should realize how constitutionally difficult it would/should be to link voting to taxes. But, his idea isn’t nearly as stupid as linking the debt ceiling to a balanced budget amendment. Historically, the average amendment has taken well over a year from proposal to ratification. In a politically overheated environment like the debt-ceiling fight, just forming a proposal that is passed by 2/3 of ^both^ houses would likely take longer than that and would amendment would likely fall short of ratification by 2/3 of the states. Of course, stranger things have happened.

    I went to high school with a George Peters. Wonder if they’re related?

  8. [...] Taxes and Job Creators (aphilosopher.wordpress.com) [...]

  9. [...] Taxes and Job Creators (aphilosopher.wordpress.com) [...]


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