Monday, August 15, 2011

Tax Rates & Job Creation

Three things happened this morning that prompted me to write this post. First, a friend of mine commented on my previous post by stating that raising taxes during a recession is a bad idea. Sounds like common sense. Then I read in the Tribune about an interview with Michele Bachmann.  "We have to lower tax rates considerably on job creators. And with everything from the death tax to alternative minimum tax to 100% expensing immediately for small business,” she said on Fox News Sunday. When asked about extending unemployment benefits to regular people she replied: “I don’t think we can afford it.” OK, so we know where her priorities lie. Then I read the article about Warren Buffet. He said that we need to stop “coddling” the mega rich. He claimed that higher tax rates will have little effect on investment and job creation.
I decided to do a little digging to see if I could find some numbers and see if there’s any correlation between top marginal tax rates and unemployment. I googled “tax rates by year” and clicked the link to the National Taxpayers Union (www.ntu.org). Their tagline: “America’s independent non-partisan advocate for overburdened taxpayers.” I might have agreed with the non-partisan part if they had left out the “overburdened” part, but I’m guessing their numbers are good. I also googled “unemployment by year” and got the Bureau of Labor Statistics (data.bls.gov). Their website shows unemployment by month, going back quite a ways. Here’s what I found:

Year(s) Top Marginal Tax Rate Average Monthly Unemployment Rate
1954 - 1963 91% 5.4%
1964 77% 5.2%
1965 - 1967 70% 4.0%
1968 - 1980 70% or more 5.9%
2001 39.1% 4.7%
2002 38.6% 5.8%
2003 35% 6.0%
2004 35% 5.5%
2005 35% 5.1%
2006 35% 4.6%
2007 35% 4.6%
2008 35% 5.8%
2009 35% 9.3%
2010 35% 9.6%
2011 (so far) 35% 9.0%
Does this mean that if we raise taxes we’ll lower unemployment? NO! It means that Buffet is right – that the relationship between taxes on the richest and jobs is non-existent. The rich aren’t big job creators anymore anyway. Hedge fund managers don’t employ many people. Most of the industries that employ enough people to make a difference have decided that manufacturing is best done outside the United States – and taxes had little to do with that decision.
Next time you hear a candidate talk about the evils of raising taxes on “job creators” ask for some proof! Conversely, when a politician says that we must raise taxes to create jobs – ask for proof! Don’t just take the sound bites at face value – politician talking points usually have little substance. Demand more!

Monday, August 8, 2011

Congress: Please Stop Being So Dysfunctional

The United States government owes too much money. Standard & Poor’s (the same folks who told us the mortgage backed securities were A-OK) has downgraded the US to AA+. This is a proud moment, isn’t it? And, is the amount of the debt the reason S&P downgraded us? Not really. It’s political dysfunction. It’s the apparent inability of the Congress to deal with the debt. It’s partially because a chunk of our elected officials were dumb enough to sign a pledge saying they would NEVER raise taxes, under any circumstance. Stupid. Problem-solving 101 says you don’t block potential solutions right off the bat. And, it gets worse. According to this morning’s Marketwatch.com: “Mitch McConnell is already sabotaging the new Congressional “Debt Super-Committee,” vowing to appoint only Republicans who have signed Grover Norquist’s ‘no new taxes’ pledge”. So, by Republican tea-party design, that committee is doomed to stalemate and ultimate failure. Why not temporary tax increases? The Bush tax cuts were enacted with an expiration date. Why not do the same thing with tax hikes? Make them effective long enough to get us out of the hole (with substantial spending cuts, of course). For those of you who say they’ll end up being permanent: hogwash. Taxes go up; taxes go down. Reagan reduced them. Bush reduced them too.

I’d also like to remind Congress that their actions have consequences. My retirement funds are sinking as I write this. Their dysfunctional, pig-headed, obstinate stupidity is costing the populace dearly. Of course they don’t care. They’re already wealthy and have a great taxpayer-funded pension program. Little of this affects them.