Taxing the Super Rich Does Not Reduce Jobs

Enough already!  Increasing taxes on the super rich does not harm the economy in any way whatsoever.

There are two popular theories about why taxes on the super-rich should be avoided and both are flat out wrong.

The first theory is that taxes shift spending power from consumers to government, and consumers spend money more effectively than government.

This does not apply to the super-rich though.  While a family making $250,000 a year may consume nearly all of what they make, the average annual income of the top 1% of families is over a million dollars a year.  At anywhere near a million dollars a year of income, the vast majority of families have reached a lifestyle they are comfortable plateauing at, they have saved enough to secure that lifestyle in retirement and “lean” times, and they are banking money away for their estates and heirs.  Once people reach a threshhold where additional income goes into inter-generational savings rather than consumption, additional income to them does not stimulate the economy.   Sure, there are exceptions.  Paris Hilton undoubtedly spends way more than a million dollars a year and every dime she spends creeates jobs for someone, somewhere.  Paris and her breed are the exception though.  Of the tens of thousands of families with million dollar plus annual incomes, most live in nice houses, in nice neighborhoods, with nice cars, they send their kids to nice schools, etc. but they don’t convert anywhere near their total income to economiic demand for goods and services.  Reducing that income by taxing it more will not reduce demand in the economy until tax levels get very high indeed.

The second theory is that wealthy people hire people and therefor they are the ones that create jobs.  If I may be so bold… bullshit.  Demand for goods and services on one side and investment capital on the other side is what creates jobs.  One million dollars of investment capital can come just as easily from ten people with one hundred thousand dollars, or a thousand people with one thousand dollars, as it can from one person with a million dollars.  Savings are pooled all the time… hell, the entire idea of publicly owned corporations is to pool savings.  If there is demand here and capital there, there will be jobs.  The capital does not need to be in the hands of a few very wealthy individuals.

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Filed under economy, Politics

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