The Truth About Taxes and 'Job-Killers'

Sunday, December 9, 2012

I f you want to fully appreciate the absurdity of the game of chicken that Congress is playing with the president over the "fiscal cliff" (the draconian budget cuts and tax increases that will take effect if the two sides cannot strike a deal before the end of the year), you need to know this:

In the third fiscal quarter of 2012, the quarter running from July through September, corporate profits in the United States reached an all-time high.

According to a report by the Commerce Department released on Dec. 3, third-quarter corporate profits came in at $1.75 trillion for the third quarter of 2012 - up 18.6 percent from the same period in 2011.

This comes on the heels of a report published by The New York Times on Nov. 30 which revealed that the tax burden for most Americans - federal, state and local taxes combined - are the lowest that they've been for the past 30 years.

In fact, households earning $350,000 in 2010 paid a combined rate of 42.1 percent in 2010, compared with 49 percent back in 1980. That's an inflation-adjusted savings of about $24,000 for households at the low end of the top 1 percent in this country.

Just to be clear, corporate profits are the highest that they have ever been, and taxes for Americans, especially high-income Americans, are lower than they've been since before Ronald Reagan was president. The "job creators" are sittin' in high cotton.

Our country's supply side is so sated that rather than trickling down, wealth should be pouring down in torrents. Surely, unemployment will be eradicated like smallpox by year's end and Obama's second inauguration will come on the eve of a ticker tape parade down Wall Street in his honor.

Unfortunately, what has been eradicated is any connection between Wall Street and Main Street.

The same Commerce Department report that heralded the record Q3 profits also noted that those profits came at the expense of workers, whose inflation-adjusted income dropped 0.7 percent. According to Moody's Analytics economist Aaron Smith, that's "largely because they are squeezing more productivity out of their workers without paying them more. Workers are afraid to slack off because it's become so hard to find another job." In effect, there is a perverse incentive to keep unemployment high in order to keep wages low.

Similarly, the benefits of lower tax rates are greater for high-income households. The aforementioned report in The New York Times noted that households with incomes in excess of $200,000 saw the biggest drop in the percentage of income spent on taxes. Eighty-five percent of middle-income households also saw their taxes drop, but to a much less significant degree. Lower-income households saw little or no drop in tax rates.

This disparity in income distribution and relative tax benefits highlights the problem with supply-side economics. Simply put, it is neither the obligation nor the inclination of the wealthy to redistribute their wealth. Rather, the objective is to accumulate it.

The result of the Bush-era tax cuts and the implementation of supply-side policies has been to expand the deficit by reducing revenues and concentrating more and more money in the hands of people who have neither the need nor the inclination to spend it. It is winner-take-all economics with ever fewer winners.

It is increasingly clear that Republicans will have to accept a 3 percent increase in federal income tax on the winners, those households with incomes of more than $250,000. The president is committed to it, a study by the Congressional Budget Office confirms that it won't kill growth, and 65 percent of Americans want it. What is yet to be determined is what price people who have seen their wealth redistributed upward will pay in a "bargain" to avoid another recession or worse.

In a saner world, the cacophony of fiscal-cliff rancor would be the death knell of supply-side economics - and with it, the phrase "job creators," and the need to add the words "job-killing" before using the word "taxes."

In a saner America, our leaders would be seeking more sustainable economic models, perhaps emphasizing local economies, to reinvigorate the greatest job creator the world has ever known, the American middle-class.

In this world, in this country, the winners have too much invested in the status quo to let that happen.

Kevin Smith lives in Aberdeen. Contact him at kevinasmith@gmx.com.

More like this story

Middleman522 5 months, 1 week ago

Why is it that no one is talking about cutting the size of government. There are way too many people getting paid with American's tax dollars, with great bennies, job protection and top pay. Who else has this, and we pay for it. We need to privatize a lot of what they have "conquered" and take that burden off our backs!

njc17 5 months, 1 week ago

First Kevin, remember the Commerce department is under that aegis of the fed, and publishes what it is edited. . Second the New York Times if an unofficial arm of the Obama administration. It prints whatever looks good for the Obama administration. Corporate profits have been stagnant at best, but also realize profits come not only from American commerce but forwign as well. But the tax burden obama calles for barely touches the corporate world, but does severely smack the small businessman, wherein if the small business earns $250,000.00 or more that is taxed with the upgrade tax. where I as a small businesman make a profit, i look to reinvest that profit back into the business to either grow of upgrade. With the new tax structure it gives me less money to restructure, upgrade or add more personel, and which speaking of the new healthcare declaration , that cost will also impact my business in a very negative way because by the time the bookkeepersfigure out my cost per person, the business cost becomes so high that I either cut personel or cut the healthcare which also results in fines to me cutting into my business income. If you are saying that the corporate world should be slammed with a major tax uptick, and that the corporate world is too massive to allow to exist, may I remind you of the ability to mass buy , mass produce and mass market, meaning lower cost at the consumer level. So then do you want to break the corporate structure? allowing the smaller mom and pop businesses to flourish [ at way higher consumer costs] but then the Obama tax structure driving them out of business, thereby giving the Chinese open house for the American market.

interesting.

Thatcher 5 months, 1 week ago

"In a saner America, our leaders would be seeking more sustainable economic models...." Uh, let's assume that increasing the marginal tax rates on the "rich" would, as Obama claims, generate $88 billion in more revenue a year. With a yearly deficit of over $1 trillion (each of the last four years), you'd still have "yearly" deficits of over $920 billion...each year, every year. Please spare us your thoughts on "sustainable economic models," because you are not serious. Cheers!

packwilleat 5 months, 1 week ago

Do I have to explain trickle down taxes again?? Just to remind everyone, these are the same people that advocate VAT and Carbon Footprint/offset taxes. These lefties keep hacking at the branches of the problem. The cause is inflation stupid.

Thatcher 5 months, 1 week ago

packwilleat-- I have to disagree with you. The lefties are not hacking at the branches of the problem. Instead, by proposing the VAT and Carbon Footprint nonsense, they are just adding more branches that they would never hack..and they want to add more branches with no hacking. Taxing the "rich" more, is yet another branch they would never hack. You, me, and Yukon will be hunting game and keeping our homes safe when this thing collapses under its own weight. Be well my friend! Cheers!

packwilleat 5 months, 1 week ago

Thatcher~ haha! Man I've seen that tree!! Growing under it there is a little bonsai tree with a sign that says "Money Tree".

Thatcher 5 months, 1 week ago

pack-- The lefties see it as "The Free Money Tree." Which is why, sadly, it will collapse. And when it does, and it will, it will be ugly for some time. I want nothing from the lefties or anyone else. From the posts here, they want something that I and others earned by hard work. Good luck with that. Cheers!

clarabelle 5 months, 1 week ago

" Thatcher - pack-- The lefties see it as "The Free Money Tree."

I am a lefty - and probably paid more in taxes last year then you have the past ten!

You are a poor man's rush lardbaugh!

packwilleat 5 months, 1 week ago

Clara ~ good for you! Now pay more.

The_AnonymusProfit 5 months, 1 week ago

Where is ol bentpan when you need him

packwilleat 5 months, 1 week ago

15 signs of the upcoming economic collapse....................

http://theeconomiccollapseblog.com/archives/15-signs-that-the-economy-is-rapidly-getting-worse-as-we-head-into-2013

Thatcher 5 months, 1 week ago

clarabelle-- My bet? I'll pay more in federal and state income taxes for fiscal year 2012 than you earned overall in 2012. Since you made the rude accusation, I will call you on your baseless claim...mostly because all you do here is make rude accusations. You paid more in federal/state income taxes than me for 2012? Prove it and I will give $5000 to a charity of your choice. If you are not telling the truth, you give $5000 to the Wounded Warriors Project. Agreed?

Yukonjohn 5 months, 1 week ago

Good work Thatcher!! Call her on it.

I have been watching MSNBC for the last couple of days and have reached a conclusion. Let's go over the cliff. Wide open, eyes closed, right over. This is the only way we are going to get the serious cuts we need in programs. Let us go through sequestration and the severe cuts we need. The tax issue is a non-issue to me. I will pay, not happily, but will pay. Companies will pay....to a point, then they will leave. I do not blame them in the least, go to another country that treats business better. If we do not go over the cliff, and the economy collapses, and many of us know it will, we will have room for some of you. If you are a "taker" that does not want to work for your food and sustinance, no need for you to come, you will perish here too. You will freeze and starve here. Bad thing is....they are going to perish there too.

Yukonjohn 5 months, 1 week ago

Clara.....CLARA...you have been called. Where oh where could my clarabelle be? Oh where oh where could she be?? LMAO!!!!

njc17 5 months, 1 week ago

Are we getting off the point? Going after the corporate world, as Kevin suggests, would be a diseaster to the economy as a whole and taxing those making $250,000 and up is a bigger diseaster . But the left has no clue what business is about much less mom and pops as opposed to corporatism. Now it seems they want to tax farms, and with the new inheritance taxes America will see the end to the farm.

packwilleat 5 months, 1 week ago

Capitalism vs. Corporatism by andyjonestv

skylinefirepest 5 months, 1 week ago

Yukon, you got it. We need to cut spending, not raise more taxes. We pay enough already. And for once why don't we try spending at home instead of throwing money at countries that hate us?? Obama wants class warfare and he ran his campaign on it. He is the most divisive president we've ever had...makes up for his incompetence otherwise, I guess. Obama hates business, big or small and is not willing to compromise. He is absolutely the worst president in my lifetime and people like Clara don't want to see it. Clarabelle, honey Thatcher called your bluff...it's time for you to put up or shut up...can't say as I'll miss your snide comments that lend nothing to any discussion. We're now at 47 cents borrowed for every dollar our government spends and despite Jimmy Heim's silly beliefs we can't continue like this!

jat 5 months, 1 week ago

Actually it's the fault of the job killing unions. This trend has been going on since the 1960's. At that time union membership across the country was in the high 20 percent. Today it is around 12 percent. In the 1960's CEO's made ten times what the average worker made. Now it is cresting about 100 times. The reality is that owners and CEO's are greedy and unions were originally created to ensure balance. A perfect illustration is in North Carolina schools whose average pay among the seventeen eastern seaboard states is seventeenth. As long as there isn't any checks and balances with big business, the gap between the average worker and management will continue to grow as will our prisons. Our government does need to be smaller, but we need a better checks and balances against corporate and individual greed.

njc17 5 months, 1 week ago

So, JAT; you are saying there needs to be a leveling of the playing field between worker and boss? CEO and UNION boss? And I'm not sure what the point of the teachers pay is on the Eastern seaboard. There will always be inequities wherever there is work to be done with whoever is doing the work and whoever is in authority. You cannot legislate that out.