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(The Street)   Someone gave a calculator to a reporter and he figured out that lower taxes for the wealthy creates exactly zero new jobs. Behold, the power of fifth-grade math   (thestreet.com ) divider line
    More: Obvious, Whoppers, great whites  
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2923 clicks; posted to Politics » on 12 Sep 2012 at 1:51 PM (3 years ago)   |   Favorite    |   share:  Share on Twitter share via Email Share on Facebook   more»



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2012-09-12 01:20:46 PM  
Then how are jobs created?
 
2012-09-12 01:25:41 PM  

The Stealth Hippopotamus: Then how are jobs created?


Increased demand.
 
2012-09-12 01:26:39 PM  
Businesses don't expand based on market conditions and expected profits. That's the real myth. They expand based on calculations of exactly how much tax they will pay. If a business's taxes are lowered by 25%, its labor force will increase by exactly 25%, even if there is zero demand for more of its products or services, because the entire nation has gone broke to pay for rich people's tax cuts..

This is the Law of the Jerb Creators, and as such, it is above question.
 
2012-09-12 01:51:52 PM  

The Stealth Hippopotamus: Then how are jobs created?


i291.photobucket.com
 
2012-09-12 01:52:36 PM  
Fifth grade? Elitist liberalism.
 
2012-09-12 01:54:29 PM  

The Stealth Hippopotamus: Then how are jobs created?


A tax system that rewards expanding businesses and punishes profit hoarding.
 
2012-09-12 01:54:39 PM  
No shiat, Sherlock.
 
2012-09-12 01:56:01 PM  
Did he also figure out that taxing them more doesn't create any jobs?
 
2012-09-12 01:56:47 PM  
Robert Reich explains in 2:30. Link
 
2012-09-12 01:58:13 PM  
When it comes to figuring out that voodoo economics doesn't work and never did, it's always amusing to see the slow horses crossing the finish line. Scratching their heads and furrowing their brows in a vain attempt to understand, they ask: Then how are jobs created?
 
2012-09-12 01:58:48 PM  
Hey subby. That's no reporter, that's an economist.

Written by Walter M. Cadette, an economist (JPMorgan, retired) and formerly senior scholar at the Jerome Levy Economics Institute at Bard College.
 
2012-09-12 01:59:38 PM  
FTFA:
Short of a wholly implausible tax rate of 100% on earnings, the tax rate does not even enter into a firm's decision to hire or not hire.

This is, of course, false.
 
2012-09-12 02:01:05 PM  

cirby: FTFA:
Short of a wholly implausible tax rate of 100% on earnings, the tax rate does not even enter into a firm's decision to hire or not hire.

This is, of course, false.


And the reason for your ludicrous claim?
 
2012-09-12 02:02:15 PM  
That is indeed fifth grade economics. Yes, an individual firm will not base its hiring on the tax rate it pays. However, capital is allocated based on the after tax rate of expected return.

Using the intentionally unrealistic 100% tax rate cited in TFA, there would be no after tax profits and no incentive to allocate capital to business. As you reduce the tax rate, the after tax expected returns increase, increasing quantity of capital supplied to industry. More capital supplied equals more investment in new or expanded businesses, and therefore more jobs. The more you know.

There are more complexities involved of course (some tax is necessary to pay for govt expenditures, how much govt spending is appropriate is subject to debate as is how to pay for it, etc.), but TFA misses the entire point, as do anti tax folks who think that businesses fire people to pay for a higher tax burden.
 
2012-09-12 02:03:39 PM  
So they do what with the money they save stick it in a mattress or do they stick it in a bank that then loans out 90%
 
2012-09-12 02:03:39 PM  
It creates plenty of new jobs for the countries that hosts the banks that keep their savings. That bank can use the additional capital to lend out to businesses, which hire workers. Simple economics.
 
2012-09-12 02:03:58 PM  

hillbillypharmacist: The Stealth Hippopotamus: Then how are jobs created?

[i291.photobucket.com image 193x135]


That's some funny shiat, that is.
 
2012-09-12 02:05:18 PM  
I was about to comment that the author had stayed awake during Econ 101, then I saw that he was an economist who retired from JP Morgan.
I'm torn between congratulating him for telling the truth and condemning him for profiting from creating the current mess.
 
2012-09-12 02:05:24 PM  

cirby: FTFA:
Short of a wholly implausible tax rate of 100% on earnings, the tax rate does not even enter into a firm's decision to hire or not hire.

This is, of course, false.


Oh, please, honorable random internet message board poster, explain how you're right and how the noted economist in TFA is wrong.

Go ahead, I'll wait.
 
2012-09-12 02:05:34 PM  
Shenanigans! Jobs are created by the Free-Market fairy giving a handjob to the Job Creators.
 
2012-09-12 02:08:05 PM  

tenpoundsofcheese: Did he also figure out that taxing them more doesn't create any jobs?


We'll ignore common sense for a moment, pointing out that federal infrastructure projects are a huge benefit to blue-collar construction workers. Who in turn can buy a few nice things (new TVs, microwaves, clothes that aren't from Goodwill). Which pushes money up the chain, creating more jobs at the next level (car sales, restaurants, tourism industries). But yes. We'll ignore that, and say that we'll just raise all this extra tax revenue and not reinvest it in the US economy that same year.

So... worst case scenario, the government pays down some of the national debt with that money. What a horrible idea.
 
2012-09-12 02:08:23 PM  

tenpoundsofcheese: Did he also figure out that taxing them more doesn't create any jobs?


No one claims that more taxes creates jobs. Greater taxation is about generating revenue, which you need to move toward a more balanced budget. This is especially true if we want to keep the social programs we love, as large majorities do. TFA is dispelling the idea that we should not raise taxes to raise revenue because it will only harm the economy because jobs will be lost.
 
2012-09-12 02:09:09 PM  
 
2012-09-12 02:11:32 PM  

cirby: FTFA:
Short of a wholly implausible tax rate of 100% on earnings, the tax rate does not even enter into a firm's decision to hire or not hire.

This is, of course, false.


If demand for their product or service increases enough, more workers will be needed.

If taxes are lowered and there is zero increased demand for their product or service, tell me exactly why "jobs will be created." Even the most generous, employee-loving company in the world isn't going to pay more people to do less work.
 
2012-09-12 02:11:36 PM  
The matter isn't that they can't make new jobs.

They won't.

Because it makes Obama look good. All that matters to them is getting him out of office, no matter how much of the country had to burn to the ground in the process.

komplexify.com

/Math motherfarkers
 
2012-09-12 02:14:09 PM  
There is exactly 1 reason businesses hire more workers. When there is more demand for their goods/services. That is it.
 
2012-09-12 02:15:39 PM  

clkeagle: If taxes are lowered and there is zero increased demand for their product or service, tell me exactly why "jobs will be created." Even the most generous, employee-loving company in the world isn't going to pay more people to do less work.


The saving from the taxes don't just get stuffed into some hole in the ground they are placed in a financial instutition that loans that money out to people and business which bumps up demand. It may not create jobs in their market but it does result in job creation.
 
2012-09-12 02:16:18 PM  

tenpoundsofcheese: Did he also figure out that taxing them more doesn't create any jobs?


Au contraire. It gives them incentive to create jobs to earn money because they can't just sit back and do nothing and rake in billions the way they do today.
 
2012-09-12 02:18:20 PM  

Expolaris: The matter isn't that they can't make new jobs.

They won't.

Because it makes Obama look good. All that matters to them is getting him out of office, no matter how much of the country had to burn to the ground in the process.

/Math motherfarkers


I didn't see the speech. By "we", did he mean himself, the GOP congress that forced budget cuts, and an unsustainable Internet/tech bubble created spike in revenues?

Because that's what it sounds like.
 
2012-09-12 02:18:28 PM  

tnpir: cirby: FTFA:
Short of a wholly implausible tax rate of 100% on earnings, the tax rate does not even enter into a firm's decision to hire or not hire.

This is, of course, false.

Oh, please, honorable random internet message board poster, explain how you're right and how the noted economist in TFA is wrong.

Go ahead, I'll wait.


As I understand it, the economist is exaggerating/simplifying a bit. Obviously it's more complicated than "no effect, then a sharp cliff at 100%". 99% would be almost, but not quite as bad, and so on.

The Laffer curve is a real thing, but the people who always talk about it lure about where it starts to actually bend. I've heard that that's around a 70% to marginal rate for individuals, but obviously that was just an estimate. After that, the benefits of trying to skate around the law start to outweigh the potential costs of getting caught. For rational people, that is; I'm sure there's a different, lower line for the Romneys of the world.
 
2012-09-12 02:20:27 PM  
I always wondered why there is no disconnect between the rich people aka job creators and the companies they work for. My understanding is that the Bush tax cuts were income taxes on individuals not taxes on corporations. So if the millionaire CEO of Ford gets a huge income tax cut and he has more of his own capital to spend what jobs is he going to create? Maybe hire a new maid or have that deck built. But if you have something like a payroll tax cut then the company he runs has more money to hire many more workers to build cars at a lower per car cost for labor thus giving an incentive to hire workers here to make things.
 
2012-09-12 02:20:53 PM  

Alphax: cirby: FTFA:
Short of a wholly implausible tax rate of 100% on earnings, the tax rate does not even enter into a firm's decision to hire or not hire.

This is, of course, false.

And the reason for your ludicrous claim?


Because Jesus? Or is it Socialism? Honestly, I can't keep it straight any more, and I lost my Commander Ronnie Selective Outrage Calendar. Little help here?
 
2012-09-12 02:21:54 PM  

roddack: clkeagle: If taxes are lowered and there is zero increased demand for their product or service, tell me exactly why "jobs will be created." Even the most generous, employee-loving company in the world isn't going to pay more people to do less work.

The saving from the taxes don't just get stuffed into some hole in the ground they are placed in a financial instutition that loans that money out to people and business which bumps up demand. It may not create jobs in their market but it does result in job creation.


That sounds like wishful thinking to me.
 
2012-09-12 02:25:40 PM  

roddack: clkeagle: If taxes are lowered and there is zero increased demand for their product or service, tell me exactly why "jobs will be created." Even the most generous, employee-loving company in the world isn't going to pay more people to do less work.

The saving from the taxes don't just get stuffed into some hole in the ground they are placed in a financial instutition that loans that money out to people and business which bumps up demand. It may not create jobs in their market but it does result in job creation.


How do jobs in Switzerland and Grand Caymans help Americans?
 
2012-09-12 02:26:21 PM  

Tusz: tnpir: cirby: FTFA:
Short of a wholly implausible tax rate of 100% on earnings, the tax rate does not even enter into a firm's decision to hire or not hire.

This is, of course, false.

Oh, please, honorable random internet message board poster, explain how you're right and how the noted economist in TFA is wrong.

Go ahead, I'll wait.

As I understand it, the economist is exaggerating/simplifying a bit. Obviously it's more complicated than "no effect, then a sharp cliff at 100%". 99% would be almost, but not quite as bad, and so on.

The Laffer curve is a real thing, but the people who always talk about it lure about where it starts to actually bend. I've heard that that's around a 70% to marginal rate for individuals, but obviously that was just an estimate. After that, the benefits of trying to skate around the law start to outweigh the potential costs of getting caught. For rational people, that is; I'm sure there's a different, lower line for the Romneys of the world.


No, the economist I think is correct in that a 100% tax rate wouldn't affect an individual firms hire/not hire decision. Because at 100%, there's no reason for the firm to stay in business at all. Turn off the lights and shut the door.

The laffer curve doesn't apply here- that speaks to govt revenues at different levels of taxation. TFA is about private sector jobs. And as I mentioned above, the higher te tax rate, the lower the expected after tax return, and the lower investment in private industry and private sector employment.

As tax rates go down, expected returns go up, as do capital allocated to taxable ventures and jobs provided by them. The relationship isn't linear, but unlike the laffer curve, there is no inflection point in regard to private sector employment.
 
2012-09-12 02:27:21 PM  
How is jobby formed?
how is jobby formed
how girl get jabb
 
2012-09-12 02:27:42 PM  

cirby: FTFA:
Short of a wholly implausible tax rate of 100% on earnings, the tax rate does not even enter into a firm's decision to hire or not hire.

This is, of course, false.


You make such a compelling argument, surely many will believe you over "Walter M. Cadette, an economist (JPMorgan, retired) and formerly senior scholar at the Jerome Levy Economics Institute at Bard College."

I mean, why wouldn't they? Must be some kind of political agenda, yeah that's it...
 
2012-09-12 02:28:41 PM  

cirby: FTFA:
Short of a wholly implausible tax rate of 100% on earnings, the tax rate does not even enter into a firm's decision to hire or not hire.

This is, of course, false.


Incorrect.


(wow, that was easy!)
 
2012-09-12 02:29:12 PM  
Aren't businesses and individuals taxed separately? How does taxing the CEO's personal finances affect whether or not the corporation itself decides to hire or expand?

When Bill Gates earns his $600k salary, isn't that already taken from the gross income of Microsoft and its entities? How does taxing him more or less, personally, affect how much the corporation decides to invest in expansion? Unless CEO's and other executives are paying themselves a salary based on a percentage of net income (which is obviously not the case), then why the hell are these discussions continuing? A personal income tax should have no bearing on job creation at all. That should come down to corporate tax rates, shouldn't it?

Or am I completely confused about how this works? Can anyone with explicit knowledge about this explain?
 
2012-09-12 02:30:23 PM  

Debeo Summa Credo: That is indeed fifth grade economics. Yes, an individual firm will not base its hiring on the tax rate it pays.

[OK.] However, capital is allocated based on the after tax rate of expected return. [No, it farking isn't.]

Using the intentionally unrealistic 100% tax rate cited in TFA, there would be no after tax profits and no incentive to allocate capital to business. [OK] As you reduce the tax rate, the after tax expected returns increase, [Maybe. It's not that simple.] increasing quantity of capital supplied to industry. [NO. Just stop right there. Your causal chain is broken at the third link.] More capital supplied equals more investment in new or expanded businesses, [Not necessarily.] and therefore more jobs. [No: Automation. And if you're talking about the US economy: Outsourcing. Offshoring.] The more you know. [Everybody in Fark is less intelligent for reading that.]

There are more complexities involved of course (some tax is necessary to pay for govt expenditures, how much govt spending is appropriate is subject to debate as is how to pay for it, etc.), [This is only one small part of what you purport to address above.] but TFA misses the entire point, [I'm sorry that the author did not build your ideal strawman.] as do anti tax folks who think that businesses fire people to pay for a higher tax burden. [OK]

So the pattern is: Reasonable statement > Broken and illogical chain of "reasoning" > Reasonable statement.

I've always been impressed (and thoroughly disgusted) by your ability to type the kind of overly-simplistic, causality-violating, and empirically incorrect nonsense that purports to educate (that entire second paragraph is a perfect case in point), while simultaneously acting as the plutocrats' designated Fark fluffer.
 
2012-09-12 02:33:57 PM  

wantedbadass: Aren't businesses and individuals taxed separately? How does taxing the CEO's personal finances affect whether or not the corporation itself decides to hire or expand?

When Bill Gates earns his $600k salary, isn't that already taken from the gross income of Microsoft and its entities? How does taxing him more or less, personally, affect how much the corporation decides to invest in expansion? Unless CEO's and other executives are paying themselves a salary based on a percentage of net income (which is obviously not the case), then why the hell are these discussions continuing? A personal income tax should have no bearing on job creation at all. That should come down to corporate tax rates, shouldn't it?

Or am I completely confused about how this works? Can anyone with explicit knowledge about this explain?


TFA speaks specifically to taxes on businesses, not individuals.

The impact of changes in individual taxes is another analysis.
 
2012-09-12 02:34:36 PM  
Done in two this time.
 
2012-09-12 02:34:38 PM  

roddack: clkeagle: If taxes are lowered and there is zero increased demand for their product or service, tell me exactly why "jobs will be created." Even the most generous, employee-loving company in the world isn't going to pay more people to do less work.

The saving from the taxes don't just get stuffed into some hole in the ground they are placed in a financial instutition that loans that money out to people and business which bumps up demand. It may not create jobs in their market but it does result in job creation.


How do loans create demand
 
2012-09-12 02:35:19 PM  

tenpoundsofcheese: Did he also figure out that taxing them more doesn't create any jobs?


Uh, yeah. It was sometime in between when he said: "As for fact, years of relatively high tax rates on those at the top of the income distribution (the 1950s and the 1990s, for example) have also been years of prosperity. Years of unusually low tax rates have been times of high unemployment, notably the past few years. None of the history, however, disproves a causal relationship. But neither does it support one." and when he...

No, wait, That was where he said it.
 
2012-09-12 02:37:05 PM  

Debeo Summa Credo: Tusz: tnpir: cirby: FTFA:
Short of a wholly implausible tax rate of 100% on earnings, the tax rate does not even enter into a firm's decision to hire or not hire.

This is, of course, false.

Oh, please, honorable random internet message board poster, explain how you're right and how the noted economist in TFA is wrong.

Go ahead, I'll wait.

As I understand it, the economist is exaggerating/simplifying a bit. Obviously it's more complicated than "no effect, then a sharp cliff at 100%". 99% would be almost, but not quite as bad, and so on.

The Laffer curve is a real thing, but the people who always talk about it lure about where it starts to actually bend. I've heard that that's around a 70% to marginal rate for individuals, but obviously that was just an estimate. After that, the benefits of trying to skate around the law start to outweigh the potential costs of getting caught. For rational people, that is; I'm sure there's a different, lower line for the Romneys of the world.

No, the economist I think is correct in that a 100% tax rate wouldn't affect an individual firms hire/not hire decision. Because at 100%, there's no reason for the firm to stay in business at all. Turn off the lights and shut the door.

The laffer curve doesn't apply here- that speaks to govt revenues at different levels of taxation. TFA is about private sector jobs. And as I mentioned above, the higher te tax rate, the lower the expected after tax return, and the lower investment in private industry and private sector employment.

As tax rates go down, expected returns go up, as do capital allocated to taxable ventures and jobs provided by them. The relationship isn't linear, but unlike the laffer curve, there is no inflection point in regard to private sector employment.


But then what is a businesses incentive to hire more people? just because they're making more after-tax capital doesn't mean that they need more people to work on making widgets. It just means that the higher ups (CEO, CFO, BOD, etc.) get to pocket more cash.

At least that's what i see
 
2012-09-12 02:41:20 PM  

CPennypacker: roddack: clkeagle: If taxes are lowered and there is zero increased demand for their product or service, tell me exactly why "jobs will be created." Even the most generous, employee-loving company in the world isn't going to pay more people to do less work.

The saving from the taxes don't just get stuffed into some hole in the ground they are placed in a financial instutition that loans that money out to people and business which bumps up demand. It may not create jobs in their market but it does result in job creation.

How do loans create demand


Are you trying to trick us with the definitional difference between "demand" and "quantity demanded"?

Because, if you imagine wells Fargo and Citibank and bank of america and Fannie mae and Freddie Mac all deciding one day that they weren't going to make home loans anymore, that would certainly affect demand (or quantity demanded) for housing.

The availability of credit absolutely improves the demand for products or assets for which that credit will be used to purchase, no?
 
2012-09-12 02:41:54 PM  

forever_blowing_bubbles: For the "tax cut enthusiasts" out there I submit this ... (new window)


You're submitting a blog that sucks?
 
2012-09-12 02:42:24 PM  

tenpoundsofcheese: Did he also figure out that taxing them more doesn't create any jobs?


To pay for everything our government does, we need to tax somebody. If we shift more taxes onto the middle class and the poor, they won't have any money to buy goods/services from any companies. At that point, what does the tax rate matter if you're company isn't making any profit to be taxed?
 
2012-09-12 02:44:30 PM  

Nickdude: Debeo Summa Credo: Tusz: tnpir: cirby: FTFA:
Short of a wholly implausible tax rate of 100% on earnings, the tax rate does not even enter into a firm's decision to hire or not hire.

This is, of course, false.

Oh, please, honorable random internet message board poster, explain how you're right and how the noted economist in TFA is wrong.

Go ahead, I'll wait.

As I understand it, the economist is exaggerating/simplifying a bit. Obviously it's more complicated than "no effect, then a sharp cliff at 100%". 99% would be almost, but not quite as bad, and so on.

The Laffer curve is a real thing, but the people who always talk about it lure about where it starts to actually bend. I've heard that that's around a 70% to marginal rate for individuals, but obviously that was just an estimate. After that, the benefits of trying to skate around the law start to outweigh the potential costs of getting caught. For rational people, that is; I'm sure there's a different, lower line for the Romneys of the world.

No, the economist I think is correct in that a 100% tax rate wouldn't affect an individual firms hire/not hire decision. Because at 100%, there's no reason for the firm to stay in business at all. Turn off the lights and shut the door.

The laffer curve doesn't apply here- that speaks to govt revenues at different levels of taxation. TFA is about private sector jobs. And as I mentioned above, the higher te tax rate, the lower the expected after tax return, and the lower investment in private industry and private sector employment.

As tax rates go down, expected returns go up, as do capital allocated to taxable ventures and jobs provided by them. The relationship isn't linear, but unlike the laffer curve, there is no inflection point in regard to private sector employment.

But then what is a businesses incentive to hire more people? just because they're making more after-tax capital doesn't mean that they need more people to work on making widgets. It just means that the higher ups (CEO, CFO, BOD, etc.) get to pocket more cash.

At least that's what i see


Well, the shareholders (owners) would pocket more cash. Other potential investors would see the additional cash being pocketed by the owners of the original company and start their own. Or, the shareholders themselves would see how much cash their pocketing and say "hey this is a pretty sweet business we've got here, let's expand!". It all gets pretty fungible but broadly speaking higher after tax returns will attract more capital to an industry, and vice versa.
 
2012-09-12 02:48:13 PM  

Debeo Summa Credo: CPennypacker: roddack: clkeagle: If taxes are lowered and there is zero increased demand for their product or service, tell me exactly why "jobs will be created." Even the most generous, employee-loving company in the world isn't going to pay more people to do less work.

The saving from the taxes don't just get stuffed into some hole in the ground they are placed in a financial instutition that loans that money out to people and business which bumps up demand. It may not create jobs in their market but it does result in job creation.

How do loans create demand

Are you trying to trick us with the definitional difference between "demand" and "quantity demanded"?

Because, if you imagine wells Fargo and Citibank and bank of america and Fannie mae and Freddie Mac all deciding one day that they weren't going to make home loans anymore, that would certainly affect demand (or quantity demanded) for housing.

The availability of credit absolutely improves the demand for products or assets for which that credit will be used to purchase, no?


DEMAND DOES NOT WORK THAT WAY. GOOD NIGHT.
 
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