Romney Myth Busters: Making the Wealthy Even Richer With More Tax Cut Will Create More Jobs
With cunning and contempt and catechismal fervor the super-rich have argued that all money should move to the top, where it will be used to stimulate the economy and create jobs. But they ignore the facts that prove them wrong. And it doesn't take much to prove them wrong.
1. First, a look at the success of the super-rich: Money has quickly moved to the top
Based on IRS figures, the richest 1% nearly tripled its share of America's after-tax income from 1980 to 2006. That's an extra trillion dollars a year. Then, in the first year after the 2008 recession, they took 93% of all the new income.
Wealth is even more skewed. The richest 10% own 83% of financial wealth, which they've skillfully arranged to be taxed at just 15%, ostensibly because they pump that money back into job-creating ventures. More on that misconception later.
Conservatives claim that wealth inequality has remained steady for the richest Americans. But data from Edward Wolff shows that the excess wealth was simply redistributed among the rest of the top 5%, who saw their share of America's net worth increase by 18 percent from 1983 to 2007. It was also noted by Sam Pizzigati that much of the top-level wealth was socked away tax-free overseas, a fact largely confirmed by a Tax Justice Network study.
2. Corporations are just as successful: profits have doubled, taxes cut in half
While corporate profits have doubled to $1.9 trillion in less than ten years, the corporate income tax rate, which for thirty years hovered around the 20-25% level, suddenly dropped to 10% after the recession. The biggest firms basically said "We're not paying."
That's a half-trillion dollars a year unpaid by the very companies who have successfully convinced much of America that their tax rates are too high.
The tax they actually pay is very low relative to other countries. U.S. corporations paid a smaller rate of income taxes than all but two of the OECD countries analyzed by the Office of Management and Budget and the Census Bureau. A Treasury report agreed, noting that the Tax/GDP rate for U.S. companies was 35% lower than the OECD average from 2000 to 2005.
Corporations even pay less than low-wage American workers. On their 2011 profits of $1.97 trillion, corporations paid $181 billion in federal income taxes (9%) and $40 billion in state income taxes (2%), for a total income tax burden of 11%. The poorest 20% of American citizens pay 17.4% in federal, state, and local taxes.
3. Some Non-Job-Creation Facts
The Wall Street Journal noted in 2009 that the Bush tax cuts led to the "worst track record for jobs in recorded history." 25 million people remain unemployed or underemployed, with 30 to 50 percent of recent college graduates in one of those categories. Among unemployed workers, nearly 43 percent have been without a job for six months or longer.
For the jobs that remain, most are low-paying, with the only real employment growth occurring in retail sales and food preparation. A recent report by the National Employment Law Project confirms that lower-wage occupations (up to about $14 per hour) accounted for 21 percent of recession losses and 58 percent of recovery growth, while mid-wage occupations (between $14 and $21 per hour) accounted for 60 percent of recession losses and only 22 percent of recovery growth.
The minimum wage is shamefully low, about 30% lower than the inflation-adjusted 1968 figure. And the tiny pay can't be blamed on small business. Two-thirds of America's low-wage workers, according to another National Employment Law Project report, work for companies that have at least 100 employees.
All these job woes persist while productivity has continued to grow, with an 80% increase since 1973 as median worker pay has stagnated.
4. So what are the "job creators" doing with all their money?
Over 90% of the assets owned by millionaires are held in a combination of low-risk investments (bonds and cash), the stock market, and real estate. Business startup costs made up less than 1% of the investments of high net worth individuals in North America in 2011.
Perhaps, instead, they're building businesses on their own? No. Only 3 percent of the CEOs, upper management, and financial professionals were entrepreneurs in 2005, even though they made up about 60 percent of the richest .1% of Americans. A recent study found that less than 1 percent of all entrepreneurs came from very rich or very poor backgrounds. They come from the middle class.
That deserves repeating. Entrepreneurs come from the middle class.
Not surprisingly, then, since the middle class has been depleted by the steady accumulation of wealth at the top, the number of entrepreneurs per capita has decreased 53% since 1977, and the number of self-employed Americans has decreased 20% since 1991.
5. Big business is even worse at job creation
First of all, the cash holdings for non-financial U.S. firms increased to $1.24 trillion in 2011, with about 57 percent of it stashed overseas. Commerce Department figures show that U.S. companies cut their work forces by 2.9 million from 2000 to 2009 while increasing overseas employment by 2.4 million.
The top holders of cash, including Apple and Google and Intel and Coca Cola and Chevron, are also spending their money on stock buybacks (which increase stock option prices), dividends to investors, and subsidiary acquisitions. According to Bloomberg, share repurchasing is at one of its highest levels in 25 years.
6. The Big Fraud: Tax us less, and the jobs will come
Despite their unwillingness to invest in jobs, and even in the face of damning evidence against their tax myths, the super-rich fight like wildcats at any suggestion that they support the country that provided their wealth. Way back in 1984, right after the Reagan tax cuts, the U.S. Treasury Department came to the obvious but belated conclusion that tax cuts cause a loss of revenue. A 2006 Treasury Department study found that extending the Bush tax cuts would have no beneficial effect on the U.S. economy. Other sources have confirmed that economic growth was fastest in years with relatively high top marginal tax rates.
Ample evidence exists to show that no relationship exists between the capital gains tax rate and investment. As noted in the Washington Post, "The top tax rate on investment income has bounced up and down over the past 80 years - from as high as 39.9 percent in 1977 to just 15 percent today - yet investment just appears to grow with the cycle, seemingly unaffected." In fact, the low rate may even have a negative effect on growth. A Congressional Research Service report states: "Capital gains tax rate increases appear to increase public saving and may have little or no effect on private saving. Consequently, capital gains tax increases likely have a positive overall impact on national saving and investment."
7. So what becomes of the jobs?
Corporations are hoarding over a trillion dollars. The richest 1% take a trillion dollars a year more than productivity-based earnings since 1980. Over eight trillion untaxed dollars is being hidden overseas.
That's a present value of ten trillion misdirected dollars. Just 1/10 of that would create 25 million jobs, one for every unemployed or underemployed worker in America. Or a $45,000 a year job for every college student in the United States.
But the people who call themselves "job creators" do nothing to make that happen.
Yet the Romney-Ryan plan to create jobs - and Republican governors as well - is to further cut taxes. Never mind that we've had ten years of tax cuts not producing jobs. Demand creates jobs. People with jobs who buy cars, toothpaste, cereal and gadgets create jobs, not billionaires who make most of their money from capital gains. It is no coincidence that as we keep the Bush tax cuts and state level conservative politicians cut local taxes, our infrastructure needs needs an upgrade and education spending is down.
Cenk Uygur Unravels Anti-Obama Smiley faced Fascist Wacko Dinesh D’Souza and Conspiracy 2016: Obama’s America
Author Dinesh D’Souza, whose The Roots Of Obama’s Rage is the basis for the newly-released hackumentary 2016: Obama’s America, is making the rounds to promote the film. On Tuesday night’s The Young Turks, host Cenk Uygur confronted D’Souza with the facts behind the film’s deranged view of President Obama, and asked him why he never complained about the George W. Bush policies that exploded the debt, and that President Obama is still paying for.
Dinesh D’Souza could not even bother to look up the correct deficit left by Republicans and Bush in 2008.