[Mbaker73]

[quote="Publius"][quote]The main issue is government ignorantly trying to decide how to "help" the economy and businesses. The reason we have become the most powerful and advanced country is because of our free market and the ability to let smart business owners thrive by making their own decisions, not being directed by government.[/quote}

Yes. There are reasons that raising the personal income tax would get them to invest, but not in the nation where the tax rates are risen. There is one obvious reason for this.

1. S-Corporations certainly wouldn't invest because all the profits of the S-Corporations would be taxed at rates higher than the Corporate Tax rate already is, which in marginal rates are the highest in the world, or at best, 2nd highest in the world. It is this high rate on C-Corporations, that are subjected to the Corporate Tax rate, that is what prevents large firms from making investments. Sure, people argue that they are making record profits (that's how they survive). If they were to hire a bunch of people and make things that won't sell for 5 years, their cash flows would be in the red for 5 years, then we have large firms filing bankruptcy, which means that all of the suppliers don't receive payments for what they provided and have already spent money on producing. That produces a snow-ball effect. Trickle Down economics works both ways, and this is exactly why the left ignores it, so they don't have to be in touch with reality.

2. Second, the tax rates increase that is being pushed by the American Left on Capital Gains is an automatic reduction to the offset of risk, which reduces investment. Also, Capital Gains taxes are taxes on the individual.

If the expected yield is 7%, and the tax is risen to 28%, as Barack Obama and the Democrats propose, then the total yield would be reduced from $5.95 yield per every $100 invested to $5.04 for every 100 invested. If the risk is a 5% loss, investment will not occur if the Capital Gains tax is risen.

[Beal]

I realize that this is an old thread, resurrected by Mbaker, but I didn't notice your comments before, so I will respond.

Actually the US leading up the mid-1900s was extremely protectionist, ie, the government intervened to protect US business interest. We also spent a lot of money on infrastructure and what not. Our single largest period of growth (both by duration and in terms of GDP growth) was from the mid-1940s to the early 1970s, which was our period of highest economic intervention in the economy.

Are you referring to protectionism, or intervention in general?

If the former: GATT was signed in 1947. It reduced taxes on billions of dollars of trade, eliminating thousands upon thousands of tarrifs. The post-war period to 1970 was a time of opening markets and quickly expanding trade.

If the latter:
-US Federal Tax receipts from 1946 through 1970 averaged 17.4% of GDP. From 1971 to 2010, they averaged 18%.
-Outlays from 1946 though 1970 averaged 17.9% of GDP. From 1971 to 2010, they averaged 20.9%.

You call this declining economic intervention?

In the period you cite, there was no EPA, no price controls, no endangered species act, no Clean Water Act, no Clean Air Act, no requirements for catalytic converters or air bags or probably 100 other features mandated on all vehicles. Buildings codes were more lax, asbestos was common, aerosols were mostly unregulated, AC units were filled with CFCs, and lead was in everything. For most of that period there was no Medicare or Medicaid, no War on poverty, no Fair Packaging and Labeling Act, no Truth in Lending Act, and no meat inspectors.

By what measure was intervention higher during that 30 year period?

[Wolfman]

What you just said is so incredibly wrong, I don't even know where to start.

[Rainbow Crow]

There's lots of evidence that high taxes upon the rich (who tend to sit on top of large amounts of money) can stimulate an economy. When you become a "job creator" your job-creating money is often not taxed. Not taxing the money that hasn't been used to create jobs because it might get used to create jobs simply doesn't make any sense.

[Beal]

There's lots of evidence that high taxes upon the rich (who tend to sit on top of large amounts of money) can stimulate an economy. When you become a "job creator" your job-creating money is often not taxed. Not taxing the money that hasn't been used to create jobs because it might get used to create jobs simply doesn't make any sense.

Haven't we already been over this? Where is this money possessed by the wealthy that is not being used to create jobs? The exact opposite is true. Wealth, virtually by its definition, is invested. Even if Bill Gates had $60 billion stashed in to a checking account, it will still be used by the bank to fund business loans and mortgages. If you spend everything you earn, you will never be wealthy, no matter how big your pay check may be. Outside of winning the lottery or being an exceptional thief, the only way to accumulate wealth in the first place is to invest and the only way to preserve wealth--even if you inherited it--is to keep it invested. Investing creates jobs. Wealth held in private hands creates more jobs than wealth taxed from the private sector and spent by the government.

Do you disagree? Then where does it stop? If you believe that the government can create more wealth or more jobs or a stronger economy--by whatever measure--by allocating capital and directing consumption itself, then what is the point of any kind of free market? Why don't we just put the government in charge of everything? If you really believe that the government can do a better job with our money, then stop with the namby-pamby bullshit and tell us what you really think. Either you think that the government is better at the job or you don't. But if you do, there is no point in arguing for moderation, is there? That, by itself, does not mean that the government should never intervene. There are other reasons to intervene. Internalizing external costs? Benefiting national security? Providing for people who cannot provide for themselves? You can make a reasonable argument for all of these. But you have to acknowledge the cost. There is always a net economic cost when the government intervenes.

[Meta777]

Haven't we already been over this? Banks do not and cannot lend out 100% of the money stored in their accounts.
They are actually prohibited from doing so by law, and even of the portion that they are allowed to loan out,
they do not even loan 100% of that.

Furthermore, even loaned money that can be said to be economically stimulating is spent by someone at some point.
According to the Bureau of Labor Statistics estimates,
Americans made close to $60,712 after taxes on average in 2010,
and only spent around $48,109 on average the same year.
Given 121,107,000 individuals in 2010, that would come out to about $1.526T of idle money that wasn't used for anything in 2010.
Incidentally, our federal deficit is less that 1.3T.

http://www.bls.gov/cex/2010/Standard/age.pdf

I believe that there are some things that the government can do better, and there are some things that the private sector can do better.
Which of the two Beal, do you think is better at providing a basic standard of living to the poorest among us? And why?

-Meta

[starcraftzzz]

Where is this money possessed by the wealthy that is not being used to create jobs?

The several trillion that is sitting idle. Not to mention its not jsut money that the rich aren't using the create jobs its land/capital. Currently the rich are only making use of 70% of all capital (meaning theoretically the economy could be 30% larger)

If you believe that the government can create more wealth or more jobs or a stronger economy--by whatever measure--by allocating capital and directing consumption itself, then what is the point of any kind of free market?

There is no point in a totally free market because a totally free market results in a crappy economy with high poverty and unemployment. Glad we agree on that.

Why don't we just put the government in charge of everything? If you really believe that the government can do a better job with our money,

The government can do better. The government does better on health care, insurance, utilities, welfare, retirement, , energy, transportation, prisons, court systems, and child care.

[skeptic-1]

The greater number of businesses are small business.

Hiring should be based "only" and not otherwise on the ability to service demand and produce a satisfactory profit that will sustain the business and create reserve for future growth without need to borrow if at all possible.

Employee compensation should be at market rates (easily discernible).

Year end bonuses should be considered to reward contribution.

FIT is a virtually inescapable non controllable cost of doing business. The target for most is to meet ones profit goal before tax period.

It's your risk and your money alone. All you owe is to practice fairness.

Rewards are not long term when we play games with the economy (as we did ) in allowing moving production overseas. (cheap goods and a credit

binge). Now we pay for our folly !. Mitt has no clue just gas.

[Someone5]

It's absurd on its face. Tax deductions do not provide greater savings than the amount invested,

Not so. If the government changes tax law such that divestment is less advantageous than reinvestment, companies will reinvest rather than divest profits. Extensive business deductions in an environment of otherwise high taxation is one such example of a situation where reinvestment is more advantageous than divestment.

This is pretty simple microeconomics.

[ray188]

Can we get down to the basics? It is not the roll of a company to creat jobs in a sane economy. Truthfully, it is the roll of a company to make a profit and thereby reward the investors who made it all possible.

But what about jobs?? Jobs are not "created", they are the natural result of a sane economy.

[Rei Murasame]

The question is, what does a sane economy look like?

[Daktoria]

The question is, what does a sane economy look like?

Are you admitting that psychology implies economy?



______________________

Can we get down to the basics? It is not the roll of a company to creat jobs in a sane economy. Truthfully, it is the roll of a company to make a profit and thereby reward the investors who made it all possible.

But what about jobs?? Jobs are not "created", they are the natural result of a sane economy.

That's an interesting claim when literally read.

You're saying that groups (company) don't come together to get busy (jobs), but rather groups come together to realize free time (profit). Getting busy is just something that happens when people are self-respecting (sane), and those who commit themselves (investors) reap the harvest (rewards).

Economics would be so much easier if people slowed down, realized what they're really saying, and stopped making things complicated.

[ray188]

I'm sorry but that is a bit esoteric for me (all those parens cloud the mind).

Simply stated, jobs come from a natural process in which someone comes up with an idea that will turn a profit and acquires the necessary support to accomplish that.

It really ain't rocket science if we allow ourselves to approach the issue logically as opposed to ideologically.

[ray188]

What is a sane economy - interesting question.

To me Adam Smith figured it out a few years ago. It is controlled and regulated by the "invisable hand" which has no ideology, has no agenda. Rather, it is a self regulating entity.

On the other hand - the alternative is government control which does, in fact, have ideology and agenda. Simply stated, a government controlled econony is ruled by one basic concept - "will it get me reelected?".

[Rei Murasame]

Are you admitting that psychology implies economy?

What do you mean by 'implies'?

Simply stated, jobs come from a natural process in which someone comes up with an idea that will turn a profit and acquires the necessary support to accomplish that.

What's the definition of 'natural' at the moment?

It really ain't rocket science if we allow ourselves to approach the issue logically as opposed to ideologically.

But aren't you as ideological as anyone else? After all, to claim that having the state take no action is 'natural', as you seem to be claiming, is a pretty ideological statement.

To me Adam Smith figured it out a few years ago. It is controlled and regulated by the "invisable hand" which has no ideology, has no agenda. Rather, it is a self regulating entity.

How can you claim that this has no agenda, when clearly the agenda there is to allow private entities to carry out operations without being obligated to any social goals set by the community at large?

[JaxsonRaine]

It's really basic logic, and there are multiple ways you can address this.

The claim is that business owners will hoard their money with low tax rates. The claim is usually that this is due to greed.

Now, let's assume that Business A operates on a 4% profit margin, and has $100 million in cash. Business A operates in 3 major cities in US, and provides a service that is in universal demand.

If Owner A's driving factor in business decisions is greed, then why would Owner A hoard the money, when he could use it to expand to another city, and increase revenues and profits even more?

If Owner A doesn't choose to do this, then there must be a reason. Either he isn't greedy(the premise of the argument), or there are market forces that make the decision to expand too risky at this point. Taxes, regulations, competition, a recession causing a temporary drop in demand, or any other factor.


The second way to address this is to address this is to consider financial responsibility. If an individual spends every dollar of every paycheck, but becomes too sick to work for a month, they will face serious consequences. However, if that individual had saved 10% of every paycheck, they would be able to get through that period just fine.

The same thing applies to businesses. Keep in mind that corporations just went through(and are still going through) a global recession. Revenues and profits dropped, many had to lay off workers and cut salaries. I imagine the memory of that still weighs on the decision-makers' minds. When revenues start coming up again, who's to say they should start spending it all immediately?

The point of that is to show that it's not necessarily a good thing for a company to re-invest all of its profits. It can become over-extended, lose liquidity, and be unable to get through tough times.


The third factor is international competition. If you can do the same thing in two countries, but one country taxes you 90% and the other taxes you 20%, there have to be some very compelling reasons to operate in the country that taxes you 90%.


The last factor I can think of right now is new investments, especially among the international types. Would you rather invest in a company that is going to be taxed at 90% or 20%? Basically, you would be telling all international investors 'Go away, you're not going to get anything out of your investment here'.



So, as far as the 'they'll invest it rather than get taxed' argument goes, would you want the government to force you to spend all the money you make, to the point where if you try to save it they will take 90%?

[Rei Murasame]

In other words, it depends on the circumstances at the time, and there is no hard and fast 'law of nature' to call upon or refer to on this issue. That's basically what it seems to be.

[ray188]

What's the definition of 'natural' at the moment?

Well, the word does have a definition. In this instance I am refering to a reaction which by it's nature flows from an action. Example - I want to sell more products so, I must make more and that requires that I hire additional staff. The natural outcome - job creation.

But aren't you as ideological as anyone else? After all, to claim that having the state take no action is 'natural', as you seem to be claiming, is a pretty ideological statement.

Oh sure, I have an ideology which makes sense to me. But I also feel that logic can get into the discussion and trump ideology.

How can you claim that this has no agenda, when clearly the agenda there is to allow private entities to carry out operations without being obligated to any social goals set by the community at large?

I can fully agree with that if we can agree that individual consumers are also "private entities".

[Rei Murasame]

Well, the word does have a definition. In this instance I am refering to a reaction which by it's nature flows from an action. Example - I want to sell more products so, I must make more and that requires that I hire additional staff. The natural outcome - job creation.

Okay, I don't think anyone would disagree with that.

Oh sure, I have an ideology which makes sense to me. But I also feel that logic can get into the discussion and trump ideology.

Well, it's not like ideology is illogical, since all ideology has some internal logic which (hopefully) claims to be in touch with reality. My view is that part of the problem in the North Atlantic is that people have come to see certain ideologies as 'not-ideologies' and simply 'common sense'.

For example, the first part you wrote there seems okay by itself, but then you are going to claim that it follows that the state ought to have no role in the economy, and that is an ideological statement.

I can fully agree with that if we can agree that individual consumers are also "private entities".

I agree that individual consumers are private entities as well. My question is, why should they not be governed?

[ray188]

Well, it's not like ideology is illogical, since all ideology has some internal logic which (hopefully) claims to be in touch with reality. My view is that part of the problem in the North Atlantic is that people have come to see certain ideologies as 'not-ideologies' and simply 'common sense'.

In a sense I think we are in agreement in that all to often ideology becomes religion-like in that something is true "because it is true". But logic follows what could be called "natural law". Hold a brick up and let it go. It will fall - no ideology there, just natural law. Now, if someone were to try to tie that to an ideology, that would be wrong but all too common in our modern political world. How often do we see pols passing laws that have as much chance of success as outlawing gravity. The rhetoric makes it sound good = but it is pointless.

For example, the first part you wrote there seems okay by itself, but then you are going to claim that it follows that the state ought to have no role in the economy, and that is an ideological statement. (and) My question is, why should they not be governed?

The role of the State is that which is assigned to it by the people. In reality, the consumer is well regulated as is the whole economy by the "invisible hand" when the government stays out of it. No one makes something that no one will buy. Supply and demand regulates the cost. And that nasty ol' thing ambition (often called "greed) provided the incentive to innovate and create.

As the Soviet 10 year (and other numbers) plans clearly shows, managed economies do not function effectively or efficiently. To me, the only involvement that the government should have in the economy is the maintenance of a system in which the free market can flourish. That means do not over-regulate and do not socially engineer through the use of the tax codes and certainly do not disencentivize the quest for profit. Yes, stop "cheating" while remembering that turning a profit in and of itself is not "cheating".