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Actually, "the Rich" Don't "Create Jobs," We Do

Saturday 14 May 2011

by: Dave Johnson, Campaign for America's Future

You hear it again and again, varia­tion after varia­tion on a core mes­sage: if you tax rich people it kills jobs. You hear about "job killing tax hikes," or that "tax­ing the rich hurts jobs," "taxes kill jobs," "taxes take money out of the economy, "if you tax the rich they won't be able to provide jobs." ... on and on it goes. So do we rea­l­ly de­pend on "the rich" to "create" jobs? Or do jobs get created when they fill a need?

Here is a re­cent typ­ical ex­am­ple, Obama Touts Job-Killing Tax Plan, writt­en by a "sen­ior fel­low at the Cato In­stitute and chair­man of the In­stitute for Glob­al Economic Growth,"

Some peo­ple, in their pur­suit of pro­fit, be­nefit their fel­low humans by creat­ing new or bet­t­er goods and ser­vices, and then by em­ploy­ing oth­ers. We call such peo­ple en­trep­reneurs and pro­duc­tive work­ers.

Oth­ers are para­sites who suck the blood and en­er­gy away from the pro­duc­tive. Such peo­ple are most often found in govern­ment.

Per­haps the most vivid de­scrip­tion of what hap­pens to a society where the para­sites be­come so numer­ous and power­ful that they de­stroy their pro­duc­tive hosts is Ayn Rand’s clas­sic novel “Atlas Shrug­ged.” ...

Producers and Parasites

The idea that there are pro­duc­ers and para­sites as ex­pres­sed in the ex­am­ple above has be­come a core philoso­phy of con­ser­vatives. They claim that wealthy peo­ple "pro­duce" and are rich be­cause they "produce." The rest of us are "para­sites" who suck blood and energy from the productive rich, by taxing them. In this be­lief system, We, the People are basically just "the help" who are otherwise in the way, and taxing the producers to pay for our "entitlements." We "take money" from the producers through taxes, which are "redistributed" to the parasites. They re­peat the slogan, "Taxes are theft," and take the "money we earned" by "force" (i.e. government.)

Re­pub­lican Speaker of the House John Boehner echoes this core philosophy of "producers" and "parasites," saying yesterday,

I be­lieve rais­ing taxes on the very peo­ple that we ex­pect to re­in­vest in our economy and to hire peo­ple is the wrong idea,” he said. “For those peo­ple to give that money to the government…means it wont get re­in­vested in our economy at a time when we’re try­ing to create jobs.”

"The very peo­ple" who "hire peo­ple" should­n't have to pay taxes be­cause that money is then taken out of the pro­duc­tive economy and just given to the parasites  "the help"  meaning you and me...

So is it true? Do "they" create jobs? Do we "de­pend on" the wealthy to "create jobs?"

Demand Creates Jobs

I used to own a busi­ness and have been in sen­ior posi­tions at other busines­ses, and I know many oth­ers who have star­ted and op­erated busines­ses of all sizes. I can tell you from di­rect ex­peri­ence that I tried very hard to em­ploy the right numb­er of peo­ple. What I mean by this is that when there were lots of cus­tom­ers I would add peo­ple to meet the de­mand. And when de­mand slac­ked off I had to let peo­ple go.

If I had extra money I would­n't just hire peo­ple to sit around and read the paper. And if I had more cus­tom­ers than I could han­dle that  the re­venue generated by meet­ing the ad­dition­al de­mand from the extra cus­tom­ers  is what would pay for em­ploy­ing more peo­ple to meet the de­mand. It is a pre­tty sim­ple equa­tion:

you employ the right number of people to meet the demand your business has.

If you ask around you will find that every busi­ness tries to em­ploy the right numb­er of peo­ple to meet the de­mand. Any busi­ness owner or man­ag­er will tell you that they hire based on need, not on how much they have in the bank. (Read more here, in last year's Busines­ses Do Not Create Jobs.)

Taxes make absolutely no difference in the hiring equation.

In fact, pay­ing taxes means you are al­ready mak­ing money, which means you have al­ready hired the right numb­er of peo­ple. Taxes are based on sub­tract­ing your costs from your re­venue, and if you have pro­fits after you cover your costs, then you might be taxed. You don't even cal­culate your taxes until well after the hir­ing de­cis­ion has been made. You don;t lay peo­ple off to "cover" your taxes. And even if you did lay peo­ple off to "cover' taxes it would lower your costs and you would have more pro­fit, which means you would have more taxes... ex­cept that lay­ing some­one off when you had de­mand would cause you to have less re­venue, ... and you see how ridicul­ous it is to as­sociate taxes with hir­ing at all!

Peo­ple com­ing in the door and buy­ing th­ings is what creates jobs.

The Rich Do Not Create Jobs

Lots of re­gular peo­ple hav­ing money to spend is what creates jobs and busines­ses. That is the basic idea of demand-side economics and it works. In a consumer-driven economy de­sig­ned to serve peo­ple, re­gular peo­ple with money in their poc­kets is what keeps every­th­ing going. And the equal op­por­tun­ity of de­moc­ra­cy with its re­in­vest­ment in in­frastruc­ture and educa­tion and the other fruits of de­moc­ra­cy is fund­ament­al to keep­ing a demand-side economy func­tion­ing.

When all the money goes to a few at the top every­th­ing breaks down. Tax­ing the peo­ple at the top and re­in­vest­ing the money into the de­moc­ratic society is fund­ament­al to keep­ing th­ings going.

Democracy Creates Jobs

This idea that a few wealthy people  the "producers"  hand everything down to the rest of us  "the parasites"  is fundamentally at odds with the con­cept of de­moc­ra­cy. In a democracy we all have an equal voice and an equal stake in how our society and our economy does. We do not "de­pend" on the good graces of a favored few for our livelihoods. We all are supposed to have an equal op­por­tun­ity, and equal rights. And there are things we are all entitled to "entitlements" that we get just because we were born here. But we all share in the re­spon­sibil­ity to cover the costs of democracy with the rich having a greater responsibility than the rest of us because they receive the most benefit from it.

This is why we have "pro­gres­sive taxes" where the rates are sup­posed to go up as the income does.

Taxes Are The Lifeblood Of Democracy And The Prosperity That Democracy Produces

In a de­moc­ra­cy the rich are sup­posed to pay more to cover th­ings like build­ing and main­tain­ing the roads and schools be­cause these are the things that en­able their wealth. They ac­tual­ly do use the roads and schools more be­cause the roads en­able their busines­ses to prosper and the schools provide educated em­ployees. But it isn't just that the rich use roads more, it is that every­one has a right to use roads and a right to trans­por­ta­tion be­cause we are a democ­ra­cy and every­one has the same rights. And as a citiz­en in a de­moc­ra­cy you have an ob­liga­tion to pay your share for that.

A de­moc­ra­cy is sup­posed have a pro­gres­sive tax struc­ture that is in pro­por­tion to the means to pay. We do this because those who get more from the sys­tem do so be­cause the de­moc­ratic sys­tem of­f­ers them that ab­il­ity. Their wealth is be­cause of our sys­tem and therefore they owe back to the sys­tem in pro­por­tion. (Plus, his­to­ry has taught the les­son that great wealth op­poses de­moc­ra­cy, so de­moc­ra­cy must op­pose the ac­cumula­tion of great, dis­propor­tion­al wealth. In other words, part of the contra­ct of li­v­ing in a de­moc­ra­cy is your ob­liga­tion to pro­tect the de­moc­ra­cy and high taxes at the top is one of those pro­tec­tions.)

The con­ser­vative "pro­duc­er and para­site" anti-tax philoso­phy is fund­amen­tal­ly at odds with the con­cepts of de­moc­ra­cy (which they pro­ud­ly acknow­ledge - see more here, and here) and should be un­derstood and criticized as such. Taxes do not "take money out of the economy" they en­able the economy. The rich do not "create jobs, We, the Peo­ple create jobs