By Nick Hanauer

Raise Taxes On Rich To Reward True Job Creators

December 1, 2011 7:42 pm Category: Bloomberg View, Memo Pad 24 Comments A+ / A-

Dec. 1 (Bloomberg) — It is a tenet of American economic beliefs, and an article of faith for Republicans that is seldom contested by Democrats: If taxes are raised on the rich, job creation will stop.

Trouble is, sometimes the things that we know to be true are dead wrong. For the larger part of human history, for example, people were sure that the sun circles the Earth and that we are at the center of the universe. It doesn’t, and we aren’t. The conventional wisdom that the rich and businesses are our nation’s “job creators” is every bit as false.

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Raise Taxes On Rich To Reward True Job Creators Reviewed by on . Dec. 1 (Bloomberg) -- It is a tenet of American economic beliefs, and an article of faith for Republicans that is seldom contested by Democrats: If taxes are ra Dec. 1 (Bloomberg) -- It is a tenet of American economic beliefs, and an article of faith for Republicans that is seldom contested by Democrats: If taxes are ra Rating:

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  • snowbeard

    Aren’t taxes on job creators, and everyone else, on the net income and not the gross? After business costs and the costs of creating jobs? If job creators don’t want to pay more taxes, maybe they should create more jobs.

  • jltjgjmjgs

    Wow! This is a truth we know instinctivly but having it verbalized by someone who is living it out on the other end of the spectrum is truly valuable to our nation. Have you addressed this with President Obama? He knows this as well but he is not saying it as succinctly as you have stated it in this article. He needs you, and other very wealthy like you, traveling the country with this message and addressing Congress with this message. I know you are not alone on in this position because some of your peers descended on Congress in an attempt to get them to do the right thing. I am afraid the Republican majority has an agenda that cares nothing about the public, the economy, or what happens to this country. I am from Ohio and I know what can happen when the majority get behind a cause. You have spoken the words in this article that the majority wants to hear. Perhaps another uprising as happened in Ohio at the voting booth needs to take place on a national level, and soon.

  • npsteach

    It’s about time we admit that TRICKLE-DOWN WCONOMICS WILL NEVER WORK, especially during a recession. It failed when Herbert Hoover tried it and that was 80 years ago.

  • awegweiser

    Right on target, but as long as current political candidates receive sacks of money from many wealthy individuals (including corporations now, courtesy of the brilliant minds of SCOTUS). Perhaps those who want to monkey with the Constitution should change the Courts term to 10 years max instead of untouchable forever by the electorate – and untouchable is how it acts. Perhaps even a required mental test to continue beyond a certain age?

  • freethinker

    You admit that entrepreneurs and investors create and grow the companies that create jobs. Given consumers with no means of creating companies (i.e. Europe), how does that create jobs? You and I both use the wealth we have created to build or invest which creates more jobs. The caveat is that there must be a climate in which we think a new investment will be successful. We don’t have that with the current administration. There is a tremendous amount of money in hold waiting for that climate. Giving it to government is ridiculous. Since when has that been a recipe for success. Compare the concentration of wealth in countries with the size of their respective governments. There is a direct correlation.

  • Totenkatz

    HUH?? Nick what are you smoking, please stop before it destroys the rest of your brain. If you went to the nearest ice cream shop and invested in it, because you can, the owner can use your money to pay off bills and used the freed up money to hire that person he has been wanting to hire but couldn’t. Only those with money to invest can do this. Getting 10 more customers for a week won’t provide the funds the shop needs to hire.

  • Dik

    Mr. Hanauer;

    Following your logic, I should just quit my job, get government benefits, go deeply in debt, and spend like crazy. Then we will all be more wealthy.

    Dik Thurston
    Colorado Springs

  • GaryDuell

    These last two comments- anonymous of course -fly in the face of all the evidence; faith in one’s own omniscience seems all too common these days. It was the “evolution” word, right?
    #1- Considering his track record, Mr. Hanauer probably has more of a clue than you about the dynamics of economic systems. He probably even makes more money than your sources on FOX “News”.
    #2- Supply side economics was handily debunked within years of its publication. It has failed miserably since Reagan, despite the hefty tax increases he implemented to try to reverse the damage. Here’s a handy website for you to look up things you may not know much about: Wikipedia.

  • DianneLee

    The bit of information that absolutely needs to get out there to the American People is that cutting taxes for the wealthiest of Americans creates jobs is pure bunk. If you chart national unemployment rates since 1920 parallel with tax rates with the top 1% of wage earners, you will see there is a NEGATIVE correlation. The “Big Lie” of “trickle down economic theory is the cornerstone of the Republican Party’s opposition to any additional taxes on the 1%ers.

    Clinton raised taxes and 23 million jobs were created during his time in office. Bush cut taxes and created 3 million jobs.

    There is absolutely no data to support the idea that the rich give people jobs when they have the money to do so. In fact, they have the money to do so right now. In 1980, the average CEO made 42 times what the average worker made. In 2010, that number had increased to 343.

    A business owner hires because they expect for that person to make money for them. As long as the workforce they have is producing what they can sell, they have no reason to hire. The only reason to hire is when additional workforce is required to fill demand. The only reason there would be an increase in demand is that more people are buying, and the only reason that more people would be buying is that they have more money. You can’t increase prosperity in the country as a whole by any other means than increasing prosperity for the Middle Class. The Middle Class is the one thing in this country that is actually “Too Big to Fail”. When the rich have bought enough politicians who will make laws to enable them to make more money so they can buy more politicians etc etc etc., then the Middle Class will wake up from their Fox induced stupor and vote against those who are taking money from them and giving it to the rich.

    And the OWS movement is just the beginning.

  • eaberry1

    Getting back to Nuts’s ice cream shop, why is the owner wanting to hire another helper but can’t? Are customer’s being turned away because his employee’s can’t serve them all? No way, he already laid off two workers when consumer spending went south in 2008, and he doesn’t really have enough business to keep his current workers busy. If there were customers being turned away he could borrow the money – interest rates are at historical low – and pay it off with the extra income from the first few weeks.
    The “climate” that keeps him from investing is not unavailablility of funds or excessive regulation, its the knowledge that consumers aren’t going to buy any more ice cream just because there is another smiling face behind the counter to serve them. There are factories standing idle now with laid-off workers who could be recalled in a week, if only there were demand for their product.
    If you give the owner more money by cutting his tax he won’t throw it away by hiring another worker to stand around waiting, he’ll put it in a savings account for retirement. Basically lost to the economy. If you give money to a wage-earner who is barely getting by, he will spend it all, maybe even buy an ice cream cone, or pay his mortgage so the bank won’t have to repossess another house it can’t sell and require a government bailout.
    What got us out of the depression was not spending cuts, but the massive stimulus package that was WWII – government spending without regard for balanced budget or inflation. Spending cuts mean less consumer spending means more layoffs means less tax revenue and further decrease in consumer spending, spiraling down to a dead economy. The Reagan tax cuts have been in place for long enough to see it isn’t working that way.

  • j_berry50

    ALL IT TAKES IS JUST A LITTLE TIME TO FIGURE THESE THINGS OUT BUT TRY TO CONVINCE CONGRESS !!

    The U.S. Congress sets a federal budget every year in the trillions of dollars. Few people know how much money that is, so we created a breakdown of federal spending in simple terms. Let’s put the 2011 federal budget into perspective:”
    “”””• U.S. income: $2,170,000,000,000″”
    “”””• Federal budget: $3,820,000,000,000″”
    “”””• New debt: $ 1,650,000,000,000″”
    “”””• National debt: $14,271,000,000,000″”
    “”””• Recent budget cut: $ 38,500,000,000 (about 1 percent of the budget)””
    “””” “”
    “”””It helps to think about these numbers in terms that we can relate to.””

    “”””Therefore, let’s “”remove eight zeros from these numbers”” and pretend this is the household budget for the fictitious Jones family.””
    “”””• Total annual income for the Jones family: $21,700″”
    “”””• Amount of money the Jones family spent: $38,200″”
    “”””• Amount of new debt added to the credit card: $16,500″”
    “”””• Outstanding balance on the credit card: $142,710″”
    “”””Amount cut from the budget: $385″” “

  • j_berry50

    You said you are an “venture capitalist”.That means you HAD THE MONEY TO INVEST OR TO START THOSE COMPANIES!!!! You had to be rich to start those other companies.Otherwise, you would have just kept what you sold your company for and retired. Had you not been fortunate enough to make as much from your company,those other companies would not have been. It takes money for most companies to get started. I don’t know many welfare recipients who have started as successful company as you have. I suppose there are a few,but you were certainly fortunate as was Bill Gates!

  • JulesGuidry

    President Obama want to extend payroll tax cuts, which could promote jobs, help small businesses to create more jobs, and put $1500 more in the pockets of working Americans. To pay for this, Mr. Obama want to increase tax on the wealthy Americans who earn a million dollars or more a year. Republicans say they want to extend the payroll tax cut but don’t want to the 3% tax increase on the rich, but are will to cut wages on Federal Employees(Working middle class Americans), cutting Federal Jobs,(causing more unemployment on people making less then a million dollars a year).Does this make sense? Remember, the majority of the wealthy do not hold jobs, but earn their millions as bank stock-holders, play the stock-market on Wall Street through a stock brokers who are making “FAT MILLION DOLLAR PAYCHECKS”. These people earn in excess millions each year and only pay a 15% capital gains tax, while the working middle class, are making less..much less then one million a year, pay about 25 to 30% of their work-hard-for paychecks in Federal Income tax.The 3% tax President Obama want will bring them to 18% tax on their Income. Keep in mind, The rich has all the loop-holes, off-shore banking account and off-shore Trust, and Corp., they can keep their tax free.

  • JulesGuidry

    President Obama want to extend payroll tax cuts, which could promote jobs, help small businesses to create more jobs, and put $1500 more in the pockets of working Americans. To pay for this, Mr. Obama want to increase tax on the wealthy Americans who earn a million dollars or more a year. Republicans say they want to extend the payroll tax cut but don’t want to the 3% tax increase on the rich, but are will to cut wages on Federal Employees(Working middle class Americans), cutting Federal Jobs,(causing more unemployment on people making less then a million dollars a year).Does this make sense? Remember, the majority of the wealthy do not hold jobs, but earn their millions as bank stock-holders, play the stock-market on Wall Street through a stock brokers who are making “FAT MILLION DOLLAR PAYCHECKS”. These people earn in excess millions each year and only pay a 15% capital gains tax, while the working middle class, are making less..much less then one million a year, pay about 25 to 30% of their work-hard-for paychecks in Federal Income tax.The 3% tax President Obama want will bring them, (the rich) to 18% tax on their Income. Keep in mind, The rich has all the loop-holes, off-shore banking account and off-shore Trust, and Corp., they can keep their tax free.

  • CRES105

    Follow my plan and jobs become a moot point. Why does the Fed want to create jobs anyway except to tax your earned income.
    The CRES105 plan is to stop taxing earned income below $300,000 per year. Remember this is EARNED INCOME not UNEARNED INCOME. Now Mr.Hanauer and his pals will be paying all of the taxes. Then the Fed. has to create a National Consumption Tax (sales tax) that everyone including Mr. Hanauer and his children pay when we buy things. Including airplanes and cars and candy canes. This NCT can simply start with a penney on the dollar next year and after one year we will know just how strong the economy is and how much the NCT should be to make it better. Now when the EARNED INCOME TAX below $300,000 is stopped this will give all of the working class ( those of use who spend all of the money like Mr. Hanauer says ) an instant boost in spendable income of $thousands of dollars per year and this is what will drive the economy according to Mr. Hanauer.

  • G Schmidt

    That is why the current Republican strategy of reducing budgets to cut government jobs makes no sense for America at this time.

    What we should cut is what we spend outside the US. It makes no sense spending our money (borrowed nevertheless) to build or support other countries

  • bigtommy63

    I wish we could have Mr Hanauer appear before congress to refute the policies of the Norquist robots.There must be a way to reach the majority of Americans , who simply do not understand the principles of economic stimulus. The goal is not to create additional debt,but to increase the consumers capability to buy, as so aptly explained by Mr. Hanauer in his blog; so that consumption will increase , thus allowing manufacturers and retailers to hire more people and continue moving the employment level upward.A healthy economy requires a healthy middle class, capable of providing the purchasing power necessary to keep the economic engine running at the highest rates. Once we have healthy economy, then we can redirect funds to paying down the deficit,which should have been done 2001, instead of tax cuts heavily weighted to the wealthy.

  • in.the.flood.zone

    . . . for reminding everyone yet again of the simple facts of economics.
    But as I figure it, here’s why the ultrarich are not “job creators” no matter how low their taxes go, and no matter whether regulation disappeared altogether. They aren’t job creators, first BECAUSE THEY DON’T HAVE TO BE! It is no longer necessary to produce anything in great quantity to become rich beyond your wildest dreams. Thanks in large part because of robotrading, not to mention deregulation, MONEY MAKES MONEY. If you think you will strike the mother lode by the sweat of your own brow–or by anyone else’s–you’re behind the times.
    Second, wealthy individuals, as you seem to say, don’t actually create jobs (unless it’s household staff). The expensive toys and baubles that the ultrarich go for are created by extremely small specialty companies, “studios,” or individuals. These items are usually marketed as “special editions.” Did I hear of a million-dollar jewel-encrusted Blackberry? How about Rolex watches? Or $20,000 furniture-grade music boxes? That’s what I’m referring to.
    But that’s only the individuals. To repeat: their demand for toys doesn’t create jobs in any significant way.
    Now for the corporations. Ross Perot called it “that giant sucking sound” (or words to that effect)–the sending of production-level and technology jobs overseas. Companies have been running from regulation, taxation and unions for decades, first from the North to the “Right to Work” states in the South and West, and now around the globe. And to entice overseas corporations to employ U.S. workers on U.S. soil, we are literally selling the store in exchange for hiring seasonal workers at minimum wage. I’m thinking specifically of such a deal, struck between a major ski area in one of the most economically depressed counties in Vermont and a European corporation.
    With high-tech worldwide networks, ever more sophisticated and immediate schemes for money to make money, and the entrenched practice of offshoring production–under the protection of the Constitution, mind you–why in the world would these people ever create jobs?

  • in.the.flood.zone

    Right on, eaberry1! ‘Nuf said (or should be, anyway).

  • Johnny B CPA

    I would like to discuss the effect taxing the income of millonaires at a moderate rate and also tax their accumulated wealth…the value of their assets…stocks, bonds, homes, land, vehicles, etc., etc., etc….require a huge penalty for underreporting the values of those assets…perhaps allow the government to purchase it at their stated value, etc…

  • ENetArch

    It is interesting that there are more factors to creating jobs, than just investing. But then, why start a company to sell a product that no one is going to buy? That only leads to a loss of principle investment. While some companies do need start up capital to get off the ground, if sales are strong enough of a simple product, those sales could be leveraged as the investment needed to grow the company.

    So the questions your article raised are: What does a product need to get to market? How much will those resources cost? Will there be a market once the product arrives? At what price point will the consumer purchase the product? How many are expected to sell and in what time frame? How much will it cost to expand if demand is higher than expected? What happens if demand is lower than expected? What is the exit strategy at the end of the products life?

    Now, how to attract investors to potential products?

  • Hankk

    This article was well said and extremely true. This Nation can not exist with out a strong middle class. Service jobs are mostly minimum wage part time jobs and they do not pay enough to support one person let a lone a family.

    If a minimum wage job pays say $10.00 per hour and it’s a 40 hour job, that’s $400.00 per week, first take out federal taxes, then state taxes, and finally city taxes. Now take out for Social Security and Medicare and what you have left would be somewhere around $229.60 per week,or $11,939.20 a year, this person is one of our citizens living in poverty. He or she gets up every morning and finds a way to get to work, while the illegals and welfare people, live with free housing, free food, free clothing, free health care, etc. I guess you get the picture.

    Don’t you dare try to blame this on the unions, in 1985 I bought a New Buick for $8,598.00 out the door. Gm started closing shops in the USA and moving them to other countries in 1983, because they said that they could no longer make a profit because of the union? They had no clean air to worry about,no epa, and no retirements, no taxes, no healthcare, and only paid their new work force .50 per hour. You tell me when did the price for any car from any car company come down in price to match their expenses, not once.

    Our congress and citizens should go and goggle FDR and read his 1ST Inaugural speech, maybe we would all wake up and put our nation back on the right track. In 1933 FDR and his mixed congress placed regulations on the items that were necessary for households to be maintained with in their means, they were(electricity, heating fuels, gasoline, telephones, and Banking/wallstreet) over the last 30 years the GOP have removed/eliminated each one and have brought us the bailout of the SNL’s in the late 80’s, they helped export all of our good paying middle class jobs with their tax breaks for the wealthy and corporations, and in the 2000’s so far the total collapse of our country and Europe, and you can trace it all right back to the de-regulation of the banking community,which is wallstreet, and the mortgage companies. hankk,MI

  • dugantr

    For those of us who grew up during the 50s, owning your home was always the goal taught to us by our parents. Home ownership helped create the most stable basis of wealth for the middle-class. But to the ultra-wealthy it represented wealth that was untouchable to them. So the question was “how to you gain access this home-based wealth that amounted to trillions of dollars?”. The simple answer was “convert it do debt”. So the financial industry lobbied (bought) and got laws passed to allow second mortgages (equity loans). They then went on a massive marketing campaign to convince home-owners that their money (home-equity) was wasting away and needed to be put to work for them. Fancy cars, boats, trips, etc. were a simple loan away from them.

    These seemingly simple loans provided the wealthy with two amazing results. Not only did it start the movement of vast amounts of the middle-class wealth upward to the super-rich, it acted as a panacea to the working middle-class whose earnings were going flat relative to the economy. “We must be rich now. Look at all of the nice things we have.” It was all an illusion, put on by one of the largest con games in history.

    When you look at the massive shift of the country’s wealth to the top 1% since 1980, this is one of the sneakiest and most well planned tools that helped it happen. Is it any wonder that the finance industry is against any form of regulations?

  • JulesGuidry

    Republicans were willing to cut the payroll tax, cut the extended unemployment, and refuse to raise the 3% tax that would help to create jobs. Does anyone still believe that Republicans are for working Americans?

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