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Tuesday, September 27, 2016

Watch The TED Talk You Weren’t Supposed To See Because It Destroys The Lie That Low Taxes On The Rich Create Jobs

Why was millionaire investor Nick Hanauer’s 2012 TED Talk held back from the public?

TED Founder Chris Anderson said that it was “explicitly partisan.” Others think that Hanauer’s attack on the big lie “If taxes on the rich go up, job creation will go down” was so clear and devastating that TED didn’t think it was an “idea worth spreading.”

There’s no doubt that income inequality is the economic issue of our time.

This chart from the Congressional Budget Office became famous during the Occupy Wall Street movement for demonstrating how much wealth has been transferred to the richest Americans since 1979:
CBO inequality after-tax income

“In 2010, the first year of economic recovery after the 2009-2010 recession, 93 percent of all pre-tax income gains went to the top 1 percent, which in that year meant any household making more than about $358,000,” according to Timothy Noah.

A recent Brookings study shows that this inequality may be permanent and our progressive tax system has done little to improve the situation.

So watch the speech (above), read the transcript and decide for yourself why TED didn’t want you to see it.

 

  • Economic growth, stability and job creation are influenced by many factors, but high among them are public and private sector investment, and money in the pockets of the middle class and the poor. Giving more tax breaks, loopholes, and subsidies to companies and individuals that already own most of our wealth and are posting record profits does not contribute to more investment, at least not in the USA. A multi-millionaire or billionaire earnings higher profits as a result of lower tax rates will engage in practices such as leveraged buyouts and/or investment abroad to increase sales and maximize profits, by expanding in new markets and taking advantage of favorable labor conditions and lack of regulations abroad.
    Job creation dropped, and deficits and the debt grew, when the tax rates were lowered by Reagan and Bush. Job creation grew to record levels and deficit spending ended when Clinton raised taxes in 1993. Ours is a consumer oriented economy and, not surprisingly, it depends on consumer confidence to function. Fiscal irresponsibility caused by refusal to pay for what we need and benefit from, and irresponsible borrowing and accumulation of debt, erode confidence and the spending needed to encourage private sector investment.

    • gahoof

      Thank you, Dominick, for your cogent thoughts.
      Please allow me to build upon them.

      Tax Reform!

      I love the sound of those words. The idea at first blush seems wonderful. What American wouldn’t want a fairer tax system than we have right now (“We don’t! We don’t,” scream many in the top 1%).

      But then, knowing the foibles of congress (congress, as opposed to progress), we face the very real possibility, that lobbyists will work their “magic” (read: money), and we end up with a new version of the tax code with another set of loopholes. Back to square one!

      How about trying something new. Why not eliminate ALL loopholes and deductions. ALL of them! No more “tax expenditures” that congress has to deal with in trying to figure out new budgets. Everybody bites the bullet, and feels some discomfort.

      But wait; with no loopholes and no deductions (hence no tax expenditures, the tax rate should be somewhat lower, even figuring in an added amount to help pay down the debt (something all Americans would pay for just to save in interest costs to service the debt).

      Progressivity can still be kept in the tax code (it would only be fair that those with the broadest shoulders carry more of the load).

      No corporation or citizen gets away with paying nothing for taxes (unless they earn nothing, of course).

      Is this an impossible expectation? Maybe.

      Is is a worthy goal? Definitely!

      Members of congress (the capital “C” would be returned as I regain respect for that body of government) could agree to not allow access to members for lobbyists during the tax reform period (after all of the political and fiscal contortions and gymnastics we saw this past year’s crises, I’m sure they could figure out some method to accomplish this) For example, members of congress could agree to a set limit on time slots available to meet with people who want to discuss tax reform, including private citizens (one lobbyist, one private citizen, one lobbyist, one private citizen). You didn’t get in? Sorry, ran out of time slots.

      Would lobbyists scream “Foul?”

      Sure. Would the rest of us care? Probably not. Our voices (that is to say, the voices of the average citizen) are not often heard anyway.

      The only loser in having a more simple tax code that I can see would be my tax accountant (I currently pay over six hundred dollars to his firm for him to figure out what I can get away with paying in taxes on April 15th.

      Anyone else interested? Maybe we could start a new movement.

      • Allan Richardson

        The so-called Fair Tax that has been around for about a decade was promoted initially as combining a federal sales tax with a “prebate” handed out by the government at the first of each month to EVERYONE, equal to the sales tax that would be paid by someone at the poverty level (or 2 or 3 times, number subject to negotiation). The claim was that this would cancel out the inherent regressive nature of sales taxes (as the millionaire says, he only buys 3 cars, not 1, so he only pays 3 times as much in sales taxes as the average person) by ensuring that even the poorest would not be made poorer by the tax, AND that it would eliminate the bureaucracy of the IRS.

        I found two BIG problems with that idea immediately. The IRS has a hard time getting tax refunds to poor people when they deserve them, ONCE a year. Often the only practical way to get the money to people without bank accounts is to have a private company (which deducts the filing fees) get the refund and put it on a prepaid debit card when it arrives. And we have a big problem with crooks “hijacking” taxpayer identities and filing fraudulent returns with “new” addresses, both depriving the honest taxpayer of the refund they deserved, but often putting them in legal jeopardy for the fraud committed by someone else. Now if the government has to find a way to pay the “prebate” for sales taxes EVERY month to people who MAY NOT have a bank account (or may have changed it), or a stable job (where Payroll can process the credit), or even a stable address, there has to be an almost foolproof way for people who are just barely getting to work and home again (from 2 or 3 jobs) to NOTIFY the government of these changes. This part alone would require a bureaucracy BIGGER than the IRS is currently.

        The OTHER problem is that Congress might pass only the tax itself, and amend out the prebate; or pass both but fail to appropriate funds for the office that pays the prebate; or pass both, wait a year, then repeal the prebate. Then our entire federal government, and most of the state governments, would be funded by the sales tax (perhaps 25-30 percent) with NO RELIEF for the poorest Americans who get hit so hard by sales taxes already. In fact, the first objection may have already been considered by proponents of “fair tax” since they have not mentioned any prebate in the last few years. Since they are primarily higher income people, they have no idea (except through statistics, which they choose to ignore) how regressive sales taxes are. Or maybe they WANT to punish poor people for being poor.

        The same thing is true of the “flat tax” on income. While it may sound appealing, the truth is that its wealthy sponsors want to have a flat tax rate on EARNED income, not on INVESTMENT income. Since they get most of their income from investments, that means no tax on THEM, just on US who get less than $200 per year from investments.

        Oh, and the idea that no one would get away with paying no taxes unless they earn nothing? The whole point of loopholes is to guarantee that none of what you actually make is taxable income. In other words, their tax returns SAY they made nothing. With a corporation, this is much easier, and might be turned to our (the public’s) advantage: allow a corporation to deduct DIVIDENDS ACTUALLY PAID on their common stock, giving them an incentive to keep profits circulating in the economy…

        • Justin Napolitano

          You left out the problem with spending money you already paid taxes on. Those that saved their money for retirement and paid the taxes as they went will now have a 30% tax to pay when they spend their hard earned and previously taxed savings. The fair tax folks know this and don’t care. They lie about the tax rate (it is 30% not the 23% they say because they calculate the tax as a amount on the new total that already includes the tax.) The fair tax is anything but fair.
          Another thing that has to be considered is that when a person with a million dollars in investments earns one percent it equals $10,000.00. When a person with just a thousand dollars in investments earns 1% it equals just ten dollars. The rich, therefore, have all of the advantages because they can leverage the wealth they already have.

          • Independent1

            Bingo!! That’s what the already rich don’t want you to realize; that they’re only intent is to game the system.

        • gahoof

          You have done everything but define what you mean by “the so-called fair tax.” Just what is your concept of it.

          I was suggesting that loopholes (e.g. deductions for corporate jets) would be eliminated. We would keep (as is now the practice) the progressive nature of our tax code (where those who earn more, pay a higher rate for the higher amounts).

          All income would be considered taxable. No special rates for say capital gains or “carried interest.” Earnings are earnings.

          • Allan Richardson

            The Fair Tax was proposed in the early 2000’s as an alternative to the income tax. The idea was publicized under that name, and as I described it, the original pitch was to finance the federal government with a 25 to 30 percent SALES tax, on top of the various state and city sales taxes, but to relieve the “poverty problem” by refunding, ahead of time, each month, the sales tax on the first (some multiple of poverty level) amount of spending, which they called the “prebate”. They have since dropped the prebate and are now advocating only the sales tax, possibly for the reasons I suggested, possibly because they are no longer looking for support among those who CARE about what happens to the poor.

            Your idea, gahoof, is much better than the “fair tax”, and better than the “flat tax” people like Donald Trump have proposed. The problem with closing loopholes is, and has always been, that some loopholes are actually business expenses, without which the business would not make as much (or any) revenue. Others are just luxurious perks executives would otherwise have to buy for themselves (with after tax personal income). But how to tell which is which? A hospital that does organ transplants NEEDS a corporate jet (more than one jet and more than one pilot and crew, to assure 24/7 availability) for obvious reasons; a large company CEO, maybe not. At a business level, the costs of doing business are not part of PROFIT. It might be easier, rather than cataloging what is and what is not legitimate, to limit the TOTAL percentage of gross revenue.

            I think you and I basically agree, especially on the last point. The devil is in the details (and there will be “devils” to obfuscate the details, most assuredly).

    • Kim McDonald

      Dominick-There is a book written by Orrin Woodward and Oliver DeMille called “Leadershift” coming out on 4/17 that you should read. Given your great handle on many things, you should find it very interesting. After you read it, I would love to hear your opinion.

    • This is what I’ve been saying all along. When the collapse started these tax breaks were in place. There was little incentive to create jobs since these companies were already seeing record profits. If we give them more breaks, they still have no incentive to create jobs, seeing as the money will continue to flow their way regardless. People who claim a lower tax rate will increase job creation are using the same faulty logic on which our economic theories were built. The theories we use have far too many flaws, such as Ceteris Paribus, which does not take into account human actions, corporate greed, or any difference between people, products, or corporations.

  • JDavidS

    Now, who are you apt to believe? Nick Hanauer or Donald Chump? No real choice there, is there?

  • Nail on the head!!

  • Pamby50

    I actually saw this before. Our economy is driven by we the people, not corporations. Stop giving them the tax breaks. They are not the job creators.

  • rapete15

    A healthy economy is created by a simple formula. PERSON 1(with a need) is met by PERSON 2 (ability to meet stated need) exchange money for goods/services at a $$price/cost agreed by those 2 parties, while PERSON 3 (the government) remains OUT of the way as much as possible. Every single major problem in the economy the last 200yrs can be directly attributed to PERSON 3 (the government) getting in the way and mucking it all up. Government getting in the way of this simple formula is the problem, nothing else.

    • Allan Richardson

      What about the case where the person with a need (say, food or water) is met by a person who CLAIMS to meet the need, but actually provides goods and services with a hidden flaw (E. coli, or mercury, perhaps) that the first person has no way to determine until AFTER they exchange the money, and perhaps not even then (you just had explosive diarrhea by coincidence; you just happened to get cancer)? Should the government intervene then? What about when person 1, a company, hires person 2, a worker, but takes advantage of a surplus of workers to pay so little that person 2 can barely survive? What about airline transportation, should the government inspect aircraft for safe operation, and make rule for safe piloting?

      The libertarian philosophy has some truth in it, but like any philosophy taken to an extreme, it results in misleading many people. I want a doctor who has actually taken care of patients, not a savant who read and memorized a medical book. I want a plumber who has actually worked with pipes, not just read a book on the philosophy of plumbing, And I want our public policy to be made by those who are aware of the situation of ALL of us, and can apply common sense AND scientific data, not one who is acting on a rigid ideology. Ideology is the reason Herbert Hoover presided over a Depression getting worse every day for over 3 years.

      I doubt you have data to prove that EVERY major problem in the last two centuries has been CAUSED by government. Maybe government should have let people starve in the 1930’s? Maybe government should have saved the money “taken from successful people” to fight the war, and just let Japan take over everything west of the Rockies and Germany everything to the east?

  • rapete15

    I suspect there are more than a few broke people on here granting the world their economic advice. Really? Maybe you should run the world!!

    • Allan Richardson

      The wealthy people running it now are messing it up. They are even creating the conditions that MAKE others broke. That is why they are making so much more than reasonable profits, by underpaying those who work for them, and having even lower paid workers waiting to take those jobs.

  • rapete15

    There should be NO corporate taxes. Zero, zilch. Only people pay taxes, not corporations, only people. Politicians like corporate taxes so they retain the power to draw lobbyists to D.C. to BEG.. and PLEAD for breaks and loopholes. Get rid of ALL corporate taxes, and change the income taxes to ONE single flat rate. 0% up to say a particular income level, IE $15k single, $30k married, then a flat %tax from there to planet X. Jeeze this would spay-n-neuter political B.S. in D.C. So it would likely never happen.

    • Dana Es

      You’ve forgotten — now corporations ARE people. The Supreme Court said so.

  • exdemo55

    New Year’s Day was tough for taxpayers. Thirteen tax increases kicked in.
    The deal that Congress and President Obama struck that finally—but only partially—avoided the fiscal cliff resulted in seven tax increases.
    Those hikes combined with six tax increases from Obamacare that also began on New Year’s Day.
    13 Tax Increases That Started January 1, 2013
    Tax increases the fiscal cliff deal allowed:
    1. Payroll Tax: increase in the Social Security portion of the payroll tax from 4.2 percent to 6.2 percent for workers. This hits all Americans earning a paycheck—not just the “wealthy.” For example, The Wall Street Journal calculated that the “typical U.S. family earning $50,000 a year” will lose “an annual income boost of $1,000.”
    2. Top marginal tax rate: increase from 35 percent to 39.6 percent for taxable incomes over $450,000 ($400,000 for single filers).
    3. Phase out of personal exemptions for adjusted gross income (AGI) over $300,000 ($250,000 for single filers).
    4. Phase down of itemized deductions for AGI over $300,000 ($250,000 for single filers).
    5. Tax rates on investment: increase in the rate on dividends and capital gains from 15 percent to 20 percent for taxable incomes over $450,000 ($400,000 for single filers).
    6. Death tax: increase in the rate (on estates larger than $5 million) from 35 percent to 40 percent.
    7. Taxes on business investment: expiration of full expensing—the immediate deduction of capital purchases by businesses.
    Obamacare tax increases that took effect:
    8. Another investment tax increase: 3.8 percent surtax on investment income for taxpayers with taxable income exceeding $250,000 ($200,000 for singles).
    9. Another payroll tax hike: 0.9 percent increase in the Hospital Insurance portion of the payroll tax for incomes over $250,000 ($200,000 for single filers).
    10. Medical device tax: 2.3 percent excise tax paid by medical device manufacturers and importers on all their sales.
    11. Reducing the income tax deduction for individuals’ medical expenses.
    12. Elimination of the corporate income tax deduction for expenses related to the Medicare Part D subsidy.
    13. Limitation of the corporate income tax deduction for compensation that health insurance companies pay to their executives.
    Each of these 13 tax increases will slow the economy, meaning that businesses will create fewer jobs. Fewer jobs will make it even more difficult to land a job than it already is for the more than 12 million Americans looking for work.
    President Obama demanded these higher taxes. Obama’s 2013 tax increases increases, in Obamacare and through the fiscal cliff deal, will not curb deficits and debt, because growing spending is driving America’s budget crisis. Congress needs to immediately turn its attention to the actual cause of our deficit and debt problem: too much spending. The proper way to address this problem is through reforms to entitlement programs.
    President Obama promised the American people a “balanced approach” of tax increases and spending cuts to reduce deficits and debt. He has achieved the tax increase portion of that approach. Now Congress needs to force him to follow through on the spending cuts portion.

  • Shocktroop

    let’s just come out and say it: Ronald Reagan ruined this country.