2013/12/30/For Economic Stability, Follow the French
- when: 2013/12/30
- author: Thom Hartmann
- source: Truthout
- topics: economics US/economy income tax taxing the rich Big Lie
- link: http://truth-out.org/opinion/item/20933-for-economic-stability-follow-the-french
- title: For Economic Stability, Follow the French
- summary: "The lie is that raising income taxes on rich people and hugely profitable companies hurts economies and even leads to unemployment. The truth is that raising income taxes on rich people and hugely profitable companies actually helps economies and causes companies to hire more and more people, thus lowering unemployment."
The thing that makes this a lie is that rich people behave differently from poor and working class people. When they get extra money from tax cuts, they don't spend it. After all, they already have pretty much everything they may want or need.
Instead, as we learned about Mitt Romney in 2012, they open bank accounts in the Cayman Islands and Switzerland and stash that money for future generations. Or, they'll buy an American company, like Sensata, and move it to China where they can get cheaper labor and pollute all they want. Or, since they got the money relatively easily and don't worry so much about losing it - after all, their basic needs are already covered - they gamble with it. They call it "investing in real estate and the market," but it's really just gambling.
None of this, of course, translates into America[n] jobs.
And history backs this up.
In 1922, when Republican Warren Harding dropped the top tax rate from 73 percent down to 25 percent, it kicked off a gambling real estate and stock market bubble that burst in 1929. President Roosevelt fixed that by raising the top tax rate on the uber-rich back up to over 90 percent, which led to over 40 years of stability and prosperity. Rich people left their money in their companies, and only took 30 times what their employees did as pay. The economy boomed, and the middle class prospered.
Then Reagan dropped the top tax rate down to 28 percent, leading within a year to the worst recession since the Great Depression, followed by the Savings and Loans crisis.
Bill Clinton took the top income tax rate back up to 39 percent and - presto - the economy boomed. But then Bush junior came into office, cut it back down, and we got another crash. And lots of unemployment.
It's a simple point of fact. Four times since 1913 we've had big tax cuts on the rich, and two led to major crashes, while the other two led to stagnation for working people. All, however, made the rich a lot richer.