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Authors, sign in!President Obama was a successful candidate for office on the proposal that he would end the Bush tax cuts for those who earn more than $100,000 per year. Soon the proposal moved to $250,000. Now it’s over a million and rising, and still the Bush tax cuts haven’t ended for anyone. I think that $100,000 was a generous number and we should get back to it.
Senator Charles Schumer, D-NY was a big part of the push to raise the bar above a million. He said: "it is hard to ask more of households that make $250,000 or $300,000 a year. They are not rich, and in large parts of the country, that kind of income does not get you a big home or lots of vacations or anything else that's associated with wealth in America." According to the New York Daily News, he went on to say that taxing those who earn less than $1 million would hurt small business. This is all pure nonsense, although I think Schumer may not know it. Like most Senators from both parties, he is too wealthy to know much about American life.
According to most sources, the median household income in the U.S. is in the low- to mid-$30,000 range. On the island of Manhattan, by far the wealthiest place in Senator Schumer’s territory, it is in the upper $60,000 range. Fewer than 19% of Manhattan families make $250,000 per year. Yet Schumer thinks that a $250,000 household income is lower-middle-class. With Democrats like Schumer, why do we need Republicans?
As for Senator Schumer’s claim that taxing those who earn less than $1 million will hurt small business, the truth is that small business owners who make $100 -$250 K can no longer afford their Bush tax cuts. They can no longer afford them because those cuts are destroying their customer base. They are destroying their customer base by destroying their customers’ job security and, in many cases, their customers’ jobs.
Many of us have observed this in our communities. The Federal government cuts aid to states. States cut aid to localities. Localities then put the matter up for referendums: voters choose between higher property taxes or else drastic cuts in education and public safety. Outraged, the wealthiest members of the community – the small business owners and the large property holders – lead citizens against the higher property taxes and thus towards drastic cuts in education and public safety. Lo and behold, they prevail and thus put many of the local teachers, firefighters, and policemen out of work. Then they discover, too late, that those local teachers, etc. were their customer base. The small business owners wind up bankrupt and, as communities die, large property holders watch the value of their holdings go into the toilet – all because they couldn’t see that they too need a strong government to survive. On a micro-scale, they demonstrate what a large majority of economists say: a recession is not the time to cut government spending.
Indeed, why do Americans think that government spending needs cut at all? The deficit? The deficit is so large because of unpaid for tax cuts, corporate welfare, and unnecessary wars. Want to reduce the deficit? Correct those things. Meanwhile, the size of the deficit by itself means nothing. It is the growing ratio of debt to GDP that is alarming. In a consumer-driven economy, like ours’, there is no chance that we can fix this with spending cuts alone, since spending cuts will reduce GDP at a higher rate than they will reduce debt. We must invest in improving our GDP to fix this, and that requires increased spending on public welfare, especially education.
Published November 3, 2011 by Peter Herbert |
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Comments (3)
Peter, I agree with most of what you say. However, statistics are sometimes quite meaningless, in reality. Whoever determines what the paramaters of the study and the interpretation of those findings are can make statistics justify what ever they want them to.
What constitutes a family? Does a single woman in her 20s or a single man in his 20s qualify for family designation? What determines small business and large business? Is it net income, taxable income, gross income, business assets, number of owners or stockholders?
How many 'head of households' are running the household on $20,000 or less? How many families with both adults working are grossing only 25 or 30,000? How much more consumer goods would those units purchase, if they had the finances to purchase more than their bare necessities? How much more would the welfare recipients spend if they had minimum wage jobs? — Probably not much, since minimum wage jobs won't meet basic needs.
When you use averages, the $million unit brings the average up from nothing to several thousand dollars for a lot of units. Our average temperature may be in the 40s, but you better have some antifreeze in your car or the 20º morning will swell the radiator. If all your neighbors have antifreeze and you don't, what does average do for you?
My illustration may be a poor one, but it makes a point. Even the low figure of $30,000 average for households doesn't provide necessities for the millions of people who have less. And simply saying those millions should get a job is assinine. There simply are not enough help wanted adds to absorb the millions of unemployed, regardless of how bad they want to work.
Cutting the taxes for the wealthy (where ever you draw that line) will not increase production of consumer goods, if the consumers have no money to buy the goods. Wealthy people do not create jobs! Consumer demand for goods and services create jobs. The business man or manufacturing company does not need more employees if they can't sell the product those new employees produce.
The millionaire doesn't need any more basic goods for living than the poor man. The average spendable income of the millionaires do not make up for the lack of demand caused by the lack of funds from the poor man. Do a little figuring, how many millionaires do we have compared to the paupers who have nothing?
Do we need to equalize the wealth in this world?
Posted by Ken Poland
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November 3, 2011 9:19 AM
Posted on November 3, 2011 09:19
Excellent blog. One suggestion I think we should all accept: Let's speak of "taxable" income, that after all legitimate deductions have been taken, not gross income. Too many people assume $250 income is all income, not that remaining as taxable.
Posted by Bob Hooper
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November 3, 2011 8:16 PM
Posted on November 3, 2011 20:16
Good blog, Peter. You're right... an economy that is more equitable benefits everyone, rich and poor. Your example illustrates why an economy with growing inequalities is in the long run as bad for the rich as it is for everyone else.
I think the line for what would constitute who is rich is different in different parts of the country. In parts of the country where costs are higher are going to have a different line on what constitutes "rich". In costlier areas, it usually takes both parents to work to earn enough to buy a home and live in some comfort, but it's a very stressful and insecure situation. If one of the parents loses their job, a lot of times the sole working parent doesn't earn enough money to pay all the bills. I know a few people in that situation.
Both you and Ken gave good explanations on the reduced purchasing power of the middle class and the effect it's having on our economy and our social fabric.
Posted by Angelo Lopez
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November 3, 2011 8:58 PM
Posted on November 3, 2011 20:58