Keep in mind that Blodget was found guilty of securities fraud and is banned from the securities industry.
by Henry Blodget
In the war of rhetoric that has developed in Washington as both sides try to blame each other for our economic mess, one argument has been repeated so often that many people now regard it as fact:
Rich people create jobs.
Specifically, entrepreneurs, when incented by low taxes, build companies and create millions of jobs.
And these entrepreneurs, therefore, the argument goes, can solve our nation’s huge unemployment problem–if only we cut taxes and regulations so they can be incented to build more companies and create more jobs.
In other words, by even considering raising taxes on “the 1%,” we are considering destroying the very mechanism that makes our economy the strongest and biggest in the world: The incentive for entrepreneurs to start companies in the hope of getting rich and, in the process, creating millions of jobs.
Now, there have long been many absurd holes in this theory, starting with
- Taxes on rich people (capital gains and income) are, relative to history, low, so raising them would only begin to bring them back in line with prior prosperous periods, and
- Dozens of rich entrepreneurs have already gone on record confirming that a modest hike in capital gains and income taxes would not have the slightest impact on their desire to create companies and jobs, given that tax rates are historically low.
So this theory, which many people regard as fact, is already ridiculous.
But now a super-rich and super-successful American has explained the most important reason the theory is absurd, while calling for higher taxes on himself and people like him.
Read the rest of Blodget’s absurd piece here.
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bi.com is a cheap business/gossip site that prints sensationalist headlines in order to get clicks. having said that, blodget is one of the few contributors on that site who adds decent analysis, regardless of whether he was some unctuous slimeball ib analyst back in the day. He is no idiot.
You OTOH, especially after that specious link concerning corporate tax rates – and after adding 0 worthwhile analysis and not being able to take into account foreign tax credits(which create a much lower effective tax rate, not including the myriad of tax shelters which lower the corporate tax rate even further).., are the one who seems to be “uninformed”.
Ted, you mean this “specious” link? http://taxfoundation.org/publications/show/27742.html
Uh, foreign tax credits were CLEARLY accounted for.
Look at slides 18,19, and 23.
Jesus, I already proved you wrong about that the first time you posted it. Look at slide 20 . That is actual rates for an average of industries and that rate is 22.8. The rest of your slides show “hypotheticals”. Please show me how these hypothetical are calculated? Best to use real data, don’t you think? Slide 20 shows that manufacturing has the lowest rate of 16.8%.
Your slide 19 is showing 33% BEFORE foreign tax credits.
Naturally, I love the Blodget!
He has recompensed, remorsed, redeemed, come clean, learned lessons of admonishment, paid for his irresponsibility/consciencelessness)… we are human; to err is human, to forgive is the right thing to do .. no need to harbor a grudge for all times
“If you do evil and commit unfairness (irresponsibility), non-righteousness (consciencelessness) and virtuelessness then people of your kind (fellow human beings) will forgive you in the same way as you can forgive yourselves if you feel sorry in uprightness and in openness (honesty) and you visibly (obviously) and recognisably change for the better.”
“And teach the prisoners, the fallible ones, who are in your hands or at places of fulfilment of guidelines (secluded island/secluded place) that they shall recognise (see) goodness and truthfulness in themselves, so that it may go better with them than before (previously) when they did non-rightful things; and be benevolent and fair to them and forgive them if they show remorse.”
“And do not be resentful if people of your kind (fellow human beings) have done terrible things, rather forgive them and let everything be forgotten when it sinks into the past, so that you do not bring it back to the light of day anew, and you are not reproachful (incriminating) if there is no necessity for it;”
if he was a sentor at the time he would have walked – hes a fall guy, just like martha stewart was.
still no perp walks on the mortgage fraud.
oh and corzine will walk.
Rich people may not create jobs by intent or directly. But they are gonna live how they live no matter how much you tax them. The more you tax them, the less they have to save/invest. So taxation really cuts into investment capital. Higher taxation, less investment capital, and hence less job creation.
It’s a zero sum game. The more you tax, the less there is in the economy.
Its more than that. The example in the article takes the profit and distributes it among 1000 people.
The point is, why take the risk starting a business if in the end all of your profits are going to be redistributed?
That is the problem. Its not that money sitting in a bank creates jobs. Its the fact that one can start a new enterprise with the hopes of getting profits and money in the bank. Jobs are created in that process of starting, building, and developing the enterprise.
That is also a fallacy. Most entrepreneurs do not get taxed at the highest tax rate, certainly not when at the stage of deciding if they want to start a business or not. Also most job creation occurs at small and medium not large businesses. This makes things like the healthcare mandate much more onerous than increasing taxes for the top earners.
TJ, you missed the point. Why take the risk of starting a business and building it if your profits will simply be taxed away and redistributed?
No I believe you missed the point. Raising taxes on the highest income bracket does not deter entrepreneurship because very few people start a business earning that sort of profit.
TJ, if I told you that if you started a business, and it became successful, that I would tax away all of your profits, would you still start one?
I’m sure that enters the minds of all the grocery store operators and landscaping companies.
Typically people who don’t have money aren’t greedy enough to not want to make it because if they make over a million a year they may be taxed more.
TJ, you are working yourself into a knot and therefore keep presenting arguments that make consistently less sense than the ones before.
People who don’t have money typically don’t start businesses. People who have money to start businesses will not risk that investment if the gov’t is going to tax away their profits.
Your idea of “greed” is personal to your own biases and has nothing to do with this discussion.
Besides employing your reasoning all we need to do is abolish all taxes and the economy will thrive.
How much research can you find supporting that particular hypothesis?
Straw man there TJ.
Who said anything about abolishing all taxes?
As for research, go for it!
Hardly, your argument is based entirely on the premise of people not taking the risk of investing in new businesses because they receive less than 100% of the profits they earn. Therefore, it follows quite logically that to maximize incentive to “create jobs” we should lower corporate taxes to 0%. Also if we do away with the costs of not polluting and paying fair wages we can really fire up that job creation engine. Just look at how many jobs that created in China.
Still a straw man TJ. No one is talking about making corporate taxes or individual income taxes 0%. Now you’re throwing in more red herrings about pollution and fair wages. Not sure why you are going off on a tangent.
Let me re-focus you. Here is the quote from the article:
“Hanauer takes home more than $10 million a year of income. On this income, he says, he pays an 11% tax rate. (Presumably, most of the income is dividends and long-term capital gains, which carry a tax rate of 15%. And then he probably has some tax shelters that knock the rate down the rest of the way).
With the more than $9 million a year Hanauer keeps, he buys lots of stuff. But, importantly, he doesn’t buy as much stuff as would be bought if that $9 million were instead earned by 9,000 Americans each taking home an extra $1,000 a year.”
Again, why take the risk if your profits will be taken from you? That is exactly what this article is suggesting would be a better way to create jobs. Let’s take this guys 9 mil in profits, tax it away, and redistribute.
So again I ask, if you have money to risk starting a business, will you risk it if profits will be taxed away?
So it is a straw man to argue for one extreme is 0% tax rate but not to argue the other extreme of 100%?
TJ, I am remarking about the merits of the argument presented in the article.
I will risk a torpedo to the face and make an observation….
Please note that in my post-childhood life, I have always and only been an entrepreneur. I’ve never voted for a liberal in my entire life, and I completely get the indignation and rage of entrepreneurs against the system that persecutes them so viciously.
And, i will observe for all who have never owned a business that businesses generate enormous amounts of tax revenue beyond the taxes paid by their owners. One example, from a biz I recently endeavored into, would be a restaurant.
If the place (which, as are most similar establishments in my area, sells product tax-included) sells $1 mil and generates a pre-income-tax profit of $200k, take a look at the taxes actually paid.
80k of sales tax + $XX,000 of payroll tax + 85k of income tax on the $200k. + property taxes (figure 15k) + fees for licensing AND MORE. By the time its all said and done the place will pay literally 3-4 TIMES the actual take home profit to the owner in taxes of various sorts.
That noted, from SIMPLY THE PERSPECTIVE OF INCOME TAX ON PROFITS TO THE OWNERS, I do not think that small business owners are overtaxed. In general, numerous tax benefits tend to pop up from owning a small business, and I would wager that a small biz generating $250k of owner discretionary cash flow is taxed less than a surgeon making $250k.
But, and, finally, here is my point: the thought that lowering taxes on high income people will create more businesses and thus more jobs is outright wrong.
Little Checkies restaurant hires more people because lil Checkie is making more money? NONSENSE AND EVERY ONE OF YOU WHO HAS EVER BEEN IN BUSINESS AND IS CAPABLE OF BEING HONEST SHOULD ADMIT THE SAME. It hires because, and ONLY because, there is sufficient demand to require more staff.
Demand creates jobs. Not lowre taxes on high income people.
Demand creates jobs. Demand creates jobs. Demand creates jobs.
Sorry, folks, but thats the cold hard facts. In my defense I think i’m still the only moron posting on these here interweb blogs who is willing to not talk his own book…
Check, that’s a great comment. I appreciate your honesty.
What struck me about this article was the fact that this guy was saying that all of his after-tax income should be re-distributed.
thanks, wood. It is probably true that if people didn’t innovate new things demand would dry up and the economy would tank. How many times are you going to buy the same Dell APCXYZ123 if computers never got faster? If nobody ever changed cars, how long would we drive our old ones? How many of the exact same suits are you going to buy? Shirts? Now what if style changed, computers got faster, and c5 Corvettes gave way to C6s and then C6 vettes got about 5x better over a 6 year life cycle?
Then we buy stuff.
But at the end of the day, demand drives job creation.
And today, the bets way to stimulate demand is to fire up the depression-ridden construction industry with a massive infrastructure stimulus project (which we can, of course, afford).
Check — the fact that “demand creates jobs” has nothing to do with the application of risk capital to your business.
How does a restaurant differentiate itself? Simply, by applying brain power and investment.
That may be in the form of hiring a top level chef at a higher cost, or advertising in the weekly circular, or upgrading the interior with plush new appointments.
DIFFERENTIATION DRIVES DEMAND. INVESTMENT DRIVES DIFFERENTIATION.
And who is going to invest if that risk capital does not achieve an appropriate return?
No, not “nobody.”
But certainly “less people.”
And that’s what drives an economy. You libs and your acting as if “demand” is just some phantom force that we have no control over.
I LOL at you. And no, I don’t own restaurants, I own real businesses.
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Now, simply making the argument that lower tax rates on high income people will not create jobs (it won’t, demand creates jobs) doesn’t mean that we as a society aren’t over taxed… we are.
We need to lower taxes and lower gov’t spending, but… keep government deficits large for the time being and remember the lessons of history and never run another government surplus unless inflation is wildly out of control. (if even then).
Investment creates jobs. NOTHING else.
To say “demand creates jobs” is truly one of the most singularly stupid things I’ve heard the libs come up with in the last 20 years.
And that’s saying a lot.
Seriously, it’s so outright dumb that it makes me angry. Sorry.
You might as well say “Oxygen creates jobs!”
DUHHHH!!
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Wow, I just read the Blodgett article.
Frankly, I’m astounded. Seriously, I knew Blodgett was a fool who didn’t understand finance, and hence his cheerleading the dotcoms over the cliff, but I had no idea he was so guileless to buy into such a completely ridiculous argument.
Rather than continue with my jeremiad (I am probably getting boring), I will leave you with this great comment from the articles comment section:
Is it the mousetrap that kills the mouse, or is it the mouse itself? Yes, the mousetrap is designed to lure the mouse into certain death, but it’s the mouse that actually decides to go for the cheese. Anyone could build a mousetrap, but none of them would be useful or necessary without the mice. So, clearly the mice dying is best described as mass suicide.”
Mice like cheese. If they liked asparagus and not cheese, we would put asparagus on the traps. The mice are what they are- the credit goes to the investor of the mousetrap who determined the tendencies and preferences of mice and then developed a trap that would attract them (though technically there would be no mousetraps without mice- yes, that is true).
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