Friday, January 3, 2014

Why Lowering Taxes For The Rich Does Not Decrease Unemployment

Lowering taxes for the rich does not decrease unemployment because it is not in the best interest of the transnational corporations to use the resulting profits for job-creation. Instead, they often opt to channel the additional funds into activities that promote their growth more than job-creation. For example, they often use the funds obtained due to decreased taxation to finance their expansion projects in other countries. Just as frequently, they make political campaign contributions through  lobbying that leads government executives to enact laws favorable to their companies. Even more commonly, they spend it on duplicitous advertisements that enable them to post windfall profits for sales of products of questionable quality.

To be sure, impoverished employers who cannot expand are incapable of giving jobs to the unemployed. That is why the government may combat the problem of unemployment by lowering taxes on moribund small businesses whose very existence is threatened by onerous taxation. Clearly, small organizations will find it in their best interest to expand and thereby provide additional jobs, but that is not always in the best interest of the transnational corporations.

If Wal-Mart wished to expand today, their capital is already more than sufficient to achieve that objective. Wal-Mart's profits are not threatened by the scarcity of consumers and they do not need to create more jobs to service more buyers. Instead, Wal-Mart's profits  are threatened by laws and regulations that prevent them from behaving in a manner that most of their customers view as immoral.  For example, Wal-Mart is threatened by the members of the government who do not always support policies favorable to their business interests, regulations on advertisements that prevent them from unethically marketing their products and laws that do not allow them to pollute the environment as they wish. Thus, it stands to reason that any windfall profits because of the "Tax cuts for the rich" will be used for purposes other than job-creation.


  1. 1.I suspect you meant to say '*increasing* taxes for the rich will not decrease unemployment.."
    2. Having said that, we can both agree that it is not in the best interest of transnational corporations to create more jobs, but NOR do I think that that's in the best interest of smaller businesses to do so. The creation of jobs in both camps comes as a result of something beyond (e.g.for transnational it could be to finance expansion projects somewhere else, yet for a smaller business that might be the same aim etc).
    3.The key point though is that taxing both the bourgeois +smaller business the same tax fee, or at least a percentage that is equal based on their income, will definitely hurt the smaller business more than a big corporation and so it will lose more in that regards.
    4. However! Intuitively speaking, couldn't it be that although the smaller businesses might take a beating due to a high tax fee, it is still more advantageous for the population to tax the bigger corporation *less*(a smaller fee) than, since the bigger corporation does have more jobs even IF that is NOT its main aim to create these. We've established that neither aim for creating jobs primarily; an easy example would be:suppose a small business cannot afford to keep 10 of its 18 employees and lays them off due to high tax. Now suppose that a big corporation lays off an equal percentage of people as the small business. Even if one argues that the two are equal they are not; 55% of people losing their jobs from a small company is not equal to 55% of people losing their job from a bigger population company. The percentages may be the same, but the number of the actual population won't. It's one thing to lose 1 chicken out of two (50%) vs losing 10 chicken out of 20 which is also 50 %. But of courser the latter contains 10 chickens that are lost despite identical percentages. (Marius Manci)

  2. Regarding your first point, my point was exactly how I've articulated it. The idea that cutting taxes for the rich creates jobs has been the center-piece of Republican ideology since Ronald Reagan. They've presumed that the rich are the sole creators of jobs and if they are to increase their capital through tax-breaks, they'd certainly use it to create more jobs. That point has been comprehensively debunked in the video I've linked in my opening sentence.

    Regarding your second point, I agree that it is not always in the best interest of small businesses to create jobs. They are not going to create more jobs until it is apparent that they are unable to service their customers with the labor-power they have now. Thus, the demand for the goods or services provided by the small businesses must go up before jobs are created. However, I do think that tax-cuts for small businesses would be more likely to create jobs than tax-cuts for the transnational corporations because small businesses have more of an incentive to figure out a way to raise demand for their products.

    Point three is a reasonable argument against a flat tax-rate, however, it may be possible to implement a low flat tax-rate for both without greatly hurting the small business. For example, if the flat tax rate is reduced to 10% and proper laws are in place protecting small businesses from the expansionary ambitions of corporate giants, the flat tax rate may benefit the small organizations.

    In point four, it looks like you found a flaw in the youtube video that was the primary reference of this post. The empirical findings the speaker at TED cited showed that lowering taxes for the rich did not decrease unemployment. Yet what he forgot was that corporations can demand tax-deductions at the threat that they will terminate a sizable portion of the work-force in the event where the government fails to honor that demand. It is a very realistic threat because in many cases, the corporations can simply outsource a good chunk of their work-force overseas. Although it is doubtful that Wal-Mart will fire 50% of it's work-force to build more stores in Indonesia and Malaysia where taxes are lower, but they could easily terminate 10-15% which will exacerbate the problem of unemployment.