Cut Taxes for the Rich and Boost the Economy

http://www.youtube.com/watch?v=HaG9d_4zij8

This was an example of a show of force.

 

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The percentage of disposable income spent (vs. saved) trends downward as the level of disposable income increases - rich people spend a smaller portion of their income than poor people do. This should be pretty obvious - poor people need to spend every penny to cover living expenses. For this reason, tax-cut stimulus is much more effective if targetted at low-income households rather than the rich.

Also, it seems that the name of this forum needs to be changed to "how can we make everything about China?"

 

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It's never worked before. I don't see it starting now.

"Cut taxes and the economy will magically improve" is as foolish an approach as "increase spending and the economy will magically improve." Neither works, and both just get us deeper into debt. Indeed, it has been a combination of those two fallacies over the years that has led us to this monumental debt.

 

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Let's return to the tax rates that gave Clinton surpluses instead of 4Ds *

Also we need to more than reverses GWB's tax cuts on those making more than $250,000 per year to stop them from building factories in China that are more modern and efficient than the older ones in the US. That advantage WE GIVE TO ASIA with their lower labor cost is closing factories in the US and out sourcing jobs.

Why are the super rich building factories in China? ** - Simple: They are not stupid like the Americans voting to give them lower (via loop holes, capital gain rates, depletion credits, etc.) taxation levels than their secretaries. They know that China is four times larger market and has rapidly growing middle class of customers anxious to buy. Chinese can buy more as the purchasing power of their salaries is going up more than 5% per year instead of stagnate or down each year as in the US.
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* Debts, Deficits, Down Grades, and Defaults.

** For example Warren Buffet helped BYD motors expand its factories and now owns 10+% of BYD. They build luxury cars now, so US cars are no longer exported from Detroit to China any more, etc. Warren has tripled his invesment while closing US factories. GM made money in 2010 ONLY because sales from its Chinese factories doubled. China sells bout 2 million cars more than the US does now every year and that margin is growing, Yet many stupid voters have bought into the line that we must give tax breaks to the very rich to make jobs.

Please read
http://www.sciforums.com/showpost.php?p=2786841&postcount=2
to understand why the gap between rich and poor in US is growing and why the coming depression in the US and EU should be called "GWB's depression."

PS - I'm "mad as hell" but unfortunately will "take it much more" when the dollar collapses.

 

Fixed that for you.

It only works out to "four times larger market," if per-capita consumption is the same. It's nowhere close.

Fixed that for you.

And we've been over this point before, many times. Would be nice if you'd stop making the same basic errors over and over and over again, even after repeated correction.

And, again, all this stuff about China is, at best, tangential to the thread topic. I don't see how repeating this same material ad nauseam in every thread here is helpful.

 

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About 5 million sold in first quarter of 2011 as annual volume is expanding.
China car sales: Over 18 million new cars sold last year. {Billy T has made two words bold in the original caption of the photo.}

You do have a slight (1.5%) validity to your insistence on “buys” instead of “sells” as China is still a net importer of cars. In 1Q11 they imported 72,700 cars (and light trucks) more than they exported:

“In the first quarter of 2011, China exported 163,800 units. … In the same quarter, China imported 236,500 units.” From: http://www.thetruthaboutcars.com/2011/05/monster-trade-imbalance-revealed-in-china’s-car-industry/ 72,000 / 5,000,000 < 1.5%

Thus Quad, your quibble is correct. Photo is from: http://www.rte.ie/news/2011/0110/china-business.html
I tell you this so you can also tell them to correct the caption of the photo (to “buys” instead of “sells”)

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:roflmao:

On my use of "market" instead of "population" I was mainly referring to the fact that most Chinese do not yet own TVs, dish washers, cars, air conditioners, clothes dryers, refrigerators, etc. and not directly to their populations. The US market is very saturated - a replacement market - not the "first time buyer" market of China - that, plus the 5% annual increase of real (purchasing power) salaries, is why the Chinese market is about four times larger.


But I did make a significant error when stating that China sold 2 million more cars. The fact is they sold 6.5 million more in 2010:

“New car sales in the US in 2010 jumped by 11 per cent on a troubled 2009, with just over 11.5 million cars being sold.”

From: http://www.autocar.co.uk/News/NewsArticle/Ford-Fiesta/254755/

PS this is all very thread related as the very rich, like Warren Buffett, owner of 10+% of BYD motors, have been using their GWB reduced tax rate saving to build new factories in Asia. That has closed many US factories - Made Detroit a "basket case" of boarded up homes and not able to collect the garbage in many districts, etc.

 

Right, no problem with the caption text. It doesn't use any verbiage that says "China sold cars." It addresses "car sales" in China and discusses how many cars "were sold." Neither of those wordings contains the attribution in your text, about China "selling cars."

"China" doesn't sell cars. Car companies do that.

Moreover, you are talking about the size of the Chinese car market - the number of buyers - and not the size of Chinese car production (which might be called "sales"). I'd expect someone charged with moderating a "business and economics" forum to be able to keep this basic distinction straight, and not play silly word games to invert meanings.

It's not a quibble, and it had nothing to do with the balance of exports and imports. You are mixing up the basic entities in the transaction: buyers vs. sellers. It renders your statements nonsensical.

That is an overt reference to the population, and not the "market." "Markets" have things like money to buy products, and not just a lack of televisions.

No, you are spouting pure nonsense. A bunch of poor people with the same amount of money as a smaller group of rich people, is not a bigger market. It's only a bigger population. This is basic stuff, and you'd do well to stop embarassing yourself with these asinine word games. Just admit that you screwed the pooch, correct yourself, and move on.

No. They purchased 6.5 million more. That's why they're supposed to make an attractive consumer market - your entire point, no?

Stop getting hung up on the term "car sales." Those are car companies making the sales, and Chinese consumers doing the buying. This is elementary stuff, and your inability to keep it straight even in the face of explicit correction is troubling.

If you can't handle basic stuff like this, and can't even admit when you're botching it, then you should think very seriously about resigning any position of authority here. It's embarassing.

See also: inability to discuss any subject (such as how the progressivity of taxation affects economic growth) without turning it into yet another repetitive jeremiad about China and the USA, complete with tons of off-topic link-dumps about whatever business trends you read about this week. How about you create a "BillyT's China obsession" thread, make it sticky, and keep all this stuff in there? We don't need to make every single thread in this forum about that same tired line.

 

Yes that is obvious, but just as one can say "America made and sold 11.5 million cars in 2010” without implying that the US government made and sold 11.5 million cars, one can also (and all but the most silly do) say: “China made and sold 18 million cars in 2010.” without implying that the Chinese government made and sold cars.

I admit that technically, if you want to quibble, it is more correct to say: “The total of all cars made and sold in America by Ford, Toyota, VW, GM, Nisian, Chrysler ....etc. in 2010 was 11.5 million." As there are nearly 100 different makers of cars in China, explicitly naming the sellers, which you seem to demand, is silly and totally impractical. Any sane person wanting to tell how many cars were sold in China would say: “China sold X cars in 2010.”

More generally:
This thread is about the effect on the US economy of reducing taxes for the rich. I have been careful to distinguish between the very rich and the moderately well off top of the upper middle class. Explicitly stating that someone who has a few years of his expenses saved and is unhappy with his job may use a tax reduction to start his own business. Also middle class tax reductions do boost the US economy as the typical American does not save much of his income. Thus, tax reductions for the middle class do make US jobs.

Exactly the opposite is true of the top 2% of the income people. (Incomes in excess of $250,000 per year.) They do not spend significantly more in the US when given a tax reduction. They can only go to so many shows, drive so many cars, use so many homes, eat so many steaks in expensive restaurants, etc. Essentially 100% of their tax reductions will be invested. – it will “trickle down” to make jobs.

Unfortunately, many Americans think that giving the very rich tax relief will make US jobs, when in fact it does exactly the opposite! The very rich are not dumb (and even if they are, the financial advisors they hire are not). They can afford to hire international lawyers, pay bribes to government officials, etc. in foreign lands where their expected rate of return on their investment is much higher than in the US.

China is four times larger than the US and Chinese salaries are increasing in real terms (purchasing power) at more than 5% per year. When very rich person is trying to decide where to, for example, build a 130 million dollar factory, he does not just consider the total buying power of the population in 2011. He has a multi-decades view. So the GDP growth rate and the rate of total salary increases, dominate his investment decisions. Also important in his decision is the “maturity of the market.” A mature market like the US or even in northern Europe, where everyone who can already has: a washing machine, a cell phone, a car, a refrigerator, a computer, etc. is much less attractive than an “immature market” where most of the population have none of these things, but do have a rapidly growing salary and now lower cost health care service so they are ceasing to save 50% of their incomes. I.e. the very rich are building new, efficient factories in Asia, especially China and closing older, less efficient, factories in the US where wages also are much higher (or at least outsourcing jobs and importing the component parts that once were made in the US).

Giving the very rich tax relief is exactly the wrong thing to do if you want to increase US manufacturing jobs. Even if only concerned with software, design jobs, drug development and testing, etc. these jobs too are moving to Asia, especially India, where public schools are producing more people more capable in math and sciences than in the US. True the US (and EU) are still strong in these non-manufacturing areas, but they are losing ground to Asia. Like it or not, Joe American’s standard of living, already lower than his parents, has a great lowering yet to come. Giving tax relief to the very rich is accelerating this decline in the US.

 

Buffett lambasts 'billionaire-friendly' Congress
http://www.telegraph.co.uk/finance/...t-lambasts-billionaire-friendly-Congress.html

I understand that Buffet made most of his money when taxes were higher, with emphasis on smart investing. So what is the argument that higher taxes prevent people becomming successful?

 

Republican ideology goes like this:

1) High income earners are job creators.

2) You don't want to do anything that might offend high income earners lest they should vent their collective wrath on the humble defenseless proletariat and stop creating jobs.

The reality is much different as Buffett notes in his article. When making investment decisions the tax issue is rarely if ever a deciding factor. If the fundamental business investment is not sound, who cares about the tax implications?

If businesses do not have a fundamentally sound investment environment (government, infrastructure, etc.) then there is no way in hell "job creators" are going to risk their capital.

And that is one of the many points/facts to which Republicans/Tea Partiers remain totally oblivious. A fiscally responsible government (e.g. one that does not threaten to not pay it's bills or one that rules out increasing taxes to pay it's bills when tax revenues as a percent of income are at historic lows)would be much more stimulative to business investment/job creation than tax cuts on the wealthy.

 

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Ah, yes, bankers begging again. But why not? Don’t we have: Government of the banks, for the banks; & buy the banks:

“…Political Action Committees and employees of six public companies— five of them entirely or partly in financial services—rank among the 10 largest organizational givers to the 12 politicians {of the Congressional “Super Committee”} from 2001 through 2010. The five are: Goldman Sachs, Citigroup, JPMorgan Chase, Bank of America and General Electric {which has a huge "bank-like" financing division}. …

“...contributions from the members and employees of the “fervently anti-tax” Club for Growth total is $1,008,884. {to the 12 members of “Super Committee”} All six Republicans have pledged never to raise taxes—including by limiting special interest tax breaks or “tax expenditures”. The Democrats, meanwhile, have indicated they won’t support cuts in such programs as Medicare and Medicaid without accompanying tax hikes. …”

From: http://www.forbes.com/sites/janetno...cit-super-committee/?partner=daily_newsletter BTW, Forbes is hardly some left-wing liberal group, but does sometimes get forced into telling it like it is. They even published Buffett’s call for increasing taxes on the “coddled too long” super rich. See my posts with comments on Buffett's remarks here: http://www.sciforums.com/showpost.php?p=2797824&postcount=71

more Billy T comments: Thus, the only sure result is deadlock and that most of the 1 million plus given by the “fervently anti-tax” Club for Growth will be split among the six anti-tax Republicans. That is an average quick 165,000 dollar profit for doing nothing but blocking a balanced deal that includes both cuts and return to the tax rates that balanced the Budget under Clinton.

PS - You may have missed the best part of photo at top. Look again and note that the only money Uncle Sam now has is "monopoly money."

 

Tax cuts for the rich is like Exlax for diarrhea. Just saying...

 

GWB's tax cuts for the very rich + This is what is destroying the America's middle class and concentrating wealth in the hands of the "1%ers"

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This huge wealth increase has gone to ~1%
Graph from: http://www.fool.com/investing/general/2011/11/23/the-next-economic-revolution.aspx Read more about this revolutionary and permanent change there.

Higher taxes on the very rich are one way (probably the only way to avoid eventual mass violence)* to redistribute the productivity gains to those who will spend in the US and boost the economy (and slow the investment of the very rich in Asian factories that are killing US jobs)

* Can you say: "French Revolution"? as you too, fall out of the decreasing middle class and into the Marshal Law state.

 

Maybe if we put a "cap" on how rich an person can be such as a billion the super rich would spread their money or be penalized(extremely high tax rate)there would be more rich peope with millions instead of a few billionaries. corperations would also need special spend it or pay the penality tax.

 

I read somewhere if we taxed the rich at the levels suggested, this would pay for about another day of government spending. It sounds good, politically, but not what you think. Much more impact could be gained by the taxing the riches of them all; US government. The US government is a not a billionaire but a trillionaire, bigger than any corporation and much more inefficient and wasteful. This should be the main source of revenue, via spending cuts and tax rebates.

 

Is it your belief, therefore, that there is a fixed amount of money, and if (for example) Bill Gates stops selling Windows OSes (because he's about to hit his limit) that money will magically appear somewhere else?

 

I was thinking maybe that the billionares would spend more instead of being taxed more something along the lines "if they dont start stimulating the economy with their emence wealth then our government will do it for them."

 

Cutting Military spending is the only way out of this mess. It can be done very easily without much drain to job flow (I.E just don't hire so many new people, reorg and get rid of some units). Stop spending in black budget. U.S simply cannot afford the luxuries such as trillion dollar military R&D programs. Particularly since NASA got cut, fuck the black budget.

 

Yes, they will "spend" but "invest" is more accurate term for them parting with their money. - I.e. your suggestion makes no change from what they have been doing since they got GWB's tax cuts. I.e. they will invest where the expected returns are the greatest relative to the risk - that has been Asia for nearly two decades.

Effectively that is very NEGATIVE stimulation in the US. As Joe American's factory can not compete against the more modern, more efficient one just built in Asia, even if the workers there got the same salary as Joe, it closes. Without salary Joe spend much less in the US than when he had a job. = Negative stimulation in US by the rich and huge job creation in Asia. China has a very sever skilled labor shortage now

What is needed, at the very least, is to kill the very job destructive GWB tax cuts given the very rich. Better would be my suggestion that any funds used to build factories (or other job makers) not in the US must be exactly matched by same sum sent to IRS for re-training US workers losing their jobs (and that includes sending them to college / graduate school etc. if so inclined) I.e. all expenses paid - plus modest salary

 

A step in the right direction:
“… {Obama´s} main proposal for reform would slash the corporate tax rate to 28% from 35% and pay for the reduction by eliminating "dozens" of business tax breaks. There are currently more than 130 on the books. …” From: http://money.cnn.com/2012/02/22/news/economy/obama_corporate_taxes/index.htm?source=zacks

But does not go far enough to make much difference. I.e. there will still be too few jobs for US workers, US production will be at disadvantage to technically advanced countries like China with much lower salaries. The Middle Class will still be shrinking while the top 1% nearly double their total wealth, thanks to their income (capita gains mainly) being taxed at half the marginal rate typical Joe American pays (if he has a salary).

I.e. US corporate tax rate should be ZERO, with all profits distributed to taxing persons within 10 years (including the interest earned on them while held by the corporation.) These “real people” all pay using the SAME progressive tax rate schedule – not the rich pay at a half the rate as is typical now and is destroying the middle class by concentrating wealth. A zero corporate tax rate would greatly help bring jobs back to the US as US corporations would be more competitive internationally.

Other suggestions as to how to make the tax law simple (Fits on 3by5 index card, not 70,000 IRS publications and recorded tax rulings, which only the very wealthy with tax consultants even know about) and is fair at: http://www.sciforums.com/showpost.php?p=1792841&postcount=1

PS I have already in this thread pointed out that "trickle down" of tax relief given by GWB (and still existing) to the very rich does create jobs, IN CHINA, while forcing US factories to outsource (to Mexico, etc.) much of the production of the subcomponents, just to avoid shutting their doors permanently, here:

PS just so quadaphonics does not again try to correct my "larger market" in China, let me be more specific: I am speaking of fact that, like Brazil, the population of China is growing significantly wealthier every year, so can buy their first ever refrigerator, motor bike, etc. not like the US population that replaces its refrigerator only every 20 years. Etc.

Also they have greater fraction of their income "disposable" now that their out of pocket medical expenses have been cut in half - less need to save up to 50% of their income for medical emergencies and routine expenses, like insulin.

This "larger market" (even with lower average income) is why Chinese are buying about 25% more cars than Americans are who mainly are only replacing their old car with a new one every 8 or so years. The size of the market is not reflected only in the average wealth of the population time the size of that population, as Quad suggested, but also in what fraction are "first time buyers" vs. "only replacement buyers."