Yesterday, the GOP filibustered a vote to extend the middle class tax holiday again, that is, they didn’t even let the issue come up for debate.
The extension of the tax cut was to be paid for by a small, temporary surtax on the top 0.2 percent of income earners.
What I hear repeated by the GOP and by people I know “in real life” who swing conservative is that when you raise taxes on the rich, they no longer have the income available to hire more people. This is the “job creators” argument, that is repeated like a mantra over and over again by conservatives.
On the surface, this argument seems to make sense, if business owners are paying less taxes, they have more income to hire and pay more employees, thus more people have jobs.
The problem with this is, tax rates for the highest earners are at the lowest they have been since the late 80’s/early 90’s, so if this were the case, why aren’t the job creators hiring?
This is because what drives business, is demand. Why would someone hire more employees if business is flat, that is, what need to you have to expand the number of people working for you if the amount of business you are doing is not going up.
Look at it this way, before I got laid off of my old job (and after I had left my ex wife) I was doing pretty good for myself. I was still making around 60k, a year, and I had disposable income.
I went out a lot to local bars and restaurants, went to the movies fairly often, I bought video games and electronic gadgets a lot, I spent a lot more money on groceries because I was buying “higher quality” food.
Another example I like to use is I used to go the car wash once a week and get the “premium wash” which was about $15.
After getting laid off I was able to find another job after about eight months on unemployment, during which time I depleted all my savings. The new job paid only about 30k a year and I had to cut back on unnecessary spending. This included all the going to the movies, going out to eat, video games, electronic gadgets and getting my car washed. I had to adjust my spending on groceries as well.
I managed to find another job making just over 40k a year, but that’s still 20k less than I was making previously.
Now days, I rarely get my car washed, maybe once a month, and when I do, I get the lower cost “budget” car wash. I bring this up not because I’m upset that I can’t afford a premium car wash every week, but because I have seen three car washes in my neighborhood go out of business in the last few years. People have less disposable income, and those things that are not absolutely necessary are the first things to be cut out of a household budget.
If you look at the trends in income recently you’ll see that poverty is rising and median income is shrinking.
Now, another thing to look at is the percentages of income increase over time.
The middle class’s income over the years has shown a change of about +25% over time since 1979, the next highest percent tracked would be the top five percent of US income earners, who have seen a +95% increase in income. The top 1% has seen an astonishing 281% increase in income since 1979.
If those in the higher percentile are job creators, and their income has raised so much, then why aren’t they hiring?
The answer is there are no demand for jobs, if the middle class isn’t spending money, then there is no incentive to hire.
This is not the time to raise taxes on people already struggling to make ends meet, in fact if you look at the data, that’s only going to make things worse.
The middle class needs to be spending money in order for there to be demand for more jobs, there needs to be a middle class in order for them to be spending money and going by recent trends this is a demographic that is shrinking.
This is proof that “trickle down” economics do not work, and the GOP really needs to stop clinging on to this idea.