how to break the vicious econmic cycle


I'm convinced that low corporate tax rates are ultimately responsible for this wholesale disregard for the welfare of workers.

The Republicans like to blame current unemployment problems on "high taxes." In their utopia, there would be no corporate taxes at all, and everyone would have a job. Or so they claim.

This line of propaganda works because most Americans do not realize that hiring people actually REDUCES a company's taxes. Unlike individuals, who are taxed on all their income minus a couple of minor exclusions and deductions, businesses are taxed ONLY on what is left over after they have met all their expenses, including employee wages and benefits. No profit, no taxes.

In the days of high corporate taxes, there was a financial incentive to hire people, upgrade facilities, buy equipment, develop new products, contribute to charity, and do other things that benefited the economy and society as a whole, because the money spent on these was not taxable.

When Reagan lowered corporate tax rates and the top rates on personal income and capital gains, shareholders received a sudden windfall. Understandably, they liked this. They began pressuring managers to increase profits from quarter to quarter, no matter what.

This was the era in which the business press glorified the "lean and mean" companies and the corporate raiders who bought other companies and gutted them.

Most companies had only a limited amount of "dead wood," so the next step in increasing profits was to outsource as much blue collar work as possible, first to non-union, cheap labor states, and then to cheap labor countries.

But how do you keep raising profits quarter to quarter when all your production is outsourced? Easy! You start outsourcing the white collar and technical jobs to India and China. Then you go around writing opinion pieces in business journals and newspapers about how you're forced to do it because American workers are lazy and have a sense of entitlement. (Talk about projection!)

Those workers who remain are told that they must accept longer hours, no raises, and reduced benefits, "because of the poor economy." Who is going to protest when there are so many unemployed out there?

Having attended two Ivy League schools for graduate school, I know that there is a certain type of wealthy person who does not see the rest of us as real human beings worthy of respect. Some are that way due to having led a sheltered life. Others are just plain cutthroat greedy and dismissive of anyone who can't make piles of money.

Meanwhile, retail and service businesses, the ones that can't be outsourced to China or Mexico, suffer because their former customers, ordinary middle class people, are afraid to spend money.

If I were in charge of this country's economy, I'd raise taxes on individuals and corporations to pre-Reagan era levels. That would make ditching workers a less attractive proposition. It would also take the trust fund parasites down a much needed peg or two.

1 comment:

rlk from chappaqua, ny said...

Last year I paid more than $3 million to the government in duties on merchandise that I imported into America and resold. Those duties are supposed to equalize the difference between the cost of producing American goods here and the cost, with cheap labor, to produce the same goods overseas.

My company gets calls everyday to hire companies with employees overseas to take my customer service calls, enter my data, do my legal and personnel files, etc. and yet I wouldn't pay any duties or fees on the cost of that cheap labor. If those same people made products, I have to pay duty on that value.

So why isn't there duty on services that are taking at least as many American jobs as our ill-fated manufacturing base of the last decades?

I wouldn't hire any of that cheap labor overseas because I believe in American worker, but just call any large company and you find you are talking to someone in India (who in my old age, I can barely understand).

Let's put a duty on that labor, at least as much as we pay for FICA taxes and Medicare taxes for every American worker.

Maybe then we can bring these jobs back to America.

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