Florida Conservative

A Conservative Take on Florida and U.S. Politics

Economic Myths

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It’s tough to find a large number of economic myths all neatly bundled together, but Henry Blodget at Business Insider was willing to take the time.  Thanks, Henry!  And now the truth about each:

1) “Modestly higher taxes would not make me work any less hard or remove my incentive to help create a great product.”  FALSE.  This statement might be true if everyone paid the same rate, but it’s ridiculous at an individual level because people simply don’t.  Even people in the same tax bracket don’t pay the same rate.  Some barely make it into the bracket while others barely avoid the next one up.  If we had a flat tax rate (which I strongly support), this argument would be spot-on.  With the current tax code, it’s utter nonsense.

2) “Raising personal and corporate income taxes, in fact, might encourage us to invest more money in our business, not less, because then we would pay less in taxes.”  FALSE.  GE already pays zero income taxes.  Do you think they’ll get excited about paying them at higher rates or just hire more former IRS employees to help avoid taxes altogether?  Wealthy individuals do the same thing with their CPAs and tax attorneys and it doesn’t always result in investment.  Higher rates without real reform will just encourage more tax avoidance.

3) “Entrepreneurs do not ‘create jobs.'”  FALSE.  Are the jobs just lying around then, waiting for someone to pick them up?  Nope.  Job creation requires entrepreneurial vision, marketable products, and successful execution.  Further, there are lots of jobs in unhealthy economies, too.  Prostitution, drug sales, and theft come to mind pretty quickly.  Are those the jobs we really want?

4) “Investors do not ‘create jobs.'”  FALSE.  In point #2 above, investment was cited as a good thing, ostensibly because it creates hiring within enterprises and creates jobs in the macroeconomy via suppliers, their suppliers, etc.  So which one is correct?  The truth is that investment really does create jobs.  The success of the thriving microcredit industry in developing nations is clear evidence.

5) “There is plenty of investment capital around right now—an astonishing amount, in fact.”  TRUE. The real question is why so much capital is sitting around because asserting that demand is weak is simply false.  I’d love to borrow some money right now, but the underwriting standards are ridiculous.  No one wants to risk losing their money, especially since income is taxed but wealth is not.  This important distinction means no one is going to take your hard-earned wealth away, but they might steal its earnings.  Why take that risk?

6) “‘Uncertainty’ about taxes and regulations plays absolutely no role in our corporate decision-making.”  FALSE.  That may be true for very small companies or those not directly affected by health care regulation in particular, but the rest of the economy is trying to shed full-time jobs to avoid having to pay health care penalties.  The misguided and misnamed Afforadable Care Act is actually decreasing the number of people insured through private enterprises (which was probably the original, unstated goal) and creating more demand for a goverment agency to take care of those who can no longer find full-time work.

As a consolation prize to Mr. Blodget, at least one of his assertions was technically (perhaps unintentionally) correct.  Either way, it was an interesting read…

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Written by floridaconservative

August 10, 2012 at 2:00 PM

Posted in Taxation

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