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Actually, "the Rich" Don't "Create Jobs," We Do

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You hear it again and again, variation after variation on a core message: if you tax rich people it kills jobs. You hear about "job-killing tax hikes," or that "taxing the rich hurts jobs," "taxes kill jobs," "taxes take money out of the economy, "if you tax the rich they won't be able to provide jobs." ... on and on it goes. So do we really depend on "the rich" to "create" jobs? Or do jobs get created when they fill a need?

Here is a recent typical example, Obama Touts Job-Killing Tax Plan, written by a senior fellow at the Cato Institute and chairman of the Institute for Global Economic Growth:

Some people, in their pursuit of profit, benefit their fellow humans by creating new or better goods and services, and then by employing others. We call such people entrepreneurs and productive workers.

Others are parasites who suck the blood and energy away from the productive. Such people are most often found in government.

Perhaps the most vivid description of what happens to a society where the parasites become so numerous and powerful that they destroy their productive hosts is Ayn Rand's classic novel "Atlas Shrugged." ...

Producers and Parasites

The idea that there are producers and parasites as expressed in the example above has become a core philosophy of conservatives. They claim that wealthy people "produce" and are rich because they "produce." The rest of us are "parasites" who suck blood and energy from the productive rich, by taxing them. In this belief system, We the People are basically just "the help" who are otherwise in the way, and taxing the producers to pay for our "entitlements." We "take money" from the producers through taxes, which are "redistributed" to the parasites. They repeat the slogan, "Taxes are theft," and take the "money we earned" by "force" (i.e. government.)

Republican Speaker of the House John Boehner echoes this core philosophy of "producers" and "parasites," saying yesterday:

"I believe raising taxes on the very people that we expect to reinvest in our economy and to hire people is the wrong idea," he said. "For those people to give that money to the government...means it won't get reinvested in our economy at a time when we're trying to create jobs."

"The very people" who "hire people" shouldn't have to pay taxes because that money is then taken out of the productive economy and just given to the parasites -- "the help" -- meaning you and me...

So is it true? Do "they" create jobs? Do we "depend on" the wealthy to "create jobs?"

Demand Creates Jobs

I used to own a business and have been in senior positions at other businesses, and I know many others who have started and operated businesses of all sizes. I can tell you from direct experience that I tried very hard to employ the right number of people. What I mean by this is that when there were lots of customers I would add people to meet the demand. And when demand slacked off, I had to let people go.

If I had extra money I wouldn't just hire people to sit around and read the paper. And if I had more customers than I could handle that -- the revenue generated by meeting the additional demand from the extra customers -- is what would pay for employing more people to meet the demand. It is a pretty simple equation: you employ the right number of people to meet the demand your business has.

If you ask around, you will find that every business tries to employ the right number of people to meet the demand. Any business owner or manager will tell you that they hire based on need, not on how much they have in the bank. (Read more here, in last year's Businesses Do Not Create Jobs.)

Taxes make absolutely no difference in the hiring equation

In fact, paying taxes means you are already making money, which means you have already hired the right number of people. Taxes are based on subtracting your costs from your revenue, and if you have profits after you cover your costs, then you might be taxed. You don't even calculate your taxes until well after the hiring decision has been made. You don't lay people off to "cover" your taxes. And even if you did, it would lower your costs and you would have more profit, which means you would have more taxes ... except that laying someone off when you had demand would cause you to have less revenue ... and you see how ridiculous it is to associate taxes with hiring at all!

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Dave Johnson is Founder and principal author at Seeing the Forest. Dave is a frequent public speaker and talk-radio guest and a leading participant in the progressive blogging community. He does a regular weekly segment on the popular Fairness (more...)
 

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I am a proponent of "fair share" taxation policies... by Doc McCoy on Saturday, May 14, 2011 at 10:07:34 PM
Let me start off by saying the authors article was... by kappie on Sunday, May 15, 2011 at 10:34:57 AM
The rich receive far more benefit from the US tax ... by Frish Frishberg on Sunday, May 15, 2011 at 8:15:19 PM
Great idea! Get rid of Tax exempt bonds so local g... by Greg Palmer on Thursday, May 19, 2011 at 10:22:56 AM
Thank you! The one term you left out of this essay... by David Kendall on Sunday, May 15, 2011 at 8:47:26 PM
Dave, this is one of the many myths repeated and a... by Edip Yuksel on Monday, May 16, 2011 at 9:41:46 PM