Dec 16, 2010

Reasons for Unemployment and a Bad American economy

 I posted the following on a Fantasy Football League Message board in Facebook: 
Give BIG tax cuts for the working folks and HIGHER taxes on the Lucky Sperm Club ($250K and above). Those making less than $250K are either working for or are running those small businesses. Then, let's play Fantasy Football and drink some beer. YEAH!
An interested blogger responded:
On what planet does it make sense to punish productivity? And, a homeless person never offered me a job, taking away incentive for business owners to earn more profits just might affect their growing the business and hiring more employees. Tax based on consumption with poverty level spending exempted: www.FairTax.org
Here's how I responded:
The reason Corporate America exists is to make money, right? If they can make more money shipping jobs overseas, they'll do it, regardless of the American economy.

Here's a practical economic theory that may make sense to you (maybe not). If they show a profit after all valid deductions are subtracted, they MAY hire if it makes sense to do so. But, if they are taxed at a HIGHER rate on their net profits, they will logically put their profits into building their business by hiring or investing in new money-making equipment. That invested money is written off as a business expense and lowers their taxes due. If their tax rate is LOWER, they will want to take the money OUT of their business and invest it elsewhere to make more money than they would by investing in their business. So, HIGHER tax rates means more hiring. Crazy, huh?

Also, small businesses work on the same principal, but their hiring and money-making investments are done in America, which grows the American economy remarkably efficiently.

The whole story about a flat tax to replace the income tax or corporate tax is a pretty radical idea, and I just can't see how a usage or sales tax is fair to lower income people. It has to be progressive, which the website says it is, but I don't see it other than being regressive. A family with an income of 40K per year (the MEDIAN income. by the way), spends MOST of that income on the necessities of life. The high income people (I hesitate to call them workers) spend money on the necessities too, but they should have a lot left over. What they do with the excess money is their own business and if they spend it all, that's great for the economy. But, they'll probably invest it some way to make more money. That's called capitalism (making your capital to make you more money). Investing is a good idea, but in my opinion the patriotic thing to do is invest in America by keeping jobs here. Sadly, many would not care and instead, make money where ever that can make it, even if it's overseas. Lower income workers spend ALL of their money in America. Heck, they don't even have enough money to pay into 401-ks or IRAs.
My career is littered with off-shoring events and over the last ten years, 40,000 manufacturing companies have disappeared. Not 40,000 jobs, 40,000 companies. That is why we have an unemployment problem.
Thanks for "listening". If you agree with this, spread it around. If you disagree, then keep your thoughts to yourself.

Any other opinions?

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