Social Question

Rangie's avatar

Do you think higher taxes on the rich, will result in less jobs?

Asked by Rangie (3656points) April 14th, 2010

If a company has to pay more in taxes, will he be forced to eliminate a few employees?

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55 Answers

dpworkin's avatar

Historically, through and including Reagan’s administration it has not done so.

janbb's avatar

Most likely not. If the company needs those employees to make a greater profit, they will keep them on. Remember taxes, even when raised, are only a percentage of income so if you make more money you are still ahead. They will very likely only drop employees if they are not making enough profit which is what is going on already.

UScitizen's avatar

Higher income taxpayers are fleeing Maryland at an alarming rate, due to high taxation.
http://www.washingtonexaminer.com/local/Millionaires-flee-Maryland-taxes-46138062.html

Captain_Fantasy's avatar

When company execs who makes millions a year decide to layoff staff instead of taking a pay cut themselves, that’s not the fault of taxes.

Cruiser's avatar

There is a direct cause and effect at play with higher any taxes especially on the business and business owner. I see it here at my company as office and sales staff get to pitch in out back on the factory floor with large orders because we are reluctant to absorb the added cost of another production worker and many of the other companies up and down the street here are doing the same. Business rags are awash with stories of continued layoffs and hiring freezes so higher taxes will surely perpetuate these tight job conditions.

@UScitizen that is the same headline that has been running here in Illinois for the past 3 years and Indiana is jumping for joy at our tax burden here which is sending countless companies over the boarder and our taxes are being eyeballed to be raised even more.

stump's avatar

No. I say tax the hell out of those rich bastards!

mammal's avatar

No, the sky wont fall down neither, you see that’s the threat from the CEO’s isn’t it? you tax us and we will sack a few, it’s blackmail, it’s nasty and the bluff needs to be called.

simpleD's avatar

Interesting and relevant story on NPR Today: Some Of The Rich Ask For Higher Taxes.

“Hollender, co-founder of the eco-products company Seventh Generation, says he doesn’t believe in trickle-down economics — the theory that what benefits the rich helps everybody.

‘These arguments are really about keeping money in the pockets of people who already have too much money,’ Hollender says.”

Rangie's avatar

@stump I wouldn’t punish them for being successful. I don’t even envy or have anger toward them. I say, more power to them for having what they have. Are you sure you are not just jealous? I ask that because you sound so hateful toward them.

softtop67's avatar

Now in theory I wuld agree that the CEO shouldnt fired an employee just to keep their pocket lined, but in reality we all know this is not how life works. Its all about maximizing profits and thereby ones own take of the pie and if this means layoffs than so be it. So by taxing the rich you will find that they will seek other measures to insure their pockets are not adversely affected by the new “taxes” ie reducing workforce or other cost cutting measures. Whereas when a company has more money, tax incentives, to invest the pure greed of most business leaders and hopes for that pot of gold will encourage investment

LuckyGuy's avatar

No. The CEO of Home Depot Nardelli abruptly resigned in Jan 2007 as chairman and CEO after six years. He left with a severance package worth roughly $210 million. Now I could understand such a large payment if he started the company and had been working there for 30 years and built it up from scratch. But he was only there for 6 years and the stock performance was terrible. Reference

Coincidentally have you ever tried to find someone to help you in Home Depot? Not enough employees. Laid off. How many people would $210 million employ?
He should be taxed and the money used to pay unemployment benefits for the thousands of people put out of work.

stump's avatar

@Rangie You are right. I am jealous. But I am not hateful toward rich people. I mean what I wrote with love. And I don’t buy it that if we raise taxes on the wealthiest people they will all move to Singapore and move their jobs to India.

JLeslie's avatar

No. They might make less profit if they cannot charge more to the consumer, but I doubt there would be fewer jobs.

Your_Majesty's avatar

This has already happened to some low-graded and average-graded company in my country. They kicked out all their employees for that reason. They’ll even do that if some raw comodities in market raises its price.

Rangie's avatar

@worriedguy I agree about the CEO’s. Absolutely unforgivable. There is no justification for that behavior in any company.
That is why I don’t shop at Home Depot anymore. And when you could find someone, they didn’t have a clue what it was your were asking.

wonderingwhy's avatar

If they’re a private company, perhaps, as some owners can’t absorb the extra losses, particularly if their business is already hurting. If they’re a public company, only if it will sustainably increase profit and then only if they’re not under pressure to grow. In the current economy your more apt to see it, when things are going well, there’s too much pressure from competitors to not pick your cuts very carefully.

JLeslie's avatar

I blame Reagan and Bush for cutting taxes so drastically that people hate the idea of going back. It is difficult to go “backwards.” If you know people who have been rich and then lost their money and had to live modestly, it is very difficult emotionally. We have been set up and spoiled and most don’t want to give it up, especially the rich fat cats. There are wealthy people who support going back to paying higher taxes, both busness and individual taxes. The most outspoken person is Warren Buffet.

Rangie's avatar

@Doctor_D What country is that? I think that is horrible. The Ceo and upper management, are making far more than they need, far more. So to loose a few employees so they can keep their income is despicable.

Rangie's avatar

@JLeslie I can’t say I lay the blame on anyone in particular. I think all of the politicians are greedy individuals, that will promise anything to improve their own lifestyle and insure their job.

Lve's avatar

Laying off employees is always one of the tools a company has to cut costs. Especially in the US where employees have hardly any protection vis-a-vis their employer when it comes to job-security. So maybe after a tax increase a company will do a cost-benefit analysis and decide to lay off a (few) workers.

That being said, a tax increase on the rich companies/corporations, is still a good idea. Over the past years upper-management have been getting richer and richer, mostly over the backs of middle class workers. Even during the difficult economic times they are laying off employees and rewarding themselves on a “job well done” by handing out huge bonuses. The time has come to pay attention to the middle class, without whom the economy would grind to a halt, and increase taxes on the elite who can easily afford it.

Rangie's avatar

@Lve And you don’t think they will pass that on to us?

CyanoticWasp's avatar

My assumption would be “yes”—on this narrow question. Don’t forget that higher taxes on businesses are always passed on to consumers. So it is consumers of [whatever] that will pay the higher taxes proposed on any business. Higher taxes to consumers take the form of higher prices, which generally means somewhat less consumption.

So the net effect would be to reduce consumption by some amount, which nearly always translates into a loss of jobs.

But the economy isn’t static. At the same time that people clamor for “soak the rich” taxes—and the government happily obliges—the government also inflates the currency with far less popular demand or awareness. (This is nearly automatic as our debt increases.) This also has effects that real people feel, from devaluation of the US dollar on world markets (making our exports somewhat cheaper overseas) and a corresponding increase in dollar-value for imports from non-dollar economies (such as Europe, Canada and much of Asia—other than China, since China pegs its currency to the dollar). As our exports of goods and services to world markets become cheaper in relative terms because of the weakness of the US dollar, then more people may be employed in the US to produce those goods and services.

But the way we feel the increase in inflation is not as direct as “having a job” vs. “not having a job”. You can still have a job and increasing income… and be less able to live on the income.

So it’s possible that there actually may be an increase in domestic (US) employment… but a system-wide lowering of purchasing power, since so many of our imports (starting with oil) come from countries that don’t use the dollar as their standard, and their currencies would increase in value against the dollar as we inflate the dollar.

JLeslie's avatar

@Rangie Well, I kind of do. And, I don’t unerstand how people who claim to be fiscal conservatives want to buy things without paying for them. Everyone who was in favor of going to war in Iraq should have been in favor of paying an assessment tax for the war. I pick on them, because it is many of these right wingers who constantly chant no taxes, and they also drone on about passing the debt to our children and grandchildren. If you don’t want to pass it to the next generation, pay it.

Your_Majesty's avatar

@Rangie That would be Indonesia. They won’t only loose few of their employees but half and even all of them for most circumstances. Our government even sided on all those companies(most of the time) since they know there’s nothing they could do(government will only offer unsolved promises to all the employees) to demand something from a company that under its bankruptcy. Demonstration and Anarchism from all the employees too always worsen this problem.

Lve's avatar

@Rangie They?
Now that I think of it, what is your question exactly? A tax increase for the rich personally is different from a tax increase for a private business.

semblance's avatar

I am not an economist but I am an attorney with a Master of Laws in Taxation so I think I can at least have a semi-informed opinion here.

I do not think that higher taxes equates to a loss of jobs. Historically – from World War II until around the early 1980’s – when taxes were much higher than today, that did not seem to be a drag on economic growth.

Further, although tax rates are now relatively low, historically, unemployment is at the highest level since the Great Depression.

So, there doesn’t seem to be a direct correlation between increased taxes and employment. I believe that these are only two factors in a much larger, more complex equation of how the economy functions. To grasp the full equation is, with all due respect, probably beyond the expertise of the Fluther collective. (I’m not pretending I know the full equation either.)

Rangie's avatar

@CyanoticWasp So, would you say a flat tax might help that situation. We all know the rich will always buy what the want, which in many cases are things we couldn’t begin to afford. and that way we could all make choices of what we want vs things we need.

Rangie's avatar

@Lve You know that is a good Q. Somehow we are talking about both I think. Originally, I was talking about corp. Because I don’t think the rich individual necessarily provides jobs to many people.
I

JLeslie's avatar

I am in favor of a flat tax. This article is great http://www.forbes.com/2009/01/29/irs-high-income-personal-finance-taxes_0129_wealthy_americans.html I have posted it before. The superrich will not likely spend less in my opinion if they are taxed a few ercentage points more, because they are so super wealthy. I agree that taxing a family that makes $300K could affect the economy. If anything putting more money in the pockets of the middle class will increase expenditures.

Rangie's avatar

@JLeslie Yeah, I think the flat tax, can be the best thing for this country. At least if I don’t like the cost of something with the tax, I don’t have to buy it, therefore I don’t have to pay the tax. I personally am conservative, but I don’t fall in line with any one particular conservative. I think each of us has our limitations. I also don’t want to pass it on to the next generation. I also think it needs to get paid asap. And the government needs to stop spending and take a breath and think things out. What is the best and fair way to get this debt taken care of? I think we all want to do our part, but we just don’t want to work hard only to have 70% of what we make to go away. And have the government building and ice skating rink in Saudi Arabia. Well, you know what I mean.

CyanoticWasp's avatar

@Rangie maybe.

As with all other such proposals, it depends on the details, and the details matter a lot. I’d never agree entirely until I saw a specific proposal.

In the long run it would hardly matter what tax rates were… if the government didn’t go deeper into debt as it raised the rates and revenues. We need to expect less, ask less and demand less from government, or rates (and debt) will continue to rise. I’m not holding my breath.

Rangie's avatar

@CyanoticWasp Neither am I, especially since I can’t, very well anyway. hehe personal joke. Yes, I would also have to see the details in microscopic detail. First thing is they need to STOP SPENDING.

abbydowns's avatar

Will it result in job loss for others probably not, but I don’t think being rich means you need to be taxed more. They work hard for their money and deserve every penny. If a business man has more money from being taxed less what will he do? Open more businesses hiring more employes thus creating more jobs and helping the economy.

Rangie's avatar

@abbydowns Why don’t people understand that? I think they are so busy being jealous of the rich, that they can’t see the forest through the trees. I have said it all along Jealousy is a sickness and will destroy a person and their ability to think straight.

ShiningToast's avatar

@abbydowns That is called the trickle-down theory. And I believe multiple people have posted that it doesn’t work that way.

Rangie's avatar

@ShiningToast Aside from those other people, what is your opinion? And why wouldn’t it work. You said it, you explain it. Why won’t it work?

JLeslie's avatar

@Rangie I mean flat income tax, not VAT tax.

JLeslie's avatar

@abbydowns Did you read my link. The top 400 earners pay an average of 17% tax because of loop holes, write-offs, and capital gains laws. I am all for the rich not being taxed more, I just don’t want them taxed less.

By any chance do you make over $300K a year? Of course I do not expect you to tell us your income, but I have found that most of the time the people fighting to keep the rich rich are nowhere close to rich, and have no real idea of the tax benefits that are out there. I am not rich, but I defend the rich all of the time if you have seen me around fluther. I get annoyed when people think they are all shallow, don’t work hard, and are selfish. My husband and I do make enough money that we have had an investment property that was a nice tax write off, and when we sold it was taxed at a low rate, and I made a whole bunch of money on a few pieces of property because of tax laws regarding selling your primary home. The people with money get to enjoy these regs and laws, because the people with very little cannot afford to even buy the investment property.

Believe me I would have bought that property even if I was going to be taxed an my normal income tax rate. The same way I believe businessman making $500K a year are going to still bu and run that business whether they are taxed at 20% or 30%.

anartist's avatar

Very possibly in USA, considering the percentage of high-income earners retiring and;/or having other options like being ex-pats.

jerv's avatar

I would think not for one simple reason that many of the “Don’t tax the wealthy!” crowd don’t like to admit.

The simple truth is most people are hired by companies. Not individuals, companies. Businesses. People don’t hire people, businesses hire people. If I knew more languages, I would reiterate that point in all of them!

Another thing is that if we raised the personal income tax on the top brackets, that would mean that we could lower taxes a bit for businesses. Maybe not much, but as it stands we have business taxes high enough to make companies want to move overseas.

ALl of the arguments I hear about not taxing the rich seem to fall back to it being bad for businesses, but no mention is ever made of business taxes or the fact that companies may be better off keeping their money in the company for company business rather than line the pockets of the CEOs who will likely not reinvest it the way that the disproven and discredited trickle-down theory says they will.

Cruiser's avatar

@jerv I wish it were that simple and distinct. Businesses are owned by people who need to make a profit or why bother. Plus it is businesses like the one I work for that represent a significant part of potential job growth. I could use another salesperson and at least one factory worker. We have had to make do without them primarily because of the slow economy. We are busy again and really could use those other employees but that would represent a significant additional cost to the company. In the last 18 months our health care cost has increased significantly which has only added to that cost burden. These higher HC costs that are in flux and so uncertain as to how much higher they will go plus the promise of higher corporate taxes and higher taxes to the owners only further takes away profits that are needed to be realized in order to justify being in business. We also do not have enough new business to offest the added payroll costs and simply makes it almost impossible to justify bringing on new people. So we make due…work harder and work longer hours. Now a tax “cut” would free up some cash so we then could justify hiring those 2 people.

ShiningToast's avatar

@Cruiser So what you really need is a tax cut for the business, not the person(s) who own it.

jerv's avatar

@Cruiser I am well aware. However, there is a balancing act involved there too, just as some of the income tax cuts have gone to the other side of the Laffer Curve. I mean, if tax cuts were always a good thing then optimum revenue would be obtained by setting the tax rate at 0%, and since that isn’t true then it stands to reason that it’s possible to overdo things.

But if I read that right then it sounds like a cut in _business taxes would help you, but since we still need revenue then an increase in personal income tax would be pretty much required.

Also bear in mind that I am from a state that had an odd balance of taxes and moved to another where it is even weirder. Neither NH nor WA have a state income tax. NH has no sales tax either but the property taxes are pretty steep. And where I am now, there is a 9.5% sales tax on most things, liquor and tobacco cost twice what they did in NH, and they just put extra taxes on candy and bottled water in addition to adding anotehr $1 to a pack of cigs.

Any way you slice it, someone gets screwed. In NH, it’s anybody who either owns property or rents from someone who does. In WA, it’s anybody who buys anything,especially certain “sin” items as well as property owners and renters. And in the US, it’s the poor who spend a larger percentage of their income on non-income taxes and can’t afford to be in less than perfect health, the middle class who gets a huge chunk of their paycheck yanked from them by Uncle Sam, and businesses who have to put up with ridiculous taxes in addition to high expenses.

Notice who doesn’t get affected: the rich. In fact, their incomes have skyrocketed in the last decade and yet they pay about half the income tax (as a percentage of their income) as a middle-class person and their incomes are so big that things like sales tax are less than pocket change to most of them. They are making out like bandits!

And whether you like to admit it, you are at best middle-class. Many people who consider themselves “middle-class” are in fact at the upper end of lower-class. Then there is the outcry over “Joe the plumber” because people didn’t understand the difference between taxing those who earn >$250K/year and raising taxes on small business. Hell, one of my old co-workers thought that every penny that [redacted] Incorporated earned counted as personal income for the owner! If that were true then going through the hassle/expense of incorporating would be futile. Taxing the rich and taxing businesses are apples and Buicks; beyond unrelated.

It never ceases to amaze, amuse, and confound me how many people that are up in arms about taxing the rich are not themselves even close to rich. It’s almost masochistic really.

I should note that that small company I used to work for managed to cover their taxes and the increasing cost of paying for our insurance pretty easily. Of course, the management lived in regular houses as opposed to small mansions,didn’t own vacation homes in the Carribean, and we went through some really lean times without layoffs. I think it may have had something to do with the fact that they were more concerned with the company than with making literally obscene amounts of money for themselves. So tell me, as a small business guy, would you rather have $1 million or would you rather have $100K/yr for the rest of your life?

The point there is that it’s possible for the suits to live a decent life without raping the companies that pay them or the regular, working-class employees, though you wouldn’t know it from watching Wall Street, banks, or insurance companies. It’s also possible to strike a different balance of taxation that would be friendlier to business while being more fair to individuals than our current system.

Of course, like all things, the devil is in the details. It would be easy to do it wrong, but I think we’d almost have to try to make it more wrong than what we have now.

Cruiser's avatar

@jerv You can do economics 101 all you want but it won’t change the fact that we cannot afford to hire those 2 extra people because our overhead (chiefly the health care and other employee expenses) is so great. Now just imagine what my 2 extra hires plus the millions more that would occur from a minor adjustment in corporate and or income tax would do to the overall picture. Face it we are being taxed into economic stagnation and the only solution is to cut government spending. I don’t care who is in charge it has to stop!! How come we here have to suffer by working harder, leaner and meaner while the fat cats in Washington just get fatter? This is complete and utter bullshit the way our money is being managed! If we can cut our expenses to the bone as a corporations so should our government. Plus where is the incentive for the welfare component to get off their asses to go out and work?? Oooops I forgot there are no new jobs for them to be had and now why is that???

BTW, that is a huge assumption to assign me to the middle class!

JLeslie's avatar

@jerv @Cruiser My example would not have been would you rather make $1million one year or $100K the rest of your life, mine is can you just earn $800K instead of the $1million and pay a little more in payroll (whether it be a better wage for employees or another couple of people hired to take the starin off of curernt staff) and a little more in taxes. That $200K does not affect a person that much at that income level, less when the owner is making more than a million.

@Cruiser forgive me if I missed it in your posts, are you the owner of the business you work for? If not, do you know the salaries the owners pay themselves and the profiits of that business?

Cruiser's avatar

@JLeslie I am not the owner yet…but I do know all the financial’s of this company including the salaries and profits. Why do you ask?

I see what you are saying but give me one good reason why if that for over 15 years a business owner could earn him/herself a millions bucks a year and now is forced to work smarter leaner meaner and even harder longer hours to earn that millions bucks should now have to additionally forfeit $200,000 dollars of their income because the government is seriously messing things up???

JLeslie's avatar

@Cruiser I am not ok with the government messing things up, there we agree. I am for paying what is spent, I am very fiscally conservative that way, more pay as you go oriented. Everyone who was in favor of the Iraq war 9I have no idea if youw ere, I am not assuming) should be in favor of paying for it. They don’t want to pass the burden to our children, then they have to pay up. They are being illogical in my opinion. That is Bush spending I know, and I am not in agreement with a lot of the Obama spending either, but I am even less in favor of a huge national deficit. Same with healthcare, I happen to be in favor of single payer, which we will never see in this country, but if we got it, I would be happy to pay it in taxes.

If the owner wants to work harder for his million fine. If his salaried employees making a modest sum are being driven to an extreme, not fine. It is a matter of integrity to me, golden rule. Treat your employees as you want to be treated.

Cruiser's avatar

@JLeslie All very good points and btw, our owner treats us very well and that is because we do work very hard and he is more than appreciative of our efforts. Your golden rule is the very reason I took this job 15 years ago.

jerv's avatar

@Cruiser I agree that we also have to trim the spending considerably too. One thing that irks me is that the people who accuse the Democrats of being all “tax and spend” are often in favor of “spend and bill your grandchildren”, and I think we both agree that that is not right. However, I think that something got lost here and I am confused as to how reducing taxes on businesses thus lowering overhead would be a bad thing. Did one of us misinterpret the other here?

It also seems to me that if a business owner takes a slightly lower percentage of company revenue as salary, the company can grow a little better and thus increase income in much the same way that tax cuts for the rich increase revenue. Think of it as an investment.

As for incentive for the welfare crowd to get off their asses, I have to say that I am not fond of scam artists milking the system and making the genuinely disadvantaged look bad. How about if you give my friend in Ohio affordable child care so that she can actually go out and work? She’s a widow with two kids and she was denied unemployment since her children and the availability of childcare restrict what shifts she can work. Like most of the people I know who needed help, she wants a hand up yet either has to settle for a hand out or basically not be able to afford to live.

How about instead of welfare, we give people what they need to work daycare subsidies, steel-toed boots, transportation, etcetera, and a job referral? That way those that want to work (more people than many Conservatives like to admit) can and those that can work but just don’t want to can suffer for their laziness? And hey, a few beater cars and boots cost less than handing out big checks every month so federal spending could go down too! My car cost me less than 2 weeks of unemployment benefits yet allowed me to broaden my job search abilities considerably. Imagine that; instead of paying me >$1000 month to look for jobs close to bus stops at hours that I could actually get transportation, they could’ve just given me a $500 car to go get a job like the one I have now at odd hours many miles away from public transit routes! I agree that DC doesn’t know how to spend their… our money wisely. I think that they actually want people to sit on their asses!

My question is why we have to work harder, leaner, and meaner than damn near any other nation just so that the fat cats on Wall Street and in the corner office can get fat. Don’t get me wrong, there’s more than enough blame to give a heaping helping to DC as well. I’m just saying that Washington isn’t the only source of bullshit here.

As for my assumption that you are middle-class, I am assuming that you personally earn less than $10 million a year, so you aren’t rich at least not he type of rich that we are talking about, but considering what you do and all, I’d be surprised if you earned nearly as little as a Walmart cashier either. That sounds like middle-class to me.

jerv's avatar

As an aside, I have to wonder how our tax situation would be if companies like GE and Bank of America paid taxes. I think that small businesses and private individuals would benefit from such a move.

Read here for more details.

JLeslie's avatar

@jerv Interesting. I don’t know what to think about the GE article? They did have a loss in America. I guess what I woud care about is if the law and its application is consistent. Meaning if they have a loss in Europe do they some how do fancy accounting to pay less in America, but then when they have a gain in Europe it doesn’t count?

I like your long answer above also.

jerv's avatar

@JLeslie That is why accountants earn the big bucks. Personally, I am all for a vastly simplified tax code since the more complex something is, the more loopholes there are. My friend goes a step further and dislikes any proposed legislation that cannot fit on a single standard-sized page in a 10-point font.

But yes, there are ways for multi-nationals to juggle the numbers to avoid US taxes. Maybe if the business tax rates here were not so high then it’d be different, but somebody has to subsidize the top 1%. And since the big boys are ducking out, that leaves the small businesses and middle-class citizens footing the bill.

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