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Trickle Down Economics - My Experience
The idea of trickle down economics is pretty simple. The idea is that you give a tax cut to corporations, and that will increase its profits. Those profits are then invested back in to the corporation and create jobs for normal, every day people. On the surface, it sounds like a pretty good idea, right?
Let me tell you a little about me. I am the son of a corporate executive. I won’t say which company, because I’m going to expose it here in a minute, and frankly, my dad might be pissed at me.
I would bet at least a million dollars, that my father is worth more then all the big time, regular posters on this forum all together. If I bet that out of my future inheritance, I would still be worth a lot. My family has had the wealth for several generations.
Now that I’m out and going to school, with my father’s permission, I sit in on board meetings. You wouldn’t believe how much of this corporate money is just wasted. I mean these guys plan lavish trips with corporate funds. They buy corporate jets when they already have a few to begin with. They pay themselves huge salaries, and it’s unbelievable. They spoil themselves.
After I was functional after being hurt in Sadhr city, and could move around on my own. My dad had them approve funding for me so I could go on R&R with my girlfriend in Rome and Paris. My father even joined us, and we splurged like hell. We spent tens of thousands of dollars there.
Do you know why they do this? They only have to have small sustainable growth every year to draw investors to buy stock, which they own. If they have five percent growth every year, people will buy their stock like crazy and raise the price of the stock. Most of these executives own HUGE amounts of stocks so they profit more when their stock rises. Where does money from investors go? It goes to pay for these big trips and jets and things that they use without having to pay a dime of their own money.
Also when they go on these trips and stuff, it doesn't hurt their wallets, and these tax cuts give them more money to play with.
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People are going to ask me why I joined the army if my dad was so wealthy, so I’ll get that over with. Then I’ll get back to the point.
After September 11th, 2001, my eldest brother decided to follow a tradition in my family. You can trace my families service back to the revolution, and in that wave of patriotism, he decided to get an education at west point. He graduated in 2006. My other brother followed him and graduates this year. After I finished high school, in 2005, I didn’t have the grades for a military education so I joined the army.
I went through Basic Training, Sniper training and all that other training, before landing in Baghdad in 2007. On October 28th, 2006, while fighting in Sadr city, I was in a humvee. My observer and I were attached to a unit heading in to the fight. We ran in to enemy small arms fire, my observer and I rushed in to a nearby building and to the roof where I unpacked my M107, and provided sniper support. After the fight had ended, I went back down to the ground and got back in the humvee. After the humvee started to roll forward, an RPG blast hit my side of the humvee. It dented my door in five feet. I was lucky, I lived. The force of the metal collapsing in around me, was immense. I shattered my leg, fractured my pelvis, two ribs, my shoulder, my arm, my skull and nearly lost my foot at the ankle, it was literally hanging on by a few tendons. I also ruptured my spleen, and had immense intestinal bleeding.
The next eleven months were hell.
Hey, wolf.
I don't know how much this fits with "trickle-down economics" but I enjoyed reading it.
Let this uneducated guy let me tell you how I think that it's supposed to work.
Before Reagan, the top marginal tax rate was 70%. It had peaked at 91% in 1951-1963.
I think that cutting that rate in half was a boon to this country, but what went hand-in-hand with it was also cutting a lot of loopholes and tax deductions etc., which many people consider to be a tax increase.
Of course, the other side is a decrease in capital gains etc. Personally I think that capital gains should be pretty much taxed at the same rate as income, although if you are aware then you know that short-term capital gains are taxed at a higher rate than are long-term capital gains.
The point, of course, is to let people keep more of the money that they earn; to make working overtime worthwhile; to make investing worthwhile even for those on the lower end of the income spectrum.
I think that it mostly works, except that I also believe that taxes can definitely be too low which endangers any feeling of "the ownership society", as we feel more and more disconnected from the goods and services that our tax dollars buy.
As for your military service, mine pales in comparison so I won't even try and comapare them. Just let me say that we as Americans owe you an enormous debt and that anyone who would call you or any other wounded veteran a whiner will have to answer to all of us.
The whole problem with the world is that fools and fanatics are always so certain of themselves, & wiser people so full of doubts.
-- Bertrand Russel
That's how it was suppose to work! I was talking about what it turned in to. It's outragious, it bastardizes the original concept.
Well trickle down economics turned in to corporate tax cuts under Bush. I just explained why those don't work that well. For people who just keep their growth constantly the same, it gives them more money to work with.
I also think that capital gains should be taxed as income, if it is investments in stock, mutual funds and bonds, because for all sake and purposes, it is income. I mean you can sell of stock and do with that money like you would do with any other. I mean I own stock, my dad gave me some when I turned 21. I sell it, and do all sorts of stuff, like buy my girlfriend fancy things, and I used it to buy a car. So to me, like a lot of investors, it's disposable income.
I think savings account and cetificates of deposit should stay at the rates they are now, because that helps the ever ailing banking industry.
Well, yeah. I think that the cronyism that created the current situation is something that most of us "regular joes" are railing against, and why we are here. I still agree with the basic idea.
I mean, when you see the same CEOs and corporate officers rotating between companies until they've saved up enough money to retire young...
The whole problem with the world is that fools and fanatics are always so certain of themselves, & wiser people so full of doubts.
-- Bertrand Russel
The basic idea is a good idea, on paper. I agree, but you can't really tell the corporations where they can spend the money. To do that, I have began to think that subsities are a better idea to replace it and also like a corporate reward system or something.
See the reason they did the whole lower corporate gains thing is because a lot of those guys are rich and most of their money is tied up in stock. There's a line in a song "the rich man writes the book of laws that the poor man must defend".
Wolf - just one point of contention with the capital gains. If stock is meant to be treated as part of an income package then I will certainly not argue that it should be considered part of that tax structure.
However, many people such as myself use their AFTERTAX money to invest in the stock market - capital gains tax is already a 2nd tax on money that has been subjected to 1 income tax. When you raise capital gains you are encouraging the removal of money from our market into another more tax friendly environment.
In general, the art of government consists of taking as much money as possible from one class of citizens to give to another - Voltaire
Are you perhaps confusing taxes on capital gains with taxes on dividends?
I don't see how capital gains are a double tax. I've heard that about dividends though.
The whole problem with the world is that fools and fanatics are always so certain of themselves, & wiser people so full of doubts.
-- Bertrand Russel
I don't see how it's a double tax either. If you own a company and you make money from it, you pay taxes on it.
When you buy stocks, you become a part owner of the company, and profit off the sucess when the stocks go up.
Sorry I don't have time to post more but an example is below:
"The "Double Taxation Elimination Act" would also have the effect of negating the less-publicized but equally damaging "inflation tax" built into capital gains treatment. Current policy taxes a capital gain from its basis without regard to the impact of inflation.
For example, an individual who purchased an asset in 1957 for $100 and sold it in 2007 for $700 would generally pay up to 15 percent in taxes on the $600 "gain." However, inflation actually rendered that investment a $55 loss. H.R. 5908 would prevent another $90 worth of salt being poured into that wound. Sound policy should not tax a "gain" which gives the taxpayer or the U.S. economy no additional economic benefit.
Capital gains and dividends taxation are not simply issues for the mega-rich. Over half of all Americans own stock, most of whom are solidly middle class. Roughly 80 percent of those claiming capital gains or dividends report earnings of less than $100,000 and 47 percent have incomes less than $50,000."
http://www.ntu.org/main/letters_detail.php?letter_id=621
DOUBLE TAXATION
In general, the art of government consists of taking as much money as possible from one class of citizens to give to another - Voltaire
Thank you for your service to our country wolfman. Your war story had me biting my nails. I'm happy for that you got the chance to go on a great vacation, and you are healing.
Now to the economy.
Is History Siding With Obama’s Economic Plan?
August 30, 2008
By Alan S. Blinder a professor of economics and public affairs at Princeton and former vice chairman of the Federal Reserve.
"It is well known that income inequality in the United States has been on the rise for about 30 years now — an unsettling development that has finally touched the public consciousness. Professor Bartels unearths a stunning statistical regularity: Over the entire 60-year period, income inequality trended substantially upward under Republican presidents but slightly downward under Democrats, thus accounting for the widening income gaps over all.
The two Great Partisan Divides combine to suggest that, if history is a guide, an Obama victory in November would lead to faster economic growth with less inequality, while a McCain victory would lead to slower economic growth with more inequality. - Link
Obama/Biden 2008
I believe what is missing from your post Misty is what is happening to the people in the income brackets? Are they languishly there or are they moving up? With 300 million people incoming and exiting this income brackets - how do you know if the 'same' people are affected. Economic Facts and Fallacies
In general, the art of government consists of taking as much money as possible from one class of citizens to give to another - Voltaire
September 1st
Report card: U.S. workers worse off
This Labor Day finds workers in worse shape than they've been in years, according to a scorecard released Monday by Rutgers University.
The Rutgers labor scorecard offered other sobering findings:
About 530,000 were subject to mass layoffs in the last year, growth of nearly 5 percent but a lower rate than five and 10 years ago.
The median weekly earnings for American workers have not grown in real terms over the past eight years.
At $6.55, the federal minimum wage is worth 40 cents less per hour, in inflation-adjusted dollars, than it was a decade ago.
Although employer-assisted child care and employee wellness programs have grown quickly over the past decade, they still cover less than one quarter of American workers.
Roughly 4 percent of the work force wants to work full-time but is working part time because they can't find full-time work. - Link
Obama/Biden 2008
Wolf - thanks first of all for your service to our country.
Second - while I am sure that your 'corp experience' is not unique it is not sustainable for a public company. Look at Tyco a case study - not too different from the situation above. If it is a private company, then someone's books are obviously not being reviewed carefully. That certainly is not the intent of trickle down economics (rather supply side if you will). A rising tide should float all boats and during Reagans years income swelled at all levels.
Since the massive oversight created by SOX I am actually shocked at your story. Companies that waste money in that fashion can't be successful but for so long (I'm sure this is the part where you let me know how wrong I am by naming names).
Executive compensation is another matter entirely. Many are paid nominal salaries under a $1million and then compensated through other means as a way to avoid taxes. Stocks are only worth something if options are granted at low prices and the value is greater.
In general, the art of government consists of taking as much money as possible from one class of citizens to give to another - Voltaire
It's a private company, and it's doing pretty well. They got money saved up and everything. When the economy comes back up, they're thinking about going public, which would be nice. I would make some money if that happened.
In fact wasting money is actually a corporate tradition, didn't you know that? Many corporate executives see nothing wrong with having to declare bankrupcy.
For your corporate experience, I could tell you stories what I witnessed first hand in everything from startups to a few major companies, and also a few stories about a certain rich San Francisco well known political family and their obnoxious offspring, but let's just say, they all have in common those excesses.
Trickle down worked under Reagan because the high taxation level was an issue directly responsible for the state of the economy then. High taxation levels have nothing to do, AT ALL, with the current problems in the economy. Indeed, it could be argued we've reached the point where the reverse is true. Unfortunately, too many rank and file republicans have hammers as their only tool and can see only nails so to speak. Their grasp of economics is not sophisticated and they approach it like "well, gee, tax breaks worked before, they should work now." and they have this view with no compelling logic or reason to support how cutting taxes addresses the fundamental issues in our economy as they currently stand.
As for your military service, much respect for you going enlisted and I'm sorry you had to experience what you have. I hope your recovery will be complete if it's not over yet.
Well-said, Benjamin. Well, at least because I agree heh!
I think that another problem is the problem of language, or spin: a new deduction or credit is necessarily a "tax cut" but removing a deduction or credit is a "tax increase" even if the rates themselves stay the same.
Just like not increasing the budget for a certain program by at least a certain amount is a "cut".
The whole problem with the world is that fools and fanatics are always so certain of themselves, & wiser people so full of doubts.
-- Bertrand Russel
Fun fact: Clinton is the only president in the past 30 years who has managed to balance the budget and net a surplus.
So much for tax and spend liberal.