Three Lies

Since 1981, Republicans have held the Presidency for 20 of 30 years. They've held a majority in one or both houses for 26 of those 30 years. During that time, a monumental shift to the right in American politics has occured, including the agreement to changes in the Fair Labor Standards Practices Act which effectively gutted protections for workers against being made to work more than 40 hours without additional comensation, and further including incentives to move jobs overseas, take massive risks with other people's money, and the effective disolution of the oversight power of the SEC.

There were three distinct stories told to the American public about why they should agree to such changes, they were:

1. High tax rates on the wealthy were an irreparable and highly unfair burden which stiffled on-shore investment.

2. Lower tax rates would result in higher tax revenues as receipts increased due to more numerous and higher paying jobs which would result from on-shore investments stimulated by those lower rates.

3. Union workers were causing US companies to fall behind Japanese (then other) competitors due to unmeetable burdens (especially in the steel and auto industries).

In 1981 the highest marginal tax rate was 70%, and the wealthiest 10% of Americans contributed roughly 19% of all taxes paid. In 2011, the highest marginal rate is 38%, yet the wealthiest 10% of Americans pay almost 37% of all income taxes. How is it that the wealthy pay double when the tax rate was essentially halved? Simple, their portion of total incomes quadrupled while the average American earns 7% less.

China has a progressive tax structure far more skewed than in the U.S. with all income above $100k taxed at 45% with few deductions, making their marginal rate roughly double that of the US. Corporate rates, while not double, are about 5% gross and there for 20% relative higher than in the US on income and capital gains, further, again the ability to dodge such taxes through shelters is very limited. In the US, 60% of Fortune 500 companies paid NO inccome tax at all (as of 2006 tax data).

Union participation in the US has fallen from about 36% (as a high) in 1975 to rougly 11%, e.g. more than a 66% reduction in membership in many respects due to propoganda about the ills of unionization (that competence is immaterial, that union workers are lazy, that union wages and benefits cause companies to fail and so on), yet when analyzed, large US union employers have in fact prospered when the business decisions they've made were sound - US automakers made a lot of money in the early 2000's selling SUV's, their downfall came as a result of decisions to abandon automobile design and advancement in favor of selling pickups and SUV's. Ford has proven unequivocally that US automakers can prosper making cars, while Toyota and Honda have shown that even minor labor protections driving them to build plants in the US have been WILDLY successful using US workers, workers who are no different than their Ford or GM counterparts in demography or job-skill. Truly, automobiles can and are manufactured very profitably in the US.


All of this points to a couple of rather obvious and profound realities.

1. Lower tax rates never led to more and better paying jobs. If it had, hard-core manufacturing in the US should have risen, but an even better measure, tax receipts NOT based on speculation should have risen sharply. This hasn't occured. In fact, other than debt-driven increases in the mid-80's, no tax cuts have appeared in any way to have fostered higher revenues OR created jobs, certainly not better paying ones.

2. Higher tax rates in the (pick your country) did not prevent investment. In fact, other than the cannibalization of jobs which occured in the EU when Ireland decided to try the "Harvard Business School" model of effectively revoking business taxes, the majority of investment in the past 20 years has been in countries with substantially higher rates than in the US (at least).

The reasons for these two truths (and the preceeding three lies) are simple and crystal clear. Corporations will employ labor wherever they can hire COMPETENT labor at the lowest price. Tax rates have almost NO effect on their decision making because pricing can be adjusted to account for tax rates as (by and large) tax rates are a zero sum game in the long term in nearly any economy, but PROFITS are driven by labor expense. US labor's share of profits has fallen by HALF in the past 30 years. Since 2001 (when LARGE cuts were introduced), tax revenues have not increased anything like what was promised. In 1987 and 1991 when assurances new taxes would kill the economy, tax revenues increased, especially after 1991. Such boogey-men fear-mongering proved to be totally untrue. There certainly WAS a recession in 1990 and into 1991, but that was from, you guessed it, real estate speculation which killed the Savings and Loan industry in the US (for which there was a bailout lead by Republicans, and which worked out quite well - to research RTC's if you don't believe it), and which ash-canned the Japanese economy for 10 years (the Japanese invested heavily in US real estate and (gasp) lost their shirts). It wasn't US tax rates which killed the S&L's, it was junk-bond speculation BY the S&L's which killed the S&L's.

By the way, Ireland is in the midst of a deep depression, tax revenues have vanished (go figure) and once the very short-term benefit of speculation wore off, most of the new jobs appeared to be just what they were, lower-paying peers without similar benefits to the jobs killed and moved from somewhere else in the EU to Ireland. Many of those jobs were based on fantasy profits in the financial services sector, money made on money rather than actual manufacturing and with the debt run up by the Irish government, many of those jobs are in jeapordy. In short, the Irish experiment appears to have been nothing more nor less than gutting the pay of workers while at the same time slashing taxes. Revenues are abysmal, and comparatively pay is far worse, the only people who've benefited have been the wealthy. Does this sound familiar to anyone?

So, the question becomes, given that we've reduced taxes, killed off unions, and otherwise done everything Republican mantra says we should do for our economy to thrive....

Where are the jobs?

but even more...

Where are the tax revenues?

As we struggle to pay for schools while China educates 1 Million engineers per year, while we struggle to pay for roads while China completes projects like the 7 Rivers Dams.. perhaps all of you who subscribe to the lower tax rates means a rising tide for all should ask yourself, what kind of world do you want for your children? One where the US has destroyed the power of workers to earn a decent wage and we can't afford schools or one where we have all of those pay by their ability to do so and the level they benefit, sharing the profits fairly with those who build the products as well as with those who invest?

If the latter, then I suggest you start voting in your economic interest, the tax burden is being shifted to you simply by the creation of vast deficits while at the same time your earnings are shrinking rapidly.

If the former, I suggest to you that you consider naming the likes of the Koch brother dukes and barons for truly we have returned to the age of servitude and rule as much by birth as anything, and the only thing missing are the titles. We worship their wealth and status, hoping to one day be like them, much as our forefathers envied the nobility. Our chances of becoming such are typically minute and simliar to the same chance they had. While they (like Paris Hilton) drive about in their 200 foot 100 Million dollar yachts and you struggle to pay for you child to go to a college at $50k/year in cost, just remember, you lowered their taxes so they'd invest in a country with higher taxes which then educated their kids, built their infrastructure and ensured YOUR kids would find very slim pickings on the world stage. But no matter, at least you can LOOK at the American dream, it's just that your chance to live it, like the three lies above, is quickly becoming a fiction.