The rationale behind “tax cuts for the rich”

By Tom Quiner


The President and his party are fixated on increasing taxes on America’s most-productive citizens, aka “the rich.”

That seems to be their solution to our debt-ceiling problems: tax the rich more.

So let me pose a question to you. Who is going to create the most jobs for America with extra money, the President … or a rich guy?

Let’s say the President wants to tax a super rich guy an extra $278,000. Would the government do a better job at creating jobs with that money than the super rich guy would with his own money?

We know how many jobs the government would create with that windfall:  one. [See a previous post: Is $278,000 per job a good taxpayer investment?]

The President would use it on public employee unions … or green energy … or high speed rails, jobs that require ongoing public subsidy.

The super rich guy would ONLY invest the money in job creation if the jobs were going to make him money. In other words, he would base his decision not on political considerations, but economic ones. His self-interest would be paramount.

The rationale is this: someone is going to spend their own money better than someone else will.

The conceit of the president and his party is that they think they know how to spend other people’s money better than they do themselves. “It ain’t necessarily so!” to quote the great Gershwin song.

The stakes are much higher when you’re spending your own money, because you feel the pain if you spend it poorly.

The stakes are much lower when you spend someone else’s money, because you don’t feel the pain if you spend it poorly. Take Mr. Obama. He took your money and used it to create or “save” jobs at a cost of $278,000 per job. Do you think entrepreneur, Steve Wynn, whom I quoted in my previous post, could do a better job than a man who’s never had to make a payroll in his life?

I’m not being critical or Mr. Obama as much as I’m suggesting that a guy with a proven track record of creating jobs, like Steve Wynn, is going to spend his next buck better than someone else will.

Interestingly, when we cut marginal tax rates for “the rich,” they end up paying more in taxes. Why? Because they invest that money in job-creating efforts that end up making them more money, money they have to pay taxes on.

The government, on the other hand, redistributes much of it to someone else.

What is the power behind government? Coercion. If they want you to do something, they’re holding a club in one hand.

What is the power behind the rich guy? It’s called the marketplace into which people freely enter and mutually benefit.

The marketplace is amazing. It magically gets people to cooperate through the power of mutual self-interest. Milton Friedman tells a great story in the video above on what goes into making a simple pencil. Not a single person in the world knows how to make a pencil! Watch the video and you’ll see Mr. Friedman’s point.

Let’s stop demonizing America’s most-productive workers. Let’s start figuring out a way to reduce government spending to the levels of the Bush or Clinton administrations. Let the rich get richer while they create new jobs along the way.

The president sure isn’t doing it.

Congress isn’t doing it.

The Steve Wynn’s of the world ARE doing it, but the president and his party have made it harder, much harder, for these super-producers to keep producing.

1 Comment

  1. maxine bechtel on July 21, 2011 at 7:07 am

    Even a poverty-stricken person who has no economic expertise (like me) knows that a poor man isn’t able to create a single job! It takes someone who has the wherewith all to pay another’s salary to help ease the unemployment crisis! And it’s been proven over and over that the Government’s efforts cost far more than a “rich” entrepreneur in the private sector!