Debunking Supply-Side Economics

PORTLAND | April 15, 2011

For the past thirty years with a special emphasis on the last ten, author David Cay Johnston a columnist for tax.com who teaches the tax, property and regulatory law of the ancient world at Syracuse University College of Law and Whitman School of Management, in a report entitled 9 Things The Rich Don’t Want You To Know About Taxes states the following:

1. Before Reaganomics, 90% of Americans saw their incomes grow faster than the top 1%. After the 1980’s, when Reagan took office, almost all income gains have been at the top.

Contrary to popular belief, poor Americans do pay taxes. In a report entitled The Wealthy Need To Pay More In Taxes, it is discussed that 20% have salaries highly in excess of the $49,000 per capita average while 80% much less, and author Johnston corroborates this fact to a degree. According to Mr. Johnston, data from the Tax Foundation show that in 2008, the average income for the bottom half of taxpayers was $15,300.

2. Wealthy Americans do not carry the tax burden.

3. The wage gap widens and the wealthy are paying less taxes.

4. Many of the wealthiest Americans pay no federal tax at all.

5. Only wealthy Americans have gained significant income.

6. Corporations are in a similar position with less taxes

7. Some corporate tax breaks actually destoy jobs.

8. Average incomes fell during the Bush years and Republicans actually like taxes too!

9. Other countries can do it better, like Germany, who has a smarter tax system.

To read the entire article, please visit: 9 Things The Rich Don’t Want You To Know About Taxes

Read all of Debunking Supply Side Economics

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The Wealthy Need To Pay More Taxes

WASHINGTON, D.C. | April 15, 2011

On Wednesday at a major speech at George Washington University, President Barack Obama stated: "If you are rich, you should be paying more in taxes." Obama also reiterated his desire not to renew the Bush-era tax cuts as he seeks to reduce the nation’s budget deficit for the wealthiest Americans, or those Americans making $250,000 a year or more.

"I say that at a time when the tax burden on the wealthy is at its lowest level in half a century, the most fortunate among us can afford to pay a little more," Obama said. "I don’t need another tax cut. Warren Buffett doesn’t need another tax cut."

CNN in response to the President’s speech asked people that fall into that income category what they thought about paying more taxes and published their findings in thisreport.

"It kinda feels like it’s my job to kind of spread around what I got. I just think as a whole, our society is in a much better place when we have the money to spend on the social stuff that needs to get spent," said Eric, owner of several restaurants in the State of New York who earns $1m a year. Eric claims his businesses will not be hurt of Obama does raise taxes. The only effect on his life would be the amount of money he puts into savings which could be reduced.

Craig, a New York City venture capitalist, said he makes well over $250,000 and is "torn because part of me says yes the higher paid people should pay their fair share… So I understand that. However, my issue is that $250,000 isn’t the same amount that it was 10 years ago."

"There’s a huge difference between someone making $250,000 and someone making a million," Craig noted.

There is an even larger divide between someone making $25,000 per year and $250,000 per year.

The CNN report continues with interviews of people that make more than $250,000, many of whom feel that the wealthy designation should begin at $500,000 to $1m claiming that $250,000 is not really that much when you have a small child or student loans.

Does anyone have a violin?

Also, the argument is raised that location plays a big factor because $250,000 in New York City is really nothing exciting whereas the same amount in somewhere like Indiana is a relative goldmine.

There is no question that locale is an important role in terms of salary retention. The more expensive a locale, the less salary is retained due to higher rent obligations. However, in areas where locale is not at high-end market rates, typically, salaries are adjusted downward or don’t qualify for "geographic differentials."

The Patriotic Millionaires for Fiscal Strength back the President’s plan and group members renewed their pledge in a letter to Obama:

"For the fiscal health of our nation and the well-being of our fellow citizens, we ask that you increase taxes on incomes over $1,000,000," the group wrote in a recent letter to the President and congressional leaders. "We make this request as loyal citizens who now or in the past earned incomes of $1,000,000 per year or more."

President Obama has asked Congress numerous times to roll back the tax cuts during last year’s lame-duck Congress. The request for a roll-back was tossed due to bipartisan compromise where the tax cuts were extended for two more years.

Read the conclusion and the entire article at: The Wealthy Need To Pay More Taxes

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Developing Economies Owed No Explanation To Fed QE2 at G20

A recent article in BBC News entitled China, Germany and South Africa criticise US stimulus reports that China, Germany, Brazil and South Africa have criticized the Fed plan to pump $600bn into the United States Economy in an effort to kickstart growth.  Further reported is that China’s Central Bank head Zhou Xiaochuan has "urged global currency reforms."  If this is the case, the China’s Central Bank head should allow the Chinese Yuan Remnibi to appreciate to its full value, as many economists believe the yuan is undervalued anywhere from 20 to 50%!  Therefore, America’s position at the G20 should concur with China’s Central Bank head recommendation, beginning with currency reforms in China.

Interestingly enough, Bloomberg goes on to report in`Hell Week’ Ends With Central Banks Split on Recovery Policies:

China’s Vice Foreign Minister Cui Tiankai yesterday demanded an explanation from the Fed because “many countries are worried about the impact of the policy on their economies.” Brazilian Finance Minister Guido Mantega said this week that Bernanke is throwing “money from a helicopter.”

If the Fed is throwing money from a helicopter, then China’s Central Bank by deliberately pegging the yuan to the dollar in times of need and then allowing it to float during times they determine safe coupled with Brazil taking advantage during the exchange rate crisis of 2008 is parallel to the Chinese and Brazilian Central Banks committing "highway robbery."

China and Brazil are hardly  in positions to complain about the Fed QE2 while their economies enjoy nearly 10 and 8% growth rates while the United States is not even at 3%.  Bloomberg further reports that:

[E]merging markets account for a third of the global economy, yet two thirds of its growth. Keen to maintain that advantage, officials from Asia to Latin America prepared for stronger currencies and asset-price inflation as they criticized the Fed’s policy for pushing a flood of capital into their already robust economies.

Apparently, as long as emerging markets maintain their advantage of trade surpluses while the U.S. suffers from severe trade imbalances due to manipulated currencies, all is "hunky dory."  But heaven forbid the U.S. try to place its people back to work by stimulating an anemic economy because to do so, emerging markets like China hypocritically state "[i]t would be appropriate for someone to step forward and give us an explanation, otherwise international confidence in the recovery and growth of the global economy might be hurt."  The global economy or China’s economy?

Here are some important facts for the United States to consider at the G20 meeting in Seoul:

China’s GDP grew from 1.2 trillion in 2000 to 4.3 trillion in 2008, which is close to 300% growth. For the same period U.S. GDP grew from 9.7 trillion to 14.2 trillion, which is 45% increase.

U.S. trade deficit with China grew from $125 Billion in 2003 to 270 Billion in 2008. Foreign direct investment in China grew from $38 billion in 2000 to $138 Billion in 2008, a 250% increase. Per capita income increased from $2330 in 2000 to $6020 in 2008. China has a stable political environment since 1990. China’s foreign reserve increased from $623 Billion in January 2005 to $2.3 trillion in September 2009. All the economic factors indicate that Chinese Yuan value should strengthen and leads us to believe, that had it not been pegged to U.S. Dollar, the Chinese Yuan would have appreciated.

Developing economies are owed no explanation to Fed QE2 at the G20 summit in Seoul.  The U.S. position should be that Central Banks who encourage currency reforms while experiencing near double-digit growth in large part due to manipulated currency creating enormous trade imbalances begin with a "balancing act."

Explanation indeed!

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