Tag Archives: Job Creator

News

Is Herman Cain’s 9-9-9 plan revenue neutral? Does it tax the poor more?

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Presidential candidate Herman Cain
Presidential candidate Herman Cain

Consider this article by rock-star economist Arthur Laffer.

Excerpt:

In the recent past, federal tax revenues from the personal and business income taxes, all payroll taxes, and the capital gains, gift and estate taxes have averaged $2.3 trillion, while gross domestic product has averaged about $14.5 trillion. The total revenue from these taxes as a share of gross domestic product averages around 16%. Sometimes it’s a good deal higher, as in the boom of the late 1990s, and sometimes its lower, as in today’s “Great Recession.” But a number in the 16%-19% range is as good as you’ll get under our current tax code.

By contrast, the three tax bases for Mr. Cain’s 9-9-9 plan add up to about $33 trillion. But the plan exempts from any tax people below the poverty line. Using poverty tables, this exemption reduces each tax base by roughly $2.5 trillion. Thus, Mr. Cain’s 9-9-9 tax base for his business tax is $9.5 trillion, for his income tax $7.7 trillion, and for his sales tax $8.3 trillion. And there you have it! Three federal taxes at 9% that would raise roughly $2.3 trillion and replace the current income tax, corporate tax, payroll tax (employer and employee), capital gains tax and estate tax.

The whole purpose of a flat tax, à la 9-9-9, is to lower marginal tax rates and simplify the tax code. With lower marginal tax rates (and boy will marginal tax rates be lower with the 9-9-9 plan), both the demand for and the supply of labor and capital will increase. Output will soar, as will jobs. Tax revenues will also increase enormously—not because tax rates have increased, but because marginal tax rates have decreased.

By making the tax codes a lot simpler, we’d allow individuals and businesses to spend a lot less on maintaining tax records; filing taxes; hiring lawyers, accountants and tax-deferral experts; and lobbying Congress. As I wrote on this page earlier this year (“The 30-Cent Tax Premium,” April 18), for every dollar of business and personal income taxes paid, some 30 cents in out-of-pocket expenses also were paid to comply with the tax code. Under 9-9-9, these expenses would plummet without a penny being lost to the U.S. Treasury. It’s a win-win.

I have heard precious few conservative commentators reporting the facts on Herman Cain’s plan, so it’s nice to see Art Laffer looking at the details.

Here are three facts about Cain’s plan:

  • Fact #1: People below the poverty line are exempt from ALL the taxes.
  • Fact #2: It is a stupid objection to say that the tax rate can be raised. ALL taxes can be raised, and Cain has already said that his plan would require a 2/3rds majority to raise the tax rates.
  • Fact #3: This plan has nothing to do with state income taxes or state sales taxes or state corporate taxes – his plan only reforms federal taxes. State tax laws are outside of the jurisdiction of the President.

I was really disappointed to hear some of the people in Tuesday night’s debate disparaging Herman Cain’s plan, especially Michele Bachmann, who ought to know better because this is her strength. When people say that a tax is regressive, that means that it is not progressive. And a progressive tax is communist. It punishes success. What we want to have is a flat tax rate that doesn’t punish success and broadens the tax base so that everyone pays something. What Cain’s plan does is lower the punishment on job creators and workers, and raises the tax on consumers who spend money. And isn’t that a good thing? Aren’t we in this whole mess because we spend too much money? Maybe we should incentivize job creation and work instead of spending. Cain’s plan would be the greatest boon to job creation that this company has ever seen – it’s brilliant precisely because it eliminates the cost of having to comply with an onerous, complicated tax code. We are getting this wealth for free, and the only losers will be the IRS and the Washington lobbyists.

Videos

Paul Ryan explains why the millionaire tax causes unemployment to rise

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From Fox News Sunday.

Partial transcript:

“If you tax something more, Chris, you get less of it,” Rep. Paul Ryan (R-WI) told Fox News’ Chris Wallace. “Class warfare, Chris, may make for really good politics, but it makes for rotten economics. We don’t need a system that seeks to divide people and prey on peoples’ fear, envy and anxiety. We need a system that creates jobs and innovation, and removes these barriers for entrepreneurs to go out and hire people. I’m afraid these kinds of tax increases don’t work.”

“This is being called the ‘Buffet rule” because it comes after Warren Buffet, the multi-billionaire owner of Berkshire Hathaway said, ‘I get so much of my money from capital gains, I end up paying a lower effective tax rate than my secretary who gets her money in salary,’” Wallace noted. “What about the question of fairness, sir?”

“What he forgets to mention is that is a double tax,” Ryan insisted. “Capital gains and dividends are taxes on money that has already been taxed once before based on income… It looks like the president wants to move down the class warfare path. Class warfare will simply divide the country more, attack job creators, divide people and it doesn’t grow the economy.”

That’s the way it is – we may not like it, but the rich create jobs. If you attach the rich, they move their capital overseas and the jobs go with the capital. That’s the way the world works. If you tax job creators less, and regulate them less, the jobs stay here.

News

How do job creators perceive Obama’s anti-business policies?

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Here’s an interview with Bernie Marcus, the co-founder of Home Depot, from Investors Business Daily.

Intro:

Bernie Marcus co-founded Home Depot (HD) in 1978 and brought it public in 1981 as the U.S. was suffering from the worst recession and unemployment in 40 years. The company thrived, creating hundreds of thousands of jobs and redefining home improvement retailing.

But Marcus says Home Depot “would never have succeeded” if it launched today due to onerous regulation. He recently helped launch the Job Creators Alliance, a Dallas-based nonprofit of CEOs and entrepreneurs dedicated to preserving the free enterprise system. IBD recently spoke to him about jobs and the economy.

Excerpt:

IBD: What’s the single biggest impediment to job growth today?

Marcus: The U.S. government. Having built a small business into a big one, I can tell you that today the impediments that the government imposes are impossible to deal with. Home Depot would never have succeeded if we’d tried to start it today. Every day you see rules and regulations from a group of Washington bureaucrats who know nothing about running a business. And I mean every day. It’s become stifling.

If you’re a small businessman, the only way to deal with it is to work harder, put in more hours, and let people go. When you consider that something like 70% of the American people work for small businesses, you are talking about a big economic impact.

IBD: President Obama has promised to streamline and eliminate regulations. What’s your take?

Marcus: His speeches are wonderful. His output is absolutely, incredibly bad. As he speaks about cutting out regulations, they are now producing thousands of pages of new ones. With just ObamaCare by itself, you have a 2,000 page bill that’s probably going end up being 150,000 pages of regulations.

IBD: If you could sit down with Obama and talk to him about job creation, what would you say?

Marcus: I’m not sure Obama would understand anything that I’d say, because he’s never really worked a day outside the political or legal area. He doesn’t know how to make a payroll, he doesn’t understand the problems businesses face. I would try to explain that the plight of the busi nessman is very reactive to Washington. As Washington piles on regulations and mandates, the impact is tremendous. I don’t think he’s a bad guy. I just think he has no knowledge of this.

And Bernie is not the only one – we saw the recent rant from a Democrat CEO named Steve Wynn.

Excerpt:

And I’m saying it bluntly, that this administration is the greatest wet blanket to business, and progress and job creation in my lifetime. And I can prove it and I could spend the next 3 hours giving you examples of all of us in this market place that are frightened to death about all the new regulations, our healthcare costs escalate, regulations coming from left and right. A President that seems, that keeps using that word redistribution. Well, my customers and the companies that provide the vitality for the hospitality and restaurant industry, in the United States of America, they are frightened of this administration.And it makes you slow down and not invest your money. Everybody complains about how much money is on the side in America.

You bet and until we change the tempo and the conversation from Washington, it’s not going to change. And those of us who have business opportunities and the capital to do it are going to sit in fear of the President. And a lot of people don’t want to say that. They’ll say, God, don’t be attacking Obama. Well, this is Obama’s deal and it’s Obama that’s responsible for this fear in America.

The guy keeps making speeches about redistribution and maybe we ought to do something to businesses that don’t invest, their holding too much money. We haven’t heard that kind of talk except from pure socialists. Everybody’s afraid of the government and there’s no need soft peddling it, it’s the truth. It is the truth.

But there are many more CEOs saying the same thing.

Excerpt:

Wynn’s remarks echo those on a lengthening list of CEOs including:

  • 3M’s George Buckley, who blasted Obama last February as anti-business. “We know what his instincts are,” Buckley said. “We’ve got a real choice between manufacturing in Canada or Mexico — which tends to be more pro-business — and America,” he told the Financial Times.
  • Boeing’s Jim McNerney, who in the Wall Street Journal last May called Obama’s handpicked National Labor Relations Board’s suit against his company a “fundamental assault on the capitalist principles that have sustained America’s competitiveness since it became the world’s largest economy nearly 140 years ago.”
  • Intel’s Paul Otellini, who told CNET last August that the U.S. legal environment has become so hostile to business that there is likely to be “an inevitable erosion and shift of wealth, much like we’re seeing today in Europe — this is the bitter truth.”
  • Home Depot co-founder Bernie Marcus, who observed to radio host Hugh Hewitt last month that Obama “never had to make payroll,” that “nobody has ever created a job in this administration” and that the president is “surrounded by college professors.”
  • GE’s Jeffrey Immelt, one of Obama’s biggest supporters, who hit out at the president last year. “Business did not like the U.S. president and the president did not like business,” the FT reported him saying. “People are in a really bad mood. We have to become an industrial powerhouse again, but you don’t do this when government and entrepreneurs are not in sync.”
  • Berkshire Hathaway CEO Warren Buffett, another Obama backer, who blasted Obama’s bank tax in January 2010 as a “guilt tax,” once called Obama’s carbon tax idea “regressive” and this month denounced Obama’s obsession with corporate jets.

These aren’t the only ones. CEOs of battered oil companies like Chevron and Exxon Mobil, media companies like Fox News and Forbes, and business groups like the Chamber of Commerce have also spoken out. When the creators of jobs and wealth are saying the same thing, isn’t it time for the White House to listen up?

When will the American people realize that you can’t support tax increases for the rich, and then be surprised when they just stop hiring – or worse they outsource jobs to more business-friendly countries. Obama’s anti-business economic policies cause outsourcing. The only reason for job creators to take a risk by trying to expand their businesses is because they might be able to make a profit. Take away their profit, and there is no reason for them to hire anyone. The profit motive is what creates jobs. Obama is attacking the profit motive, and that’s why no one is hiring. Anyone who understands economics understands that.

And it’s not just Obama’s anti-business rhetoric that is to blame for the high unemployment rate. It’s higher regulation of job creators and job-killing leftist boondoggles like Obamacare.