Tag Archives: Trickle-Down Economics

If socialism is so great, why are people moving from blue California to red Texas?

Migration from California to other states
Migration from California to other states – top 3 states are conservative states

A lot of young people seem to be really excited about socialism, and they want the United States to give it a try. They don’t know where socialism has been tried, and they don’t know what happens with it is tried. It just sounds nice to them.

Well, if you were going to pick one of the most socialist states in the United States, no one would fault you for picking California, where Democrats are running everything, and have been for a long time.

The Washington Free Beacon explains what happened next:

The number of Californians leaving the state and moving to Texas is at its highest level in nearly a decade, according to data from the Internal Revenue Service.

According to IRS migration data, which uses individual income tax returns to record year-to-year address changes, over 250,000 California residents moved out of the state between 2013 and 2014, the latest period for which data was available. The tax returns reported more than $21 billion in adjusted gross income to the IRS.

Of the returns, 33,626 reported address changes from California to Texas, which has been the top destination for individuals leaving California since 2007. Californians who moved to Texas between 2013 and 2014 reported $2.19 billion in adjusted gross income.

[…]“California’s taxes and regulations are crushing businesses, and there are more opportunities in Texas for people to start new companies, get good jobs, and create better lives for their families,” said Nathan Nascimento, the director of state initiatives at Freedom Partners. “When tax and regulatory climates are bad, people will move to better economic environments—this phenomenon isn’t a mystery, it’s how marketplaces work. Not only should other state governments take note of this, but so should the federal government.”

According to Tom Gray of the Manhattan Institute, people may be leaving California for the employment opportunities, tax breaks, or less crowded living arrangements that other states offer.

“States with low unemployment rates, such as Texas, are drawing people from California, whose rate is above the national average,” Gray wrote. “Taxation also appears to be a factor, especially as it contributes to the business climate and, in turn, jobs.”

“Most of the destination states favored by Californians have lower taxes,” Gray wrote. “States that have gained the most at California’s expense are rated as having better business climates. The data suggest that may cost drivers—taxes, regulations, the high price of housing and commercial real estate, costly electricity, union power, and high labor costs—are prompting businesses to locate outside California, thus helping to drive the exodus.”

Just recently, I heard some of my Democrat co-workers laughing to each other about “trickle-down economics”, which is the “ridiculous” idea that if you allow businesses and workers to keep what they earn, then you’ll get more economic growth than if the government takes the money to study the drug use patterns of sex workers in the far East. Actually, we’ve been trying socialism-lite in this country for the past 7 years. How has it worked? Well, Obama has averaged 1.2% GDP growth through his presidency, far below average. And in order to get even that little growth, Obama will double the debt from 10 to 20 trillion in just 8 years.

Debt increase under Barack Obama
Debt increase under Barack Obama

But what about tax cuts? Do tax cuts create economic growth?

The conservative Heritage Foundation think tank describes the effects of the Bush tax cuts.

Excerpt:

President Bush signed the first wave of tax cuts in 2001, cutting rates and providing tax relief for families by, for example, doubling of the child tax credit to $1,000.

At Congress’ insistence, the tax relief was initially phased in over many years, so the economy continued to lose jobs. In 2003, realizing its error, Congress made the earlier tax relief effective immediately. Congress also lowered tax rates on capital gains and dividends to encourage business investment, which had been lagging.

It was the then that the economy turned around. Within months of enactment, job growth shot up, eventually creating 8.1 million jobs through 2007. Tax revenues also increased after the Bush tax cuts, due to economic growth.

[…]The CBO incorrectly calculated that the post-March 2003 tax cuts would lower 2006 revenues by $75 billion. Revenues for 2006 came in $47 billion above the pre-tax cut baseline.

Here’s what else happened after the 2003 tax cuts lowered the rates on income, capital gains and dividend taxes:

  • GDP grew at an annual rate of just 1.7% in the six quarters before the 2003 tax cuts. In the six quarters following the tax cuts, the growth rate was 4.1%.
  • The S&P 500 dropped 18% in the six quarters before the 2003 tax cuts but increased by 32% over the next six quarters.
  • The economy lost 267,000 jobs in the six quarters before the 2003 tax cuts. In the next six quarters, it added 307,000 jobs, followed by 5 million jobs in the next seven quarters.

The timing of the lower tax rates coincides almost exactly with the stark acceleration in the economy. Nor was this experience unique. The famous Clinton economic boom began when Congress passed legislation cutting spending and cutting the capital gains tax rate.

Regarding the “Clinton economic boom”, that was caused by supply-sider Newt Gingrich passing tax cuts through the House and Senate. Bill Clinton merely signed the bills into law.

Very important to compare times and places where socialism has been tried to times and places where free enterprise and limited government have been tried. We know what works. It may not be what makes us feel smug, but we know what works.

How are big companies responding to Obamacare?

Caterpillar and John Deere. (H/T Hot Air via ECM)

Excerpt:

Caterpillar Inc. said Wednesday it will take a $100 million charge to earnings this quarter to reflect additional taxes stemming from newly enacted U.S. health-care legislation.

[…]The charge is expected to be a one-time cost, but Caterpillar has argued that higher taxes and other potential cost increases related to insurance coverage mandates in the legislation will hinder the company’s recovery this year after a 75% plunge in income during 2009.

“From our point of view, a tax increase like this cannot come at a worse time,” said Jim Dugan, a Caterpillar spokesman.

[…]Farm equipment maker Deere expects after-tax expenses to rise by $150 million this year as a result of the health care reform law President Barack Obama signed this week.

Most of the higher expense will come in Deere’s second quarter, the company said on Thursday. The expense was not included in the company’s earlier 2010 forecast, which called for net income of about $1.3 billion.

The law could raise expenses for large U.S. employers. Industrial companies, which typically have large numbers of retirees, may be among those facing the biggest bill. Caterpillar had argued before the legislation passed that health reform would put it at a disadvantage against global competitors.

And National Review reports on Verizon. (H/T ECM)

Excerpt:

Yesterday I posted a memo that Verizon sent to its employees concerning its view that the Democrats’ health-care bill would probably cause its costs to go up. Specifically, the memo keyed in on a change in the tax treatment of the Medicare Part D retiree drug subsidy. This is a subsidy that the government pays to employers that offer prescription-drug coverage to their retirees; it was created as part of the Medicare prescription-drug entitlement to encourage employers not to dump their retirees into the public system. As the Wall Street Journal editorial board reports today, the subsidy costs taxpayers $665 per person, “while the same Medicare coverage would cost $1,209.”

As part of their effort to keep their health-care bill deficit-neutral, the Democrats changed the law and exposed the subsidy to the 35 percent corporate income tax rate, adding $5.4 billion in revenue to the bill. In its memo to employees, Verizon warned that this tax change would make the subsidy “less valuable to employers, like Verizon, and as a result, may have significant implications for both retirees and employers.” This is a clear sign that Verizon and other employers will probably drop their retiree prescription-drug coverage, leaving Medicare Part D to pick up the slack.

UPDATE: More from National Review. (H/T ECM)

Excerpt:

AK Steele Holding Corp., “the third largest U.S. steelmaker by sales, said it will record a non-cash charge of about $31 million resulting from the health-care overhaul signed into law by President Barack Obama. The charge will be recorded in the first quarter of 2010.”

Valero Energy “will take a $15 million to $20 million charge to second-quarter earnings for the same reason.”

Medical-device maker Medtronic “warned that new taxes on its products could force it to lay off a thousand workers.”

And more from National Review. (H/T ECM)

Excerpt:

Wow: “U.S. companies employed 3.9 million fewer workers in January 2010 than they did one year earlier.”

If you will recall, when touting the stimulus, President Obama and his team declared that “a package in the range that the President-Elect has discussed is expected to create between three and four million jobs by the end of 2010 . . . More than 90 percent of the jobs created are likely to be in the private sector.”

90 percent of three million jobs would be 2.7 million jobs. Yet we’re 3.9 million lower than when we started.

To meet the goal by the deadline, the country would have to create 6.6 million jobs in the next nine months. or more than 733,000 jobs per month for three quarters of the year.

UPDATE 2: Now Business Week reports that AT&T is screwed.

Excerpt:

AT&T Inc. will book $1 billion in first-quarter costs related to the health-care law signed this week by President Barack Obama, the most of any U.S. company so far.

A change in the tax treatment of Medicare subsidies triggered the non-cash expense, and the company will consider changes to the benefits it offers current and retired workers, Dallas-based AT&T said today in a regulatory filing.

Hey! Do you know what causes outsourcing of jobs? DEMOCRATS. Democrats cause jobs to be shipped overseas. Democrats hate companies. Companies hire people. Democrats cause American manufacturing jobs to be shipped overseas. Democrats cause unemployment. That’s why the unemployment rate is double what it was under Ronald Reagan and George W. Bush. Democrats cause unemployment.

How do jobs get created, anyway?

Do you know what really works to create jobs?

I mean – do you know what actually has worked in the past to create jobs?

The Heritage Foundation reports:

President Ronald Reagan’s record includes sweeping economic reforms and deep across-the-board tax cuts, market deregulation, and sound monetary policies to contain inflation. His policies resulted in the largest peacetime economic boom in American history and nearly 35 million more jobs.

See:

That’s what actually worked.

Free. Market. Capitalism. Works.