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In the recent debate, Vice Presidential candidate Joe Biden said the wealthy would gain by paying higher taxes to lift up the middle class. The theory is that a healthy middle class is necessary for the wealthy class to thrive. Let's call that Trickle Up Economics.

Viewed in that light, the unwealthy are more like an investment opportunity than a tax burden. If you can make the poor and middle class more educated, healthy, and better employed, everyone wins. That makes sense, to a degree. But would the wealthy gain enough financially to make the extra taxes a good investment? I wonder if that has ever been studied.

Perhaps there are too many variables to make any kind of general statement about the benefits of taxing the rich. If the government raises taxes on the wealthy and pisses away the money on sketchy wars and pork, that's probably a poor investment. If the money goes into education, healthcare, and alternative energy, that starts looking a lot more like an investment with a 10-year payoff.

Obviously higher taxes on the rich are counterproductive if it stops them from building new factories, or causes them to invest overseas. Maybe corporate taxes have to remain low no matter what, or everyone moves their operations to Ireland. You can always tax the individuals, since most people won't leave the country just to save money on taxes.

Henry Ford famously paid his factory workers more than the market rate so they would be able to afford cars. I've never seen a study of how that worked out for him. Does anyone have a link to tell me if investing in poor people benefits the rich?
 
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+1 Rank Up Rank Down
Oct 6, 2008
Henry Ford's famous $5 wage was primarily a means for improving the productivity of his workforce by providing him with a large supply of eager and compliant workers. The fact that his workers could then buy cars was a bonus. See: !$%*!$%*!$%*!$%*!$%*!$%*!$%*!$%*!$%*!$%*!$%*!$%*!$%*!$%*!$%*!$%*!$%*!$%*!$%*!$%*!$%*!$%*!$%*!$%*!$%*!$%*!$%*!$%*!$%*!$%*!$%*!$%*!$%*!$%*!$%*!$%*!$%*!$%*!$%*!$%*!$%*!$%*!$%*!$%*!$%*!$%*!$
 
 
Oct 6, 2008
"If the money goes into education, healthcare, and alternative energy, that starts looking a lot more like an investment with a 10-year payoff."
Just what evidence do you have that the collection of gasbags in Congress have enough integrity and sense to put the future of the country above their own interests? Apparently saving the nation and the world from financial meltdown wasn't quite enough motivation to pass rescue (bailout) legislation without adding earmark bribes to win the votes necessary to get it done.
Anyone who thinks they are working for the good of the people is a fool.
 
 
Oct 6, 2008
"Does anyone have a link to tell me if investing in poor people benefits the rich?" http://en.wikipedia.org/wiki/French_revolution
 
 
Oct 6, 2008
Scott said "Maybe corporate taxes have to remain low no matter what..." If you think about it corporations do NOT pay taxes they merely collect them for the government. In other words, corporations have to make a profit to stay in business so their prices have to cover their costs, one of which is taxes. Taxes are therefore paid by purchasers.

Instead of raising taxes on corporations we should eliminate them since they are just a stealth way for the government to tax us. Lets go for the fair tax - fairtax.org
 
 
+2 Rank Up Rank Down
Oct 6, 2008
While this link doesn't prove that investing in the poor(er) benefits the rich, Henry Ford's scheme seems to have "worked out for him" quite well:

http://en.wikipedia.org/wiki/List_of_most_wealthy_historical_figures

Henry Ford is number 7. For reference, his net worth was 194.9 Billion USD; the highest modern-day person is Warren Buffet at around 62 Billion USD.
 
 
Oct 6, 2008
Sorry, no link.

Personally, I don't believe that any of this sort of tinkering with taxing the rich, or cutting taxes, or even the flat tax that I'm an advocate of, has any really net direct affect on the economy.

"Reagan cut taxes in the early 80's, and the economy boomed," But that was also the invention of the PC, which allowed a low-cost entry into various new businesses. Mom and Pop could (and did) open a computer store, or a software business.

"Clinton raised taxes in the 90's (especially on the rich), and the economy soared". But then again, the internet also came into public usage, again providing a low-cost entry into business startups. Google and EBay, now goliaths, were created with little seed money.

It's not the tax structure, but the ability fo form small businesses that's the keystone to the economy. That's what makes the current fiscal crisis so severe - Mom and Pop can't get a loan for the next good idea.

A well-fed, educated, healthy population (rich and poor) drives the economy somewhat, it pales, I think, to what some new innovation that can be exploited to make money with.

And, Scott, stop worrying that one candidate will raise your taxes. Even if he loses, there will be enough pressure in Congress (who actually control that tax stuff) to raise your taxes anyway, that it's going to happen. McCain could try to veto it, but in so doing, will just wind up shutting down the government until some form of tax hike is passed.

You're hosed. Find another topic to make the monkeys dance.
 
 
-7 Rank Up Rank Down
Oct 6, 2008
It doesn't seem like Ford's idea would have worked. Giving employees more so that they can afford his cars ultimately means that Ford was buying cars for their employees. Lets say a Ford xyz would cost 20k, so Ford would give 20k over lets say a 3 year period to their employees. Then we should assume that ALL employees who received that 20k would spend it only on a Ford xyz. But on an individual level, if one employee buys a 20k Ford with that extra money, a large portion goes to paying for the expenses related to the product (raw materials, parts, any sort of import needed for manufacturing, manufacturing, inventory, etc). Lets say the total expenses would be 10k. The Ford company would make a revenue of 10k, after giving 20k to an employee. That doesn't add up to a net profit, it only increases Ford's market share slightly.
And this doesn't take into account the increase in the price of the car if more people have the money to buy one (greater affordability -> higher demand -> higher price).

Am I wrong here?
 
 
Oct 6, 2008
Regarding: "Obviously higher taxes on the rich are counterproductive if it stops them from building new factories, or causes them to invest overseas. Maybe corporate taxes have to remain low no matter what, or everyone moves their operations to Ireland."

I have thought for a long time that "the rich" and the corporations that you refer to above already have moved many of their operations to India, China and other overseas locations. Have you called a phone or computer or software help line lately? So the "trickle-down" theory hasn't made sense to me because it seems that the jobs that the rich and these companies produce are already in other countries, not ours.
 
 
-1 Rank Up Rank Down
Oct 6, 2008
Two things:
1) If the poor are poor enough to resort to crime to be able to buy food then we pay anyway. People forget that. Do you want to pay in taxes for law enforcement, judicial and penal system? or do you want to pay in education? Or, do you want to pay in higher insurance/hospital fees because people can't afford to see a doctor until it's an emergency? or do you want to pay to improve the health system earlier on in their lives. It isn't *if* the more wealthy pay to support others, it's *how*. I suspect that it's more cost effective to pay for prevention than it is to pay for the cause.

2) Eventually, when the split between rich and poor becomes big enough, rebellion occurs. The "soft" rebellions are the tax options. The "hard" rebellions usually end up sending everyone into the stone age. It's just a gamble, really, to figure out what the breaking point is between the "soft" and the "hard", and whether or not it will happen in our lifetimes.
 
 
Oct 6, 2008
Just one week left to go now before events on Oct. 14th change our reality forever. Are you prepared to experience a greater and grander reality?
 
 
Oct 6, 2008
Sorry to go OT, but just in case it's not too late to do something about your McCain donation:

http://www.independent.co.uk/opinion/commentators/johann-hari/johann-hari-mccain-is-deluding-himself-over-the-surge-952490.html

Best wishes, Ken.

 
 
Oct 6, 2008
Ford was sneakier than he's often given credit for. He was a large enough employer that, when he doubled wages, he forced industrial employers across the country to double wages. Sure, they complained that Ford was convincing unskilled workers that they were worth $5 a day, but they had to make the move. And a chunk of that extra wage from the other employers went into buying Ford automobiles.

Also, the wage increase had the added benefit of greatly reducing turnover and (at least in the short term) guaranteeing that Ford had its pick of applicants.

As for the rich in general, it depends. Yes, more wealth might come their way (in the form of high-quality programs, innovative devices, etc.), but anything that raises the wages of servants effectively makes the rich less rich, unless their actual income increases by at least the same percentage.

-Wil
 
 
 
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