El duderino-

This was disproven in Argentina several years ago.

You may remember there was quite a ruckus in the early part of this decade about how Argentina was broke and people were rioting in the streets (they had the temerity to get upset over the fact that they couldn't afford both food AND luxuries like running water and electricity for their families... what a bunch of whiners hey??)

So what hapenned? Well, many businesses went belly up. Many more businesses were bought out by big investment companies on the prowl for cheap deals, at which point they were ripped apart and sold off or pumped and dumped.

So, you had empty, rusting factories all over the place with unemployed folks staring at the empty factories. All of the "idea" men, the managers and executives and investment banker-providers-of-capital had got their pound of flesh and made off while many Argentinians were sitting there unemployed going "wtf?!?!"

The solution? The workers went back to work. They quite literally walked back into the factories and started producing again, with ZERO money in their pockets to start off with and all of the previous "idea men" managers nowhere to be found. Who'd imagine that workers could co-ordinate their actions without the blessing of a western-educated MBA??? No venture capital or investment or IMF loans at all. How they accomplished this is actually pretty easy to understand:

Factory worker calling natural resource producer on the phone:

"Hello, we've recently re-started production at factory XYZ because we were all unemployed and noticed this big factory just wasting away. We also realize that you guys, working in the (insert natural resource here- mining/lumber/farming) industry also are out of jobs because both of our glorious leaders took their capital and got out of dodge. So, if you can give us resources, we can build widgets which we can then sell, and give you your fair share of the money. This way we're happy because we're back at work, you're happy because you're back at work, and since we build an actual product that people will buy we're guaranteed some form of revenue. It may not be the kind of revenue that would please shareholders demanding a ridiculous year after-year exponential growth, but it should be enough to cover our costs, pay our people and  maybe have a little left over in the end. And heck, it sure beats sitting around watching the paint dry!!!"

Now, the above example worked out because this is all part of the real economy. A tangible good produced or service rendered.

As stevendedalus has correctly pointed out earlier on, much of the economy and perceived value out there has been decoupled from reality through derivatives, in the bigger scheme something called the FIRE economy. FIRE stands for finance, insurance, real estate, and contrary to ideology and dogma, the FIRE economy is always damaging to, or worst case scenario parasitic of the real economy which deals in goods produced or services rendered.

Cutting out all of the utterly obnoxious terminology behind Collateral-Default-Swaps, derivatives, debentures, structural-adjustment-financing, Master-Liquidity-Enhancement-Conduit and a thousand other terms invented purely to confuse and intimidate you, the world of finance today serves a purpose contrary to the real economy. That purpose is:

To Ignore Reality.

That's about as simple as it can get. Modern day finance is an attempt to ignore the reality of the situation on the ground, thereby allowing money to change hands and magically create more money, with NO actual good produced or service rendered in the real economy.

Now finance, at it's roots, was actually a support structure of the economy. Emphasis on the word SUPPORT. But, because we've so royally screwed the economy here in North America, we've had to obscure that with the financialization with everything.

Did you know that the last time the middle class made the most amount of money in north america was in the early 70's? Ever since then, adjusted for inflation average wages have fallen. We got rid of the factories and replaced them with shopping malls as the engine of the economy. Since consumer spending is now the lynchpin holding everything together, and wages have been falling for almost 40 years, how did we keep consumers shopping? 

Cue the financial behemoth!!!!

Cheap, unlimited credit for everyone!!

Sounds a little unsustainable to me.

In fact, it's starting to unravel right now.

This is the great innovation of the idea men, the movers and shakers to whom supposedly billion dollar bonuses must be paid to ensure they continue their services that no one else, supposedly, is capable of doing properly.

They've had their chance. What we see unfolding now, with the constant bailouts (over 4 trillion now and growing) is a feeble, pathetic attempt to continue ignoring reality and a stubborn denial of the reality that you cannot ignore the laws of physics. We've been artificially catapulting our economy and quality of life higher and higher, with nothing underpinning it to support that growth.  Enter the smartest guys in the room, men like Paulson who now will continue to pour public money into keeping private companies going just a little longer....

just....one...more...rally!!!!

Thing about most of american business owners is that they wear many hats.  They don't just sit in their comfy offices and tell the little ants what to do, they roll up their sleaves and do grunt work too. 

So the solution to the fire sale is to poor more gas on it?  The reason they are moving out is partly due to wages, but mostly due to a more amiable business climate.  If you want business to stay here, make it worth their while.  You dont have to "give" them anything, just quit punishing them.

Wrong! It is still taxed.

Seems someone is behind the times: http://www.heritage.org/Index/country.cfm?id=Ireland

Actually in economics there are some scenarios where higher taxes can be good for the economy (assuming by economy you're just looking at GDP)

So presumably bush's rhetoric towards the end of his term was dire, since the markets fell by a larger amount in a shorter space of time? Just because the markets fell, it doesn't mean it was because of Obama's rhetoric! You could get a very rough gauge by looking at the reaction of the markets in the minutes after a specific policy announcement or speech, but even that would be a poor guideline (it would show the initial reaction, and after a bit more time+thought this could well change, and would still be at risk of being affected by other events occuring around the same time).

It will have been earnt (assuming we're not talking about criminal activities here such as theft which would of course be illegal+punishable). To give a few examples, the person investing in that company (which produces a return making them money which they have therefore earnt by investing the company) could have got the money from manual labour over many years. They could have got some of it from investing in various other companies and growing a tiny sum into a huge sum (and that tiny sum could of course then come from lots of different places). They could have been gifted it (e.g. on the death of their parents), or they could have bought an expensive house when it was cheap, sold it when houses were expensive, used the proceeds to buy a worse expensive house, and then used the net cash realised. Lets take the gift one though - that money is still earnt. Their parents will have had to earn it during their lifetime at some point (or if the parents were gifted it, the giftor would have had to earn it, etc.). So why should they be taxed more heavily? By all means have an inheritance tax if you want to increase opportunity+have a society that decreases the existence of super-rich families who just pass their wealth down over and over, but the money was earnt just as much as the money from the person working 10 hours a day on minimum wage.

It doesn't disprove it - they had the idea (either collectively, or a particular individual amongst them) to use these rusting factories, and they benefitted from the rewards of it. However one issue that you didn't cover was property rights - were these factories owned by someone else? If so then they were stealing that factory from the other person (unless they had permission), so to complete the story they'd need to have negotiated with the owner to allow them to use the factory (unless in this situation there was no owner - I'm no expert on the actual period, but I'd have thought generally if a company goes bankrupt it's assets will them be sold to pay off creditors (and depending on the loan, the creditors may gain ownership of the asset in question, e.g. with a secured debenture). Anyway that is what a good economy should do - allow anyone to do something like that if they have the idea. You don't need an MBA  or venture capital, etc. to do it, the argument for those is that sometimes it can help (e.g. venture capital would allow you to purchase a run down factory if you had the workers but no factory to use, and couldn't obtain financing elsewhere).

Actually you have proven my point.  Someone had to get the "idea" to use the factories rather than letting them rust.  Someone had to have the "idea" to purchase the factory from whomever owned it or else the profits that the workers made from the factory would have been stealing as was pointed out by maudlin27.  The bottom line here is that there was still someone or some group who had the idea to use the factory.

And even if you don't accept that argument how about this one.  My guess is that the Argentina factory wasn't really making anything all that complex, like a car.  You do need a management team of some sort to organize the labor, purchase the complex supplies and distribute the products of a complex system.  You can't do away with the businessmen in society and taxing them at ever increasing rates is only going to drive them away.

Part of our current problem in this country is that we have moved away from a production economy into a service based economy.  Without that production base we have nothing to fall back on when the services dry up as they do from time to time.  The reason that the production companies have left is that they weren't profitable in this country, they could more easily make money by moving to other countries and hiring cheaper labor and then exporting the products to this country.  The US is simply not competitive when it comes to producing goods anymore and we are feeling the effects of that now.  The way to solve that isn't to tax the businesses more it is to relax the taxes so that they can make a profit easier.  That will attract the businesses back to this country which will create jobs and help out our economy.

Wow and the current US corporate tax is 35% the second highest in the world. I guess those "thugs" are pretty incompetent. I think you're confusing Wall Street with corporate America, but at the end of the day they just sell or buy stocks at the pleasure of their clients (CEO's to common Joe's), if you believe that is inherently evil, that's your opinion. Communism is an allowed ideology in the the US.

The market is built and destroyed on expectations.  The market expects Obama to raise taxes, so it tanked.  Simple economics.  A dollar today is worth more than 65 cents tomorrow.

Not as simple as it would first appear. Obama was quite clear in the run up to the election that he would raise taxes (e.g. Joe+redistribution of wealth), and it was already looking all but certain that he would win the election. Therefore it would have been expected back then that taxes would raise. This would have been further reinforced on his winning the election (although any negative impact then would have been offset against the positive impact of the end of uncertainty as to who would win), and then you may have had another small change on specific policy announcements. However the markets would have likely expected such tax increases (and rhetoric that supports tax increases) well in advance meaning once those expectations are fulfilled they shouldn't have much of an impact - they'd only have an impact if they went further or not as far as was expected, or there was significant uncertainty about the likelihood of the expectation.

To most yes.  But then polls are not proof.  The direct causality between the election and the market cannot be denied.  After all, Dewey was never president. 

I'm not sure how this actually helps the economy.

Most people who make $250k or more in taxable income are small business owners. If you raise their taxes, they simply have less to invest back into their businesses in terms of hiring more people, building infrastructure, etc.

Our company is pretty typical. We had a very profitable year. So we bought the rest of the building we're in, we're finishing up another floor and renovating another floor in order to hire more people.

In the process of doing those build outs, we hire local workers to do the work which helps the economy and creates more opportunity.

So what exactly do you envision the government doing with this money instead that is better than how I and thousands of other small business people like me?

Huh? Do you know who the rich are demographically? They're not investing into phoney derivatives.

The rich are mostly small business owners. The lady who owns the neighborhood Salon or the guy who runs your local Quick Change oil franchise or the guy who runs your local construction contractor business.

What you say above speaks more to your prejudices about "the rich" than any sort of reality.

I started with nothing and built a company worth tens of millions of dollars. I got my money by producing things people wanted to pay for. I then took those profits and began hiring people and have continued repeating that process until today.

Running a successful business definitely takes some specific and sadly fairly rarified skills.  

As someone who has a fair amount of background in software development, engineering, marketing, accounting, IP law, and other categories I can say that it is a lot easier to find a person who can do one of those things than someone who can run a company. That's why people who run companies make more, it's just supply and demand really.

That's almost a direct quote from Atlas Shrugged ironically.

Sure, people may not want to hear it but it is still true.

The first thing to realize is that the rich are like other people. Work is a means to an end.  

So when someone makes the argument that the rich can go without the fancy car or the fancy house they aren't understanding that the fancy car adn the fancy house are the ends to which the job is a means.  If you take away those ends, you take away the whole point of the means.

For example, if my taxes were raised too high, I would simply stop working.  I don't need to work to be well off anymore as I've long since reached the level of "comfortable" living off what I have saved and invested. 

But I continue to work and invest because there are other things I would like to achieve both professionally and privately.  Higher taxes make it more difficult to achieve those objectives and at a certain point, they move beyond reach.

But if someone like me gives up, there are economic consequences - jobs.  People lose jobs and those jobs aren't being made up by the government. Those jobs are made up of people who build things in the private sector.

Well I certainly don't think you're a moron, far from it.  But I don't think you are understanding how businesses work.

First off, income doesn't generally come in steadily. It's also not a good idea to run your business too close to the metal.  For instance, I like to run my business with at least 3 months of expenses available in cash in the bank. 

Let me give you the example I'm working with right now.  Our company was very profitable this past year.  We have put together a business plan on what to do with those profits but we're already having to scale back on those plans because of the tax burden (it's not as easy as one might think to project income taxes).  

The point being, if I make $1 today I can't necessarily spend it that day. It takes time to hire people, build things, etc. and you can quickly find that that $1 you thought you had has become only 50 cents before you've had time to spend it.

In addition, businesses that invest in more capital assets are STILL taxed. You only get deduct expenses. But money spent on more assets (equipment for instance or even advances on royalties in some cases) cannot be deducted. You're still taxed.

Precisely.

Part of the problem people don't understand is that manufacturing jobs require the investment in capital assets which can only be expensed over a period of years via depreciation.  So higher taxes have a disastrous consequences on our economy because of this.

I could see a future where even I would consider moving things to say Ireland if taxes were high enough provided it wasn't just easier to just throw in the towel.  

Hey! We'd welcome you.

This statement alone proves you simply don't know what you're talking about (or are choosing to remain blind to the facts). The Irish economy was among the strongest in Europe through the 90's, and once they lowered coprorate taxes in 2003 their economy far outpaced those of other European nations with higher tax rates.

Again, you don't seem to understand how business and taxes works. Only operating expenses can be deducted from total profit. Everything else is taxed, and we're talking about people and companies that clear $250K or more, not those who only clear $100K so I don't understand why you bother to even bring them up here.

Raise those taxes and that business can no longer afford to grow, re-invest in itself, or hire more people.  Yes, companies do reinvest much of their profits back into the company, AFTER those profits are taxed. Raise those taxes and they have less to reinvest and grow their company. They more likely will have to lay people off to survive. Businesses grow on their profits not on their taxes, and the small business owners of this country drive our economy.

Tax hikes will do nothing more than cause increased unemployment and ultimately reduce total tax revenues as fewer people will be working and fewer businesses will grow.

Not entirely accurate - if you choose to reinvest profits into your business by incurring various expenditure that is allowable for tax purposes, then that will reduce your actual taxable profits, meaning you pay less tax, and the profit reinvested wasn't after tax.

What's done with the profit that has been taxed after tax? Well it'll probably either be reinvested in the business in an area not granting immediate tax relief, or it will be taken as income (business), or given to shareholders (company).

If they're struggling to survive, that suggests their profits will be minimal, or they may even have a loss, hence the tax rate wouldn't have much immediate impact.

Highly unlikely that increases in taxes would reduce total revenues. I can't remember the rough estimated level that taxes would need to be for an increase to be expected to decrease tax revenues, but it's much higher than the US's current tax level. Tax increases will reduce the tax base, but typically not by enough to outweigh the increased proportion of tax gained from the tax base.

Operating expenses are allowable, if they are incurred during that tax year. Operating expenses do not grow a business and are not an investment in that business. Capital investments grow a business. Capital investments come from after taxes monies.  When I ran my own trucking company I could not deduct the price of my truck or trailer, just the interest on the loan for them. I could deduct fuel, tires, maintenance, and everything else related to operating it, but not the truck itself.

For me to buy a second truck and consequently put a driver to work driving it, I would have to clear enough money after taxes to be able to afford to pay for that truck. Rasing my taxes would reduce an already slim profit margin and kill the chance of my being able to do so and thus prevent me from growing my business or creating jobs. That is not how one goes about growing the economy.

That would only be true if the GDP and employment situations remained constant. If higher taxes caused a large increase in unemployment and sharp negative business growth, tax revenues would have to fall. And reducing the tax base is a nice way of saying it would kill businesses and put people out of work. Hardly a good option.