No doubt you've recently heard something similar to the following about extending the Bush tax cuts:
"Millionaires receiving another decade of huge tax cuts will invest heavily in new businesses. Countless jobs will be created and goods manufactured. The guaranteed offsetting tax income means the cuts cost nothing, while slashing unemployment and the deficit."
We're supposed to believe that by giving millionaires more tax breaks, America will prosper. Unfortunately, Republicans haven't explained why, given a decade, their promises haven't materialized. Or why these cuts remain the largest component of America's deficit. Or why, in this long-awaited era of Republican "deficit fever," not one cent of either tax cut's trillions is paid for.
Millionaires living off investments might buy stocks, gold, land, even existing businesses. In such investing it's generally a matter of millionaires exchanging cash for select assets of, ultimately, other millionaires. Money handed from one millionaire to another may produce profit, and even new business names and owners. But no entirely new businesses, and only the incidental job. Unfortunately, most investments, by far, fall in this "asset exchange" category, primarily benefiting millionaires.
Today's investment-income tax rate for millionaires is generally 15 percent, a huge advantage over the "working American" tax rate of 35 percent, and far from record-high 94 percent. So why would millionaires go to the trouble and risk of Republican-promised business startups, when the act of receiving a record-low 15 percent tax rate is itself a tremendously profitable investment? As long as cash turnover can be recycled into simple, profitable "asset" investments, why shouldn't millionaires sit back and relax, while working Americans, paying 35 percent taxes, provide their millions?
The choices Republican tax policy offers millionaires are:
1) immediate, low-maintenance, minimal-risk "asset" investments (15 percent tax rate), or
2) complicated, uncertain, indefinitely income-postponed business startups (15 percent tax rate.)
This business-killing choice from Republican politicians gave fellow millionaires a gift they couldn't refuse, essentially paying them not to start new businesses. By cutting tax rates indiscriminately for any investment, the wealth of America's richest 2 percent grew beyond that of any decade in modern history. The "promise" was to cut unemployment and the deficit, as millionaires invested this "new money" in new businesses. Republican greed-based tax policy short-circuited that promise. Thus, ballooning deficits and soaring unemployment continue. These tax-cut failures should be blamed directly on their source, George W. Bush.
America's actual investment success path lies through a simple, time-tested formula, proving the opposite of fraudulent presentations made by Bush Republicans. In reality, higher taxes for millionaires = more investment, not less. Millionaires may not invest "small" sums lying around, totaling billions. But when they face losing wealth to permanently higher taxes, they will take immediate preventive action by investing more heavily, not less. Frequently in long-term, less hands-on investments, like new businesses. Tax rates need not be 94 percent, but should be closer to those of the prosperous Clinton era. More important, closer to rates paid by working Americans struggling to support families; both millionaires' families and their own. (America's wealthiest cost us far more than the poor ever have, for less return.)
Ultimately, almost any investment is (minimally) better than none. But if Republicans honestly want millionaires investing in tax-generating, job-producing, deficit-reducing new businesses, why provide strong financial motivation to not invest? There's no evidence Bush's tax cuts help America, because they weren't meant to. Only to help millionaires. It was never about investment, jobs or deficit reduction. Only greed. For America's sake, and yours, let's finally unplug Bush's Greed Machine.
The writer lives in Galivants Ferry.