What Nonsense they Talk!

It is the autumn of 2011, and the Republican Party, firmly in the pockets of the super-rich, adamantly refuses even to be seen discussing raising taxes on the very rich. “No”, they say,“the rich are the people who ‘create jobs’. Increase their taxes and they will stop investing; in fact they could even leave the country.” So deeply ingrained is this idea of not upsetting the rich that it has become a mantra, albeit very dated.

Can we please get real? This dubious peace of special pleading might have had some substance three or four decades ago before globalization, but it is utter nonsense today.

Let us look at the facts.

The rate of tax paid by some super rich is now lower than the rate of tax paid by some of their chauffeurs and the pilots of their corporate jets. Bush lowered these taxes on the grounds that lower taxes on the rich would result in more job creation. Then why do we now have a stubborn 9% unemployment that won’t come down? Where are the promised jobs?

The reality is that the super-rich gladly pocketed the tax breaks and then shipped the jobs overseas. Were they thinking of the United States, which reared them, educated them, and offered all the appurtenances of an advanced, law-based, and reasonably peaceful society? No! Patriotism has nothing to do with it; profit does.

There are two things one should know about most (though not all) very rich people. One is that they can afford (and they use) very good accountants, who make fortunes hiding assets in offshore banks and pokey islands, out of the sight of the Internal Revenue Service. Having said this there is a small minority of patriotic, rich people who do want to give back something to their countries of birth. But most of them are not Republican funders and voters.

Secondly, the super rich now have more in common with one another than they do with their erstwhile fellow compatriots. They are citizens of the world, and they owe declining allegiance to their place of birth. New York is simply a city where they have one of several penthouses; Washington D.C is where ‘their’ Congressman lives and works and protects the interests of the financial masters.

You can reduce the rate of tax to zero and it still may not make the slightest difference to the super-rich. Rather than invest in the United States or Europe they look to the new economies and to relatively large returns available there that simply are no longer available in the traditional ‘advanced̵ economies. The big profits and the bright future are in China, India, Brazil and Indonesia, and maybe Russia. Meanwhile, education is a disaster in the West (maybe Germany is an exception), and the will to work is weak and morale is low. This is not a magnet for the investor.

October 2011