Sun Subscriber Website Login



Please wait....
News Story
Updated: 09/27/2012 08:01:27AM

Tax policy for wealthy have little effect on job creation

Share this story:

Text Size:

Dear Editor,

One of the major criteria in current tax discussions is effectiveness of job creation.

Today is very unlike the 1980s, when corporate America had little cash, we were coming out of an extremely high interest rate environment (prime as high as 12 percent and mortgages as high as 18-19 percent), but we needed extensive investment in plant and equipment for both upgrading and new products.

Corporations today have more cash than ever in history and borrowing is readily available to ANY successful business at historically low rates — for some as low as 2 ½ percent. Hence, if plant and equipment were the need of our economy, it would be getting done. What is missing today is DEMAND from the consumer, primarily tied to his adjustment (delivering of debt and general hesitancy, if not inability, to take on new debt).

For the former problem, tax reduction for the wealthy, with its high rate of saving/investing, is by far the more effective policy — for the latter problem that action will have almost NO effectiveness – the wealthy are NOT dependent on tax policy to facilitate demand satisfaction. While I will question the degree of effectiveness of reduced taxes for non-wealthy (it is not possible to reduce taxes sufficiently to off-set the loss in net worth sustained in an an eighteen month period of the second half of 2007-2008), it is historically proven that a higher portion of tax breaks for non-wealthy translates into demand than for the wealthy.

Hence my conclusion that in our current economy, tax policy for the wealthy involving marginal change either up or down will have minimal effect on job creation and the economy in general.

Fred BeyersFrostproof