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Dec 08 2011

Billionaire Nick Hanauer on why rich people need to pay more taxes

Four years ago, I made the obvious point of why spreading the wealth was much better for everyone than great inequality. (I wrote a whole series of posts on this but this particular one is the most relevant here.)

The oligarchy and its allies, especially those in the Republican party and Fox News, have fought against this, saying that rich people are ‘job creators’ and taxing them more means that they will invest less and hire less people. A billionaire venture capitalist named Nick Hanauer wrote an op-ed in which he debunks this idea and pretty much makes the same point that people like me have made.

I’m a very rich person… Even so, I’ve never been a “job creator.” I can start a business based on a great idea, and initially hire dozens or hundreds of people. But if no one can afford to buy what I have to sell, my business will soon fail and all those jobs will evaporate.

That’s why I can say with confidence that rich people don’t create jobs, nor do businesses, large or small. What does lead to more employment is the feedback loop between customers and businesses. And only consumers can set in motion a virtuous cycle that allows companies to survive and thrive and business owners to hire. An ordinary middle-class consumer is far more of a job creator than I ever have been or ever will be.

It is unquestionably true that without entrepreneurs and investors, you can’t have a dynamic and growing capitalist economy. But it’s equally true that without consumers, you can’t have entrepreneurs and investors. And the more we have happy customers with lots of disposable income, the better our businesses will do.

That’s why our current policies are so upside down. When the American middle class defends a tax system in which the lion’s share of benefits accrues to the richest, all in the name of job creation, all that happens is that the rich get richer.

And that’s what has been happening in the U.S. for the last 30 years.

One reason this policy is so wrong-headed is that there can never be enough superrich Americans to power a great economy. The annual earnings of people like me are hundreds, if not thousands, of times greater than those of the average American, but we don’t buy hundreds or thousands of times more stuff. My family owns three cars, not 3,000. I buy a few pairs of pants and a few shirts a year, just like most American men. Like everyone else, I go out to eat with friends and family only occasionally.

I can’t buy enough of anything to make up for the fact that millions of unemployed and underemployed Americans can’t buy any new clothes or enjoy any meals out. Or to make up for the decreasing consumption of the tens of millions of middle-class families that are barely squeaking by, buried by spiraling costs and trapped by stagnant or declining wages.

If the average American family still got the same share of income they earned in 1980, they would have an astounding $13,000 more in their pockets a year. It’s worth pausing to consider what our economy would be like today if middle-class consumers had that additional income to spend. [My italics]

We’ve had it backward for the last 30 years. Rich businesspeople like me don’t create jobs. Middle-class consumers do, and when they thrive, U.S. businesses grow and profit. That’s why taxing the rich to pay for investments that benefit all is a great deal for both the middle class and the rich.

So let’s give a break to the true job creators. Let’s tax the rich like we once did and use that money to spur growth by putting purchasing power back in the hands of the middle class. And let’s remember that capitalists without customers are out of business.

What Hanauer is saying is (or should) blindingly obvious to anyone who gives the topic a moment’s thought. Henry Ford said pretty much the same thing a century ago. But our oligarchy has gotten so out of control and so avaricious that they have to counter this renegade from their ranks and so naturally there has been pushback. In this interview Neil Cavuto of Fox News tries to faithfully serve his masters by challenging Hanauer.

Cavuto raises the idiotic argument that I have heard so often, that if Hanauer feels he should pay more taxes why does he not voluntarily send in a check instead of changing the tax rates for everyone?

That is the kind of argument that labels you as being either incredibly stupid or willfully obtuse. It is on a par with those anti-evolutionists who think that the question “If we descended from monkeys, how come there are still monkeys?” is a devastating argument against evolution. Those who are tempted to make such an argument should really think twice, unless they don’t mind people laughing at them.

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