Trickle Down Economics Debate: Con Argument 1

Posted below is Mark’s response, responding to my last post in the Trickle Down Debate.   Please be sure to visit Mark’s blog

You have made a very strong case on how lowering taxes for President Reagan circa 1975 would have resulted in job creation. That’s a solid and strong argument, especially when tax rates for the very wealthy were 70%.

For my side of the debate, I would respectfully suggest we fast forward from 1975 to 2010. Instead of the highest tax rate being 70%, it is now 35%. Letting the current tax cuts expire for the top 2% in our country would increase their tax rate to 39.6%-back to the rate under President Clinton. Yes, it’s an increase of nearly 5% and yes it’s true, the top 2% pay about 50% of the income taxes collected in our country, yet in my opinion, not enough to deter an entrepreneur from starting a new business, making a new movie or hiring additional employees.

If we were in fact having a debate in the country about raising tax rates on the highest income earners back to 70%, then we would be flirting with disaster. But as a financial planner, I work with many business owners that have done very well financially over the past decade. Yes, a nearly 5% tax increase will pinch, but will it deter business owners/job creators from making a new investment in their business which in turn could mean adding new staff? I have yet to see evidence of that stopping anyone from moving forward with a new venture.

There’s no doubt that there’s a fine line between tax rates and job creation. Yet with tax rates on the highest income earners at 39.6% during the Clinton years, not only did the middle class see strong job and real income growth, but as a country we managed to put ourselves in a surplus situation financially.

Finally, since we’re mentioning President Reagan, I was happily surprised to read David Stockman-Regan’s Budget Director, recent op-ed in the NYT call for letting the tax cuts on the wealthy expire as planned.

Respectfully yours,
Mark Zaifman
Spiritus Financial

See Pro Argument 2:

See the original Pro Argument:

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