Are Republicans opportunistic liars, or just stupid?

[_ajax18]

If someone invests $5 million into my English school, how does that solve the problem of low consumer demand?

China seems to have no trouble finding places to invest it's money. I see lots of laborers and borrowers out there, not much capital.

[_Analytics]

If someone invests $5 million into my English school, how does that solve the problem of low consumer demand?

China seems to have no trouble finding places to invest it's money. I see lots of laborers and borrowers out there, not much capital.

China is investing hundreds of billions in U.S. treasuries. They will lock away money for 10 years in exchange for a guaranteed 1.5%. Does that seem like a good deal to you? Does anybody think that inflation over the next 10 years will average out to under 1.5% per year?

The reason long-term yields are so low is that people who save money literally have trillions of dollars stashed away, and there just aren't enough good investment opportunities around, so they take what they can find.

As another example, Apple currently has about $100 Billion sitting in its checking account right now. Think about how much capital that is--if it costs $10 million to build a small factory, they have enough cash on hand to build 10,000 factories. Do you think the reason Apple isn't creating more jobs is because they don't have capital?

What's really going on is that the rich have never been richer. They have plenty of money. They have so much money they can't spend it all. They have so much money, they can't figure out how to invest it productively. So it sits in checking accounts.

[Guest]

I don't hire someone simply because I have enough money to pay them; it has to make sense for my business. I will only hire an additional person if that person is needed to take advantage of some opportunity, and the hiring will result in more profit than cost. Similarly, the reason to eliminate a position is that the cost of the employee is higher than the benefit provided.

As taxes rise, and as your net, after tax profit shrinks, you have less money to pay any new employees, and less to take economic advantage of any new opportunity that may arise that may involves expansion of your existing operation or initiation of a new venture.

Nothing you've said above speaks to the fundamental praxeological problem: how do you hire or expand as your profit - the only funds you actually have with which to hire or expand - declines?

Either way, employee wages are deducted first, then what remains becomes my taxable personal income. A higher tax on my personal income doesn't take away money that could have been used to pay an employee. It might affect my personal spending, of course.

You're dancing now, Krose, which is what I expected would eventually happen. Employee wages, new stock, supplies, water, electric, phone, paper towels, plastic forks, window cleaner, or whatever else you need on an ongoing basis, are your operating costs. If you had no operating costs, everything you made from selling your good or service would be pure profit. You're personal income, out of which must come any new hiring or expansion beyond present operating costs, is your profit after business overhead and taxes are deducted.

Tax, krose, is a part of your business overhead. As it rises, the funds you have left after taxes (money left over to plow back into the business and to live off of) shrinks. As it shrinks, it must, if you are a rational human being, affect your incentives, calculations, and behavior regarding your economic activities. You are making distinction between your "personal income" and your ongoing operating costs, including wages, but if you are taking all after tax profit for yourself, once wages and all other operating costs are met, then what you are telling me is that you have no interest whatsoever in the economic growth of your business, but see it only as a static operation that you intend to maintain at that level.

Otherwise, you are either funding any expansion of your business through debt, or have no intention of any such expansion. Hence, you think that ever rising taxes will affect nothing more than your personal lifestyle. But as taxes continue to rise, and rise and rise, new hiring becomes a negative, no matter what the opportunity, as your profit shrinks, and your profit, by your own admission is all you have to work with. Your "personal income" is also your business income minus the cost of doing business and taxes, but its all the same money. You can take it all yourself to live off of, consume, or save for your retirement, but most small businesspeople plow much of what they make, after tax, into expanding and diversifying their business. That's how economic growth occurs. Now, you may not be interested in that, which is fine, but the praxeological effects of higher taxation are the same regardless. It may not affect someone such as yourself who is not interested in moving beyond a certain stasis point in your business. Those who want to expand, grow, and prosper at higher levels, however, will be dissuaded by higher taxes from doing so. All known economic history, including contemporary, is clear testimony to this aspect of human economic behavior.

But if I choose to eliminate a productive employee (one who adds more value than cost to my company, which is the only reason to have an employee in the first place) because I think doing so will net me more personal income, I'm an idiot who deserves to go out of business.

Come on, Krose, the sophistry here is unimpressive. You're talking about a low tax, low regulation environment in which artificial government overhead is at modest levels. At higher levels, you must make decisions, depending upon the business you are in, that will be the difference between economic survival or closing your doors. That means trimming where the highest private overhead you pay is - wages.

It doesn't matter where the business overhead comes from, whether its resupplying your stock, wages, your utility bills, toilet paper, property tax, income tax, government regulation, inflation, or the compliance costs of paying your income taxes, all of it is effectively tax, and all of it comes out of funds that would otherwise be available to raise wages, expand plant, and hire new employees.

Letting a productive employee go will end up costing me, no matter what my personal tax rate is. Even if the state takes 95% of my personal income, firing people who are making me more than they cost me will just give me less money to be taxed.

Very few entrepreneurs in their right mind are going to work long hours and sacrifice much of their free time with family, friends and pursuing other personal interests, at a 95% tax rate, or anything close to it. and especially the really rich, who will shrink their businesses to survive a high tax environment, raise prices and lay off to the point of economic survivability, or close their doors, invest in durable goods, art, land, real estate, and precious metals, take their money out of productive activity, and wait out an anti-business regime such as the one presently in power.

You only have your after tax profit, Krose, and you are dancing like a prima ballerina in an attempt to convince me that higher and higher taxes will not affect rational decisions as to the disposition of that money.

You said you would still soldier on at a 95% tax rate. Now, unless this represents millions or tens of millions of dollars of dollars (at which 5% might still appear tolerable given the work and sacrifice needed to make a business work), What happens at 100%?

[_Droopy]

gross profit - the funds remaining to you after all business overhead - including the largest chunk, payroll, is deducted ...

Point of order: you have described net profit, not gross profit (gross profit does not include "all business overhead"). Just FYI.

Typo. Yes, I meant net, as I've used the term in other parts of my posts on this thread. I went back and changed it in the original thread. Thanks for pointing it out.

[_Bret Ripley]

Thanks for pointing it out.

My pedantry is at your service.

[_Droopy]

Thanks for pointing it out.

My pedantry is at your service.

Look, any friend of the Good Doctor (especially if its Tom Baker) is a friend of mine.

[_krose]

... fundamental praxological problem...

What is this word, praxological, that you continue to use?

[Guest]

Employee wages, new stock, supplies, water, electric, phone, paper towels, plastic forks, window cleaner, or whatever else you need on an ongoing basis, are your operating costs...

You're [sic] personal income, out of which must come any new hiring or expansion beyond present operating costs, is your profit after business overhead and taxes are deducted.

Where do you get the notion that one must use after-tax, personal income to expand or hire new employees, while existing employees are paid as a deductible operating cost?

Please explain how Line 26: "Wages" on Form 1040, Schedule C, Part II: "Expenses" does not include new hires?

You said you would still soldier on at a 95% tax rate.

That was obviously an exaggerated example to illustrate the point, which was that I would still be doing better with the employee than without.

[_MeDotOrg]

Apple currently has about $100 Billion sitting in its checking account right now. Think about how much capital that is--if it costs $10 million to build a small factory, they have enough cash on hand to build 10,000 factories. Do you think the reason Apple isn't creating more jobs is because they don't have capital?

What's really going on is that the rich have never been richer. They have plenty of money. They have so much money they can't spend it all. They have so much money, they can't figure out how to invest it productively. So it sits in checking accounts.

Well said. This illustrates why having huge inequality in wealth distribution can freeze the consumption engine.

Everyone wants to hold costs down. A big part of costs is labor. If one factory holds costs down, the laborers (consumers) in the other factories will buy their products But if everyone holds labor costs down, then no one's labor force is making enough money to buy what the other labor forces are producing.

It's an old problem: you can sell a few units with a large markup, or you can sell a lot of units for a little markup. When labor gets too cheap and profits are too excessive, you end up selling fewer units for a higher markup.

This is Capitalism's version of the Omnipotence Paradox: If capitalism can do anything, can it make a product so cheaply that anyone can afford to buy it? The problem is the more cheaply it makes the product, the fewer people can afford to buy it.

[_Quasimodo]

... fundamental praxological problem...

What is this word, praxological, that you continue to use?

Maybe "paradoxical problem"? Just a guess, Droopy has some problems with English. Don't get me wrong, I certainly don't want to speak for Droopy.

He also likes to use arcane words to show his erudition. Maybe he meant this:
http://praxeology.net/praxeo.htm