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Friday, September 10, 2010

Republican bullshit

The GOP insists that extending the Bush tax cuts for the top tax bracket ($200,000 for individuals and $250,000 for couples)is the only solution to stimulating more investment and creating more jobs. This would raise their marginal rate to 39% from 35%. Most Republicans have no idea how a marginal tax rate even works. The dreaded 4% increase would only be on additional income over the above thresholds. A couple earning 4250,000 would thus only pay an additional $12,O00 in taxes were there income to be $500,000 a year. Hardly enough to affect either their spending habits or their lifestyle.

Republicans argue that not extending these Bush tax cuts for the wealthiest will stifle investment, kill job creation and any chance of an econimic recovery. Never mind that this will cost add an additional 483 billion to the deficit every year these cuts are extended.

If the Republican theory holds true that higher taxes deter innovation and investment how can they explain the fact that in the 1950's and 60's which saw the economy;s longest expansion occur when the top marginal tax rates averaged about 70%, double what it is today.

The bottom line is quite simple. Businesses invest when demand and economic conditions make it desirable, not when taxes are low. Currently, amidst slack demand, the tip 500 non financial corporations are sitting on a record 41.8 trillion in cash or cash equivalenets but for the most case, they aren't invewting it and creating jobs because on average, the are currently only utilizing about 80% of their capacity .

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