On Trickle-Down Ryan

Rep Paul Ryan (R-WI), Speaker John Boehner (R-OH), and any other bandwagon Republican want to cut corporate taxes in order to stimulate investment. Why not? Profits go up, thus companies can invest more. News Flash: Hey … Trickle Down does not Work!

Hope about a few reality checkpoints on the matter.

Profits go up, and the shareholders are happier. Corporations are first accountable to their shareholders. Yep, the shareholders get preferential treatment over the community, over the state, and over the country. You see, capitalism is not patriotic.

Profits go up, and the executives get more (thus cutting into investment). As if people in these positions don’t already get enough. Then again, more means more.

Cash reserves increase, which then allows one company to purchase another – thus a loss of jobs.

Let’s say the company is willing to invest, thus increase employment. What is the guarantee that they do so within US borders? For those in the GOP who down know, the answer is, There is no guarantee!

Bottom line: You want to stimulate companies to invest in America, don’t give them a tax break to do something – give them a tax credit for doing something.

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13 thoughts on “On Trickle-Down Ryan

  1. Well…. in some cases, one company buying another DOES help. The little I/T company I was with grew dramatically after we were bought, twice. I will give you that the second buyout, by Citicorp, was a mixed bag – we received money and resources to expand, but they also brought in management which had NO idea of what we did, and ended up driving a number of talented people out the door. (And screwed me blue with my headaches, but that’s a soap opera for another day).
    Some tax breaks do help, especially if you’re in a high-tax area (like the Chicago area). Giving a company tax breaks, as the northern suburbs on the border of Cook and Lake counties did, can create a lot of jobs, albeit by moving them from one area of a state (inner-city Chicago) to another, with no net creation.
    And now that I’ve stated the exceptions to your suggestions, Frank, I will now humbly agree, and throw myself, and my lingering conservative tendencies, onto your tender mercies! :D

    • John,
      I agree with your statement about growth after a purchase – especially when the purchaser wants to grow into that area/market. Company A doesn’t produce drugs, but then buys a drug company, hello – they are not going to dismantle much of the operations.

      On the other hand, when the third largest bank purchases the fifth largest bank – MANY jobs will be lost due to consolidation. Sure a few will survive, or even be offered opportunities involving a relocation, but nada for many. Let’s face it, in today’s world of the big getting bigger, this happens.

      In terms of tax breaks, our examples are totally different. My statement was about the feds, while yours was about the state and/or local governments. Of course local tax breaks do have a negative side, then again, not the purpose of this post. So I stand by my statement, give credit for doing something, not a break with hopes of action.

      As always, thanks for commenting.

      • D’Oh! My bad – I missed the fact you were talking about fed-level tax breaks. In that case, I absolutely agree. Oh, and I wasn’t trying to change your mind. I just like to play devil’s advocate. I figure if I do it enough, maybe I’ll get a more comfortable pair of red longjohns after I shuffle loose this mortal coil. ;)
        And as FishHawk said, I too was initially in favour of the Reagan trickle-down concept. Great concept. Lousy execution. Then again, doing a high-speed run through the North Atlantic was a great concept, and we’ve seen how well that worked for RMS Titanic! :D

        • John.
          I’m not sure the Reagan cut didn’t work as anticipated. (Also see my answer to FishHawk.) Let’s face it, everyone wants to pay less taxes! Thanks for sharing!

    • Nonnie,
      Capitalism is not patriotic as the shareholders/bottom line are the main concern. As you noted, local/state breaks is a story in itself. Nonetheless, we agree that trickle down doesn’t work. Thanks for visiting and commenting.

  2. i forgot to add that i wouldn’t mind giving tax breaks to small businesses, but real small businesses, not businesses owned by a small number of owners (which is the yardstick the rethugs use to define a small business). big businesses get all kinds of breaks from the cities they’re located in that the little guys never get (roads if they need them, new traffic lights, etc.). there needs to be a more even playing field so the little guys can compete, and consumers would have some real choice.

  3. I was all for President Reagan’s trickle-down economics at the time. For in theory, it works, but in practice, the rich just get richer.

    Why can’t we just have a flat tax? Stupid question–huh?

    I hope you weigh-in on “Sipping Some Tea,” which I just published on The Trib. I am also eagerly anticipating your next article there. There will be another one–right?

    • FishHawk,
      Two important points about the Reagan cut. 1) He dismantled (and much needed) the 90% tax bracket on the wealthy … thus made the highest bracket around 35%.

      2) The middle class got an interesting surprise. The tax rate DID go down, BUT, the amount of taxes paid went UP b/c of the reduction in deductions. Raising taxes while convincing the people of a tax cut is an interesting accomplishment.

      Thanks for commenting and sharing.

  4. Makes me wonder why bad ideas don’t go away. This hasn’t worked in the past, why would it work now? Ah wait, who does “trickle down” economics benefit? The same people who contribute large sums of money to “our” congress people.

    Another example of why campaign finance reform is crucial.

    • Nancy,
      Flat tax is a bad idea – but I imagine tax lawyers and CPAs would be against it. Nonetheless, your point basically says “follow the money” tells us the beneficiaries. Thanks for sharing!

  5. Hey Frank!

    Excellent job sorting out fact from fiction–Representative Ryan may want to hear your sensible assertions further. I am slowly coming to the realization that barring an 11th hour miracle, and some good old fashioned commonsense, my fellow Republicans will hand deliver President Obama four more years in 2012. Your wise assessment of “trickle down” says it best. Have a great week, Frank!

    Shaking my head side to side, and hoping for a Republican miracle.

    • Al,
      Thanks for the props. Washington favors the special-interest approach over the common-sense approach. What else can I say! Meanwhile, the party-first attitude continues to rule. Thanks for commenting.

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