December 3rd, 2008

Apollo 4 on column of fire

Something to explain to Joe the Plumber slowly, and in very small words

If we undertax the rich and undertax corporations, then the executives and their buddies hoard the cash that’s coming into those corporations and give it to themselves, like these auto execs have been doing. If they lay off workers, that increases the amount of money they can pocket before they move on to the next corporation.

If we greatly increase the marginal tax rates for rich people and their corporations, on the other hand—well, first, what Joe would say is that the rich people would sit on their (already shiftless) butts and the corporations would just sit around doing nothing. What actually happens is that instead of pocketing the excess cash it gets put to work—it is invested in the company and its infrastructure, producing creativity and wealth, and maybe even executives will stay with the same company for a career, getting paid well but not ridiculously well, and almost surely getting more satisfaction and reduced anxiety compared to today’s (shiftless, parasitic, wealth-destroying) big executives.