David Cay Johnston at the JP Forum, Tuesday 4/15

by Chris Sturr | April 14, 2014

Please join us this Tuesday, April 15th
for a Tax Day talk by 
David Cay Johnston: 
“Taxes and Inequality: Fixing A Broken System”

 

Tuesday, April 15, 2014, 7:00 pm at 
First Church JP, 6 Eliot St, Jamaica Plain, MA. 
Hosted by the Jamaica Plain Forum.
Please RSVP here or reply to this email.

 

Dollars & Sense is honored to co-sponsor a Tax Day conversation with David Cay Johnston, Pulitzer Prize-winning investigative reporter and author of Free Lunch andPerfectly Legal, this Tuesday, April 15th, from 7-8:30 pm.

While at The New York Times, Johnston won the 2001 Pulitzer Prize for “for his penetrating and enterprising reporting that exposed loopholes and inequities in the U.S. tax code, which was instrumental in bringing about reforms.” He is the author of several best-selling books on tax and economic policy, including: Free Lunch: How the Wealthiest Americans Enrich Themselves at Government Expense and Stick You With The Bill and Perfectly Legal: The Covert Campaign to Rig Our Tax System to Benefit the Super Rich – and Cheat Everybody Else, a New York Times bestseller about the U.S. tax system that won the Investigative Reporters and Editors 2003 Book of the Year award.

His new book, an edited collection, is Divided: The Perils of Our Growing Inequality (New Press, 2014). Johnston presently writes for Newsweek and Tax Notes. He teaches at Syracuse University and lives in Rochester.

A program of the The First Church in Jamaica Plain, Unitarian Universalist, the Jamaica Plain Forum is a free, public series of discussions, lectures, workshops, films, and events addressing current topics of interest to the Jamaica Plain community.

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Congressman Bill Foster Explains Why Middle Class Tax Cuts Lead to Economic Growth

by Polly Cleveland | April 06, 2014

[Bill Foster (IL-11) says it better than I could myself—Polly]

Washington, DC, Friday, April 4, 2014 – Today, Congressman Bill Foster (IL-11) spoke on the House floor against H.R. 1874, which would direct the Congressional Budget Office to selectively use dynamic scoring in its analyses of tax and budget legislation.  The selective use of so-called dynamic scoring is a misleading attempt by House Republicans to justify tax breaks for the wealthy.

Foster also spoke about the return-on-investment from to tax cuts for middle class families compared to tax cuts for the wealthy.  If you give a dollar to a middle class family, they will spend it in the local economy and spur growth, or they will use it to make a high return investment, such as paying for their children’s college. If you give that same dollar to a very wealthy individual, that individual will not change their spending habits.  Instead of circulating it in the local economy, it will be placed in lower-return investments, often offshore. The historical data is clear: tax cuts for the middle class have promoted economic growth, while Republican tax cuts for the wealthy have not.

Video of Foster’s speech is available here. Full text is below:

Mr. Chairman, I rise today in opposition to HR 1874, and to explain to my Republican colleagues why their tax policies have not worked, and will not work, to produce economic growth and jobs.

I am a scientist who spent over 20 years at Fermi National Lab conducting research, and a successful businessman before that.

A scientist proceeds on the basis of facts, and the historical facts on Republican tax policies are clear. Tax policies during the Clinton years, predicted by the Republicans to restrict economic growth, in fact generated the strongest uninterrupted period of job growth in our lifetimes: over 22 million new American jobs in 8 years.

Then, the Bush tax cuts enacted in 2001 reversed those policies, and in the following 8 years, the net number of new jobs was essentially zero, actually slightly negative.

Twenty million Americans entered the workforce during the Bush years and the Republican policies produced zero net jobs for them, opening up a jobs gap of over 20 million jobs, a jobs gap that we are still closing today.

So to the extent that there is a causal link between tax policies and job creation, the data is clear:  Republican policies have destroyed jobs, and Democratic policies have created them.

I will now attempt to explain why this is, and why the simplified macroeconomic modeling promoted by this legislation will fail to match the real world.

Generally speaking, Democratic tax breaks deliver benefits to the middle class, while Republican tax breaks deliver benefits to the very wealthy.  And, as it turns out, the very wealthy spend and invest their money very differently than the middle class.

Mr. Chairman, the macroeconomic models promoted in this legislation typically model our economy with a single aggregated consumer.  Like the Republicans, they pretend that giving an extra dollar to a billionaire is no different than giving an extra dollar to a working class family.

However, if you give an extra dollar to a middle class family, they will spend it in the local economy, increasing local economic growth; or they will invest it in some of the highest return investments available to anyone – investing in their children’s college education or perhaps buying a second car so that their spouse can get a job.

Now, if you give that same dollar to a very wealthy individual, they will not change their spending habits, because they are already spending as much as they feel like spending and this will not change. So there will be no local economic growth.

The investments of the very wealthy are also very different since they no longer have available to themselves the high-return investments available to the middle class.  The very wealthy have already spent everything they can to send their children to the finest schools. They already have seven Cadillacs in their garages.

So the marginal investments of the wealthy are intrinsically less productive, due to a basic principle of economics known as the Law of Diminishing Returns.

And since economic growth is equal to investment times return-on-investment, (sorry about the equation!), the economic growth from channeling money to the wealthy is far less than if that same relief had been given to the middle class.

Democratic, middle class policies are pro-growth policies, and Republican policies are not.

Mr. Chairman, there is also another important effect not captured by the single consumer macroeconomic models in this legislation, which is the increasing propensity for wealthy people to move their money offshore.

If you give an extra dollar to wealthy person, they will turn it over to their money manager, who looks around for high yields, and increasingly, invests that dollar overseas — perhaps increasing the net worth of the wealthy investor, but competing with and destroying American jobs.

Had that same dollar been given in tax relief to the middle class families, it would have been much more likely to stay in America.

So in the real world, Republican policies trickle down, but they trickle down to jobs in China.

And that is why the Bush tax cuts generated zero jobs in the eight years after they were enacted.

Thank you, and I yield back.


G. William (Bill) Foster
Rep. U.S. Congress – (IL-11)
http://Foster.House.gov
http://BillFoster.com

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