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3 Things 5-15-23

Thing One

 

Tax Cuts or Tax Hikes

 

The answer to that question always seems obvious to many of us, but consider this brief excerpt from a recent Wall Street Journal Article about US Treasury Secretary Janet Yellen’s efforts to enact a global minimum tax which, according to the article (and the dictates of logic), would make it easier for governments around the world to raise their tax rates:

 

“…The 2017 tax cut lowered America’s federal corporate tax rate from 35%, the OECD’s highest rate, to 21% … Since corporations are nothing but legal structures, no one has ever seriously disputed the notion that corporations don’t pay taxes. If a corporation can’t pass a tax on to customers, the burden will fall on investors and workers. As expected, after the 2017 tax cuts went into effect, real wages grew 43% more in 2018 and 93% more in 2019 than the 2011-17 average increase.

 

Pension and mutual funds, charitable organizations and insurance companies holding equities to fund death and annuity benefits—which own some 72% of all American equities—saw their rate of return increase 22% relative to the average 2011-17 returns in the two years following the tax cuts before the pandemic. After the 2016 elections, when it became clear a tax cut was coming, until the beginning of the pandemic, equity values rose twice as fast annually as they had risen during the previous seven years. A corporate-tax increase would be expected to produce the opposite results…”

 

There you have it.  Cutting corporate taxes increases real wages and wealth for individuals and raising them does the opposite.  The same holds for individual taxes.  Raising them (even if it will only be for people making more than $400,000, which it won’t because the math doesn’t work) will not make America and Americans wealthier, it will only give politicians more money to spend in connection with their re-election efforts.


Thing Two

 

The Folly Of Targeted Exercises

 

I was recently browsing health and fitness websites for exercise "secrets" when I came across an article that started me thinking about the similarity between an individual getting himself into physical shape and politicians trying to get the economy into shape.  The article was called, "Why Crunches and Sit Ups Do Not Get You Six Pack Abs".  The first few paragraphs are what stimulated my parallel thinking on the subject.  See below: 

"...Doing countless crunches and sit ups are by far the most common exercise mistake for anyone who wants to slim down their midsection. The thought is that doing hundreds of crunches and sit ups will work the abs so hard that the fat covering them will disappear. If this were true, you would see people walking around with toned and defined abs and a soft and flabby body everywhere else.

Here’s something to think about:  we’re always focusing on the abs but have you ever noticed that the people who have the best abs also have a great body everywhere else? This is by design – not by coincidence. The idea that doing lots of crunches is going to get you six pack abs is a myth that is known as “spot reduction”. Fat burning is not a local phenomenon.

 

When you do bicep curls your biceps do not pull fat from your arm for energy, so why would crunches reduce the fat around your waistline?

 

More on that soon. If you want to see your abs then know this:  It all comes down to the basics of losing body fat, calories in versus calories out..."

 

Makes all the sense in the world, doesn’t it?  Now think about some of our politicians’ targeted exercise plans.  If we increase the pay of all low wage workers to $15/hr., all their economic woes will disappear.  If we make (only) rich people and rich corporations pay more taxes, our troubled economy will be carefree overnight. Right?  Of course not. Those kinds of spot reductions will never work because they only take from one pocket of the economy and put it in another. They don't increase the total number of dollars in the economy's pants.

 

The whole economy must get more fit if the aim is to have its midsection (or bottom) more fit.  And, as the article later pointed out, there really is no secret to getting more fit - you simply must eat right and exert yourself.

 

Eating right, in the economic sense would be the same as spending our tax dollars prudently, while exerting ourselves would be akin to raising our production levels. By producing more, we would take care of our abs (middle class, if you will) and wage issues in a natural way that wouldn't have us wasting energy (money) for little to no real benefit.  But we would also take care of all the other parts of our economic body as well.

Now, if we could only convince ourselves of this so the politicians would be forced to go along. 

Thing Three

 

Just A Thought

 

“When you want to help people, you tell them the truth. When you want to help yourself, you tell them what they want to hear.” ―Thomas Sowell

 


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