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My response to Binve's recent blog

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September 05, 2012 – Comments (6) | RELATED TICKERS: O , DD

For some odd reason I simply could not add a reply to Binve's recent blog:

 http://caps.fool.com/Blogs/who-are-the-real-job/759260

Everytime I hit post, it wouldn't.  Maybe there is a conspiracy or maybe not so, but because I really liked my response I am setting it forth here.

From a practical point of view I suppose Roche is correct, without a consumer the producer pretty much goes belly up.  But the debate really has been about who is that entreperenuer.

The Kudlowites always claim it is the rich so they need the tax breaks.  On the other hand the bulk of the jobs created are created through the visions of individuals, who oftentimes are not rich.  His Alexander Bell is a clear example.  Same with Gates.  Same with Jobs.

Oftentimes someone with an idea takes out a loan on his/her house for startup money in the hopes of building a profitable company off that idea.  Actually Bernanke, before Congress, even mentioned how the housing crisis might have negatively impacted this as a possible reason for slow job creation.

In the end, that entrepreneur will need nore and more capital, through venture capitalists, banks, BDCs, stock market, etc.  But that will happen regardless of the taxes the rich pay.

So the real debate is do we shower the rich with lower taxes in the hopes they will create jobs or do we start giving better tax breaks on small cap companies or start up companies in the hopes they will.

I am a believer in the latter.  But that is just my opinion.

6 Comments – Post Your Own

#1) On September 05, 2012 at 6:54 AM, outoffocus (23.33) wrote:

+1

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#2) On September 12, 2012 at 1:58 PM, Melaschasm (52.35) wrote:

In the case of Jobs and Gates, they both started with a shoestring budget.  However, they did not start hiring until their companies were earning significant money.  Had they faced 90% tax rates, the businesses would have grown much more slowly, and they would not have been able to rapidly grow their payrolls.

I personally would like to cap the top tax rate on payroll, income, capital gains, and corporate earnings at 20%, and move towards a lower rate once spending is under control. 

By a liberals definition, I suppose that means I want to cut taxes for the evil rich.  But as I have pointed out on other occasions, raising income taxes does not have an impact on the super rich, because they pay capital gains.

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#3) On September 12, 2012 at 2:45 PM, awallejr (81.33) wrote:

You speak the obvious regarding a 90% corporate tax rate and as I stated the incentives and relief should be earmarked to those small growing companies, not the rich.  And as for the super rich you can always impose an alternative minimum tax on them.

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#4) On September 13, 2012 at 9:38 AM, binve (< 20) wrote:

Hey awallejr,

Sorry for the late reply. I agree with your thoughts here, and I agree that the latter is also likely a more effective way for job creation.

But the point is, businesses hire when they are swamped with demand. And if there is enough demand in the economy for goods and services, then enterprising people will start business to fill that demand. On the flip side, it doesn't matter how clever an idea an entrepeneur has if there is no demand for that idea.

And that is the real point of Roche's post, that government needs to look at the economy from both angles: it needs to decide how it wants to target taxes / tax breaks to foster job creation as well as to stimulate demand when the private sector is low (because they are still deleveraging). It is all interrealated.

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#5) On September 13, 2012 at 8:32 PM, awallejr (81.33) wrote:

Thanks for the reply Binve. I agree about the demand concept.  Bernanke certainly came out with guns blazing today in his attempt to stimulate. But the guy does need help from Congress which just isn't happening now.

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#6) On September 17, 2012 at 5:48 PM, awallejr (81.33) wrote:

Interesting study:

 http://us.lrd.yahoo.com/_ylt=Alyyht.ky1TvK5kpDfXzGGWCuodG;_ylu=X3oDMTFqMDgxZXM0BG1pdANBcnRpY2xlIEJvZHkEcG9zAzEEc2VjA01lZGlhQXJ0aWNsZUJvZHlBc3NlbWJseQ--;_ylg=X3oDMTJuZDRlcXNlBGludGwDdXMEbGFuZwNlbi11cwRwc3RhaWQDNTc2NjdkMDQtYzE2Yy0zMDNjLTk4N2QtMmRiMDBhZjU2MjA5BHBzdGNhdANuZXdzBHB0A3N0b3J5cGFnZQ--;_ylv=0/SIG=11jlq9348/EXP=1349127807/**http%3A//www.cnbc.com/id/49059989

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