The supply-side tax con

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In recent decades, an intuitive myth has been pushed on the unsuspecting public by supply-side economists - that low taxes encourage corporations, employers and entrepreneurs to create high-paying jobs. The counterintuitive historical truth is that a progressive income tax regime with over 90% for top-bracket incomes actually encourages management and employers to raise wages. The principle behind this truth is that it is easier to be generous with the government’s money.

In the past, when the top corporate income tax rate was over 50% and the personal income tax rate at over 90%, both management and employers had less incentive to maximize net income by cutting costs in the form of wages. Why give the government the money when it could be better spent keeping employees happy?

The Reagan "revolution", as inspired by voodoo supply-side economics, started a frenzy of income tax rate reduction that
invited employers to keep wages low because cost savings from wages would produce profits that employers could keep instead of having it taxed away by high tax rates.

It follows that the low income tax rate regime leads directly to excess profit from stagnant wages, which leads to over-investment because demand could not keep pace with excess profit due to low wages. Say's Law <1> on "supply creating its own demand", which supply-side economists lean on as intellectual premise, holds true only under full employment with good wages, a condition that supply-side economists conveniently ignore.

http://www.atimes.com/atimes/Global_Economy/KL15Dj04.html

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1. Supply-side economics is a con all the way around

Manufacturers don't produce more stuff just because raw materials are available. They produce more stuff when they can sell more stuff, that is when there is more DEMAND. This is so f***ing simple it is a testament to the gullibility of the American public that supply-siders aren't laughed (or is that laffed) off the stage.

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2. Kick. nt