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yes, very few paid the top rate. but that's the point, the excess income was being thrust back into the economy, driving innovation and creating jobs not just l
by mathiasben 9y ago
yes, very few paid the top rate. but that's the point, the excess income was being thrust back into the economy, driving innovation and creating jobs not just languishing in someone's bank account.
- WalterBright 9y ago> thrust back into the economy This is another variation on the "rich people hoard cash" theory, which is completely false. Rich people invest all of their money back into the economy. Even bank deposits are invested back into the economy (when the bank loans it out). Scrooge McDuck cash vaults do not exist.
- mathiasben 9y ago"Rich people invest all of their money back into the economy" - if it really worked like that we wouldn't be discussing inequality.
- WalterBright 9y agoI'm curious where you think their money is.
- mathiasben 9y agoinvested in siloed low risk fixed income vehicles ensuring that the funds don't circulate through the broader economy.
- WalterBright 9y agoThe reason fixed income vehicles pay out income is because those funds are spent on productive investments. So, they do circulate through the broader economy. There's no silo of cash sitting somewhere paying dividends.
- ericd 9y agoLow risk fixed income doesn't currently keep up with inflation.
- pcrh 9y agoI suspect a lot of it has been invested in overseas locations, including manufacturing operations globally. It may be that the money did indeed "trickle down", but not into the US.
- sokoloff 9y agoI agree. If the US makes it even less attractive to invest capital here, do we think we'll get more or less capital investment and job creation here?
- WalterBright 9y agoYup. Investment flows to where the most returns are, and taxes loom large in such calculations. But that isn't the point here, which is it is invested, not stuffed in a mattress.
- ChemicalWarfare 9y agonot following your logic here. "investing" != "giving it out". "growing economy" != "less inequality".
- collyw 9y agoWhy do tax havens exist then?
- WalterBright 9y agoReagan didn't get rid of all of the tax shelters. But the idea that tax havens (i.e. tax shelters) are relatively crummy investments remains. The reason Apple, etc., invest a lot of their cash overseas is not because those are better investments, but because the US corporate taxes are so much higher those foreign investments become more attractive. Level the taxes, and the money will be reinvested back in the US.
- samsonradu 9y agoMedia keeps telling us Apple is not investing, but hoarding cash overseas to avoid the taxation. Care to elaborate how and what they are investing in?
- WalterBright 9y agoThe media consists of people with journalism degrees, not economics. Such journalists commonly believe in the "cash hoard" theory. To know what they are investing in, consult the Apple Annual Report, which says. Even if the balance sheet says "cash", what they mean is "bank deposits". Bank deposits get loaned out to others, and those others spend it. Nobody borrows money in order to hoard a pile of currency.
- collyw 9y agoActually when I started worked for a bank, we got an initial talk on the financial system and how it works. It showed that most companies do reinvest most of the cash or pay it out as dividends, it was pointed out that the exception at the time was Microsoft who basally hoarded it. That was 12 years ago. Now Apple are the bigger player and seem to be doing exactly the same.
- RealityNow 9y agoParking money in index/hedge funds is not "investing it back in the economy". Bank lending is driven by demand, not deposits.
- WalterBright 9y ago> Parking money in index/hedge funds is not "investing it back in the economy". Of course it is. What do you think those funds invest in? Piles of cash? > Bank lending is driven by demand, not deposits. If that were true, banks wouldn't need deposits and certainly wouldn't offer free checking. They're not charities.
- RealityNow 9y agoBuying a stock on the secondary stock market is not investing in the economy. Buy that logic, high-frequency traders are investing in the economy. > If that were true, banks wouldn't need deposits That doesn't follow from what I said. Banks are required by law to back their loans up with reserves. So when they don't have enough reserves, they borrow on the interbank lending market or from the central bank. http://www.bankofengland.co.uk/publications/Documents/quarterlybulletin/2014/qb14q1prereleasemoneycreation.pdf http://www.bankofengland.co.uk/publications/Documents/quarte...
- Chris2048 9y ago> Buy that logic, high-frequency traders are investing.. HF traders don't hold for long, so why are they equivalent?
- WalterBright 9y ago> Buying a stock on the secondary stock market is not investing in the economy. Of course it is. Buying a piece of a company is investing in it. > Buy that logic, high-frequency traders are investing in the economy. And they are - even if they hold a particular stock for a millisecond. The aggregate invested across the market is what matters. It's a bit like calculus. All those infinitesimal bits add up to real amounts. > That doesn't follow from what I said. Maybe you can explain why banks offer free checking.
- ams6110 9y ago> languishing in someone's bank account Money in bank accounts is loaned to others and "thrust back" into the economy. Money in other investments (stocks, bonds) also funds economic activity. Your argument only makes sense if the wealthy are hoarding cash under their mattresses, which is not what they do.