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Buck 1 Richard Buck Allison Fernley English 1010 2 April 2014 The Control and Generation of Money The

economy is the main issue in the world today following the economic meltdown of 2008. Unemployment is above 9% (17% if you count those considered by the government to be not actively looking for work), household and national debt is at unheard of levels, and millions of Americans and others around the world are suffering. Perhaps the most controversial and party-dividing part of the conversation on how to bring the economy back is the amount of taxes on the wealthy. Low taxes on the rich have become the basis of the theory of trickle-down economics (also known as Reaganomics). This is a theory that states that low taxes on the rich improves profit-making desire for the rich (because they dont get taxed more for working hard to get that extra money) and drives investment and therefore job growth. There are many who disparage this theory. A debate rages over whether or not low taxes on the rich drives economic growth (Kemp), leads to economic stagnation for the non-rich (Frank), or causes economic ruin (Glastris). I am very interested in this matter for several reasons. Firstly, it is of major public interest that will be a major issue point for deciding elections to help improve the lives of myself, my friends, and my family. However, to me personally, major interest comes from my love for economics. I have a great interest in economic subjects and love to break down and examine major issues in economics, and personally I feel there is no bigger issue in economics currently than tax changes that could be billions in either hikes or cuts and could either stimulate massive economic growth or stagnation going by the proponents or critics or either philosophy.

Buck 2 The following is a collection of article summaries from respected economists who have strong opinions on this matter. Also included is an analysis of each article and how these will fit into my position synthesis about why taxing certain members of the top 1% would lead to a better economy for everyone else. Blumgart, Jake. Cohen, Donald. Dreier, Peter. Will Higher Taxes on the Rich Kill Jobs? Huffington Post. 1 December 2010. Web. 31 October 2011 This group of reporters and writers (led by Jake Blumgart) for the Huffington Post (a top rated blog by Time Magazine and in the Webby awards) argue against low tax rates on the rich and describe the reasons why support for this strategy continues despite lack of evidence. Their view also points to high growth rates during the high tax periods of the mid 1900s and the low economic growth of the 2000s with its low tax rates on the rich, and brings back previous historical predictions on taxes to try to slightly discredit trickle-down economics. Many highly respected economists that had supported the trickle-down view (including Jake Kemp) had predicted economic doom following the tax hikes of 1982 and 1993, yet these hikes were instead followed with economic boom. These Huffington Post writers conclude by arguing that trickledown economics dont work, and that many of the supporters are indeed lying about their benefits. This article from the Post relies heavily on firm statistics as well as predictions from well-respected conservatives that turned out to be incorrect. This article succeeds in showing the past analytical failings of this economic theory, but focuses too much on those specific predictions (making the article come off as slightly cherry-picked) and goes too much into ad hominem attacks with phrases such as cried wolf and Lying like they lied before in the article.

Buck 3 This article will be useful in pointing out that even well-respected economic theorists of the strategy of lower taxes on the rich can be wrong about what tax hikes will do to the economy. This article also describes many historical events and has some statistics that I will include in my position synthesis. Brooks, Arthur C. The Lefts Inequality Obsession American Enterprise Institute for Public Policy Research. 19 July 2007. Web. 5 November 2011 In The Lefts Inequality Obsession, Arthur Brooks takes a different approach to the growing gap between the wealthy and everyone else. He admits that the rich are getting richer at a faster rate than the poor, but doesnt think this issue matters very much. Brooks shows data that Americans have been roughly as happy since the 70s despite growing income inequality. Also brought up by Brooks are stats suggesting that Americans who believe they can advance their status in life are happier than those that believe they cannot. Brooks concludes by arguing that American policy should be more focused on increasing opportunity than improving equality. Brooks approach is very different from others by questioning whether or not economic inequality is a bad thing in itself. His conclusions seem to be data-supported, but overall fall flat. Brooks point that the happiness of Americans was roughly the same in the fairly equal 70s as it was in the less equal early 2000s becomes somewhat ridiculous when the point can easily be rephrased as: The happiness of American citizens did not increase in 30 years of massive technological and moral advancement and where the threat of nuclear annihilation is no longer present. Brooks views still have merit as it seems that people are happier when there is chance for advancement. These ideas will be included in my synthesis as a very important point to consider for taxing the rich. If the rich are taxed to a large degree and to the point where its not as great being rich, American citizens may feel that there isnt something great to aspire to work

Buck 4 towards and they may become less happy because of that. Whether or not this potential decreased happiness will occur will be addressed in my synthesis. Buffett, Warren. Stop Coddling the Super Rich New York Times. 14 August 2011. Web. 4 November 2011 In Stop Coddling the Super Rich Buffett tries to shoot down some of the stereotypes about the rich and taxes. Buffett argues that taxes do not scare off the rich from investing and that lower taxes on the rich have, in fact, led to lower job creation since 1980. He believes that most of the rich are very decent people who appreciate their country and other people and would not mind more taxes. Buffett concludes by stating that households making over a million a year should see tax increases to help the lower and middle class. Buffetts main appeal is that of personal experience which works extremely well. Buffett is one of the richest men in the world and should know a great deal about both business and other wealthy men. His personal experience with the wealthy lends him a massive amount of credibility. Buffett also evokes emotions in myself (and probably others), with his defense of the richs personality and ethics. The emotions he invokes are those of gladness and contentment that some of the people in control of a significant amount of the money supply of the world are decent. This also is a logical argument after the initial reaction has worn off as it makes sense that humans share many common things with each no matter their differences. Buffetts ability to argue both for the taxation of the rich and his defense of the rich makes him come off as extremely reasonable and understanding. Buffetts article will be used in my synthesis to show that many of the wealthy will not have major negative reactions over the ethics of higher taxes. While some corporations or investors may be upset with higher tax rates, they may not leave the country for slightly higher

Buck 5 profits because the leaders are people who have roots and feelings that may make up for slightly lower profits. Frank, Robert H. In the Real World of Work and Wages, Trickle Down Economics Dont Hold Up The New York Times. 12 April 2007. Web. 31 October 2011 In this article, Robert H. Frank, an acclaimed writer and economic theorist who currently writes for the New York Times, argues that low tax rates on the wealthy does not improve economic growth or the lives of middle and lower class people. Frank points out that low levels of income inequality (something Trickle-down economics might predict as a bad thing for economic growth) and high levels of economic growth have occurred simultaneously in recent American history. Frank also attacks the ideas that extra motivation will come from a system under Trickle-Down Economics where you will be rewarded more properly for your work. Frank explains that the exact opposite may happen as economic theory states that people whose posttax wages decline sometimes work harder to make up the money they have lost. He brings up the fact that executives with lower wages and higher tax rates work or worked just as hard as the modern-day executive who is not taxed as significantly and should be working more since he supposedly feels more properly rewarded for the work he does. In conclusion, Frank feels Trickle-Down economics is a theory that should be abandoned and that many top-earners would be willing to pay more taxes for promising public projects. Robert Frank focuses on data in this piece and uses his data extremely well. His attacks of trickle-down economics are directly to the point and seem to damage the theory by showing that the predictions of the theory are not always the case. Frank does not spend much time on developing personal ethos and lets his numbers do most of the talking but I found Frank to be extremely credible based on his track record (he was a part of the creation of many economic theories as well as the author of an extremely well regarded book Principles of

Buck 6 Macroeconomics). While Frank comes off as dismissive to views counter to his own, he shows firm understanding of the point he is countering and doesnt ignore much evidence at all. That being said, the point that the rich could potentially leave the country with their capital is ignored in this piece. He mentions points in time to support his theories on the rich and taxes in which America was the only significant Capitalist country that wasnt recovering from major damage in World War II. This could mean that he was ignoring some evidence that might make his numbers look more like coincidence than anything else. Franks piece will be the main point to respond to in my synthesis. He uses significant amounts of data that seem to show that high tax rates on the rich often do not stifle economic growth in the slightest. I will use his conclusions, as well as my own interpretations of these events, to describe how higher taxes on the rich can improve an economy. Glastris, Paul. "Playing Chicken With History." Washington Monthly 43.7/8 (2011): 3. Business Source Premier. Web. 3 Nov. 2011. Glastris provides an extremely in-depth view on whether or not high marginal tax rates on the rich leads to economic growth or ruin. In his view, high taxes on the rich would not stifle economic growth. He demonstrates his stances real world applications by pointing out the massive job increases following tax hikes on the rich in 1993 compared to only minor job increases following the tax breaks on the rich in 2001. Glastris examines everything from the collapse of the Han dynasty in the third century AD (a collapse which he attributes to the evasion of taxes from the rich), to the loss of Hungarian independence in the 15th century (an event that followed massive tax cuts for the rich), and the decline of the Spanish Empire (the beginning of its decline is linked to no taxes for the rich and high taxes for commerce which hurt everyone else) to show examples of what low tax rates for the rich can do to an economy and a civilization to build support for his case. He also examines a case where high taxes on the rich did not hurt

Buck 7 the economy at all--Britain directly prior to the Industrial Revolution. Glastris concludes by stating that taxing the rich wont stifle the economy and that many of the rich wont object to higher taxes. Glastris introduction of major historical situations makes his piece extremely interesting and brings a deeper perspective than others commenting on this issue, making him somewhat persuasive. However, I feel that his examples simply go too far back into the past to try to support his position. Too much in economics has changed since the periods in time mentioned by Glastris for this to change my position significantly. Glastris comes off as an extremely informed thinker, but his attempt to try to connect events from thousands of years ago to modern-day economics weakens his rhetoric. I will compare modern-day economics to economics in some of the periods of time in which Glastris has shown that low tax rates on the rich can destroy economics. I will show that too much has changed since those periods of time for those examples to be very applicable, but that these previous times can show that low taxes for the rich when supply for workers is also low can lead to economic issues. Kemp, Jack. Lower Taxes, Higher Revenue The New York Times. 11 February 1996. Web. 31 October 2011 In this article, Kemp argues for lower marginal tax rates on the rich. Kemp brings up stats from the 1920s, 60s, 80s to support these ideas, showing that a huge marginal tax rate cut on the rich led to massive economic growth. Kemp believes that lower marginal tax rates on the rich will stimulate investment in America, particularly in small business. Kemps piece is fairly persuasive. He comes off as a reasonable person who is willing to look at most angles of the situation and comes up with data to support his conclusion. Kemps massive amount of experience in both politics and economics (Congressman, Housing Secretary,

Buck 8 architect of 1981 tax cut) also helps his case. However, that Kemp completely ignores that the Great Depression quickly followed the major tax cuts on the rich in the 20s hurts his credibility slightly in my mind. There may not be a connection, but I still think it should have been considered. Kemps piece and data will be used in my synthesis to demonstrate that potentially a booming economy can follow tax breaks on the rich, though I will add many caveats to show that this is many times not the case, and I will also show that tax breaks for the rich would not cause a boom right now. Sowell, Thomas. "Thomas Sowell: 'Taxing the rich seldom results in greater tax revenues. " Oakland Tribune 19 May 2011, ProQuest Newsstand, ProQuest. Web. 5 Nov. 2011. In this piece, Thomas Sowell writes about some of the issues with the theory of high taxes to generate revenue. Sowell describes that the rich can merely avoid paying taxes if their rates are raised through various investment and accounting techniques. For example, Sowell describes that the rich could then possibly use their money investing overseas, creating jobs that could potentially be created for Americans. Also mentioned by Sowell is the relocation of the wealthy from high tax areas to low tax areas to demonstrate another approach to avoiding taxes. In conclusion, Sowell believes increased taxes on the rich will harm the economy. Sowell employs a fairly brutal style throughout his article; he cuts away all philosophy on both sides to look at real world application. This method makes him appear unaffected by politics and very logical. The data he presents makes his case seem far more valid as well. Sowell has managed to strip away most emotion to focus on logic and it makes his piece very persuasive.

Buck 9 My position synthesis will take into account the issues brought up by Sowell. Firstly, I will suggest a change in taxation collection methods to not allow some forms of legal evasion to happen. Secondly, I will use his conclusions and data as part of the argument that high taxes on the rich would indeed hurt some industries. From these articles (and others) I have examined to come to a conclusion about this major issue of rich taxation, it seems there is no real consensus (though a greater number of economists Ive read in researching this seem to lean towards the idea that the theory of the rich stimulating economic growth is false) and that it is an extremely contentious topic for debate. There are many well-respected men and excellent statistics in these articles on both sides of the debate. The main dividing line, as is for most economic issues, is the interpretation of the numbers. So much else happened around those tax hikes and cuts on the wealthy that it is nearly impossible to say with a large degree of certainty whether it was the tax rate or something totally unrelated that led to economic boom or bust. These men and others have done their homework on this issue and have come up with a variety of answers. After doing a good deal of research and thinking, I feel that I too can come to a conclusion about this issue. Based on all I have studied so far, I believe that tax hikes on certain members of the wealthy (those specific members being corporations employing mostly skilled workers) would generate a significant amount of tax revenue that could be used to help everyone else without hurting the employment rate. In my position synthesis, I will address why I think this is the case, and why I feel certain arguments are more valid than the others, by examining the external circumstances of the statistics and economic policy brought up by these sources.