Sheila Kennedy has a post discussing Indiana’s economic activity and sales tax. She references an Indiana Business Journal report indicating that low wages are bad for business and hurt the economy. Discussing Indiana’s heavy reliance on sales taxes, she also references Standard & Poor indicating that “the slowdown in wage growth for most Hoosiers means they’re not spending much more money than before. And our wealthiest residents tend to save a greater share of their income and spend it on untaxed services.”
None of this is surprising. Sales taxes are known to be more volatile than property taxes, declining as the economy declines — which is often when government expenditures are most needed by the citizens. And discretionary consumer income drives the economy because as Mr. Ford reputedly observed, “if I pay a man enough to buy my car, he’ll buy my car.”
But wages are kind of a tragedy of the commons sort of thing. As a business owner, focused on profits, you’d probably be ideally situated if you can produce your stuff with low wage labor and sell your stuff to people with high wages. But, as more businesses pursue this model, there will be fewer and fewer high wage customers. Eventually the economy stagnates.
Like the man said, “pigs get fat, hogs get slaughtered.” A little bit of greed makes the economic system hum. Too much greed will make the whole system seize up.
I honestly don’t see why we have to learn this kind of thing over and over. It was proven in the Thirties and Forties; we prospered greatly from it in the Fifties and Sixties, and then we started taking things for granted.
And then? In the Eighties, the “Trickle Down” heresy swept the country, and has now nearly reached its logical conclusion, which is, all the resources and wealth in the country in the hands of a few, who will, in the future, fight over it, with the warriors being as usual, the pawns (aka ‘the working poor’. Can you say “Union Thugs”?
I blame the middle class. The wealthy are just following the incentives and pursuing their short term best interest. The poor are getting the short end of the stick either way and, when they do vote, tend not to vote in favor of the trickle down stuff. The middle class votes for people who don’t support their economic interests, cutting their own throats and those of their neighbors, either because they can’t be bothered to understand, because they have unrealistic visions of their economic futures, or they are blinded by petty resentments of various kinds.
I am not a historian, but from what I’ve learned, EVERY imbalance of power fails eventually. The problem is that corrections are bloody and set humanity back a good bit each time.
If I were a rich man, I would be terrified of the current situation. Sure, you can build a panic room and an offshore place to live, and you might be able to hide away from a “revolution.” But you can be damned well sure that your piles of paper, or your digital bank account, aren’t going to be worth much after that.
I’d either be trying to figure out how to get the system balanced, or spending my vast fortunes figuring out how to be comfortable and self sustainable someplace far away. Like Saskatchewan. I see people like Bill Gates and Warren Buffet in the first camp. But I think a lot of the rich are very, very naive and disconnected about what their future, or at least their kids’ futures could hold.
Meant to add – in other words, I see the Rich cutting their own throats just like the middle class, but on a more long term, less obvious basis. Karma sucks.
Joseph Stiglitz (the famous economist) wrote the article that started the most recent inequality debate in his classic article in Vanity Fair, “Of the 1%, by the 1%, for the 1%”. He voiced your concern in the last paragraph, where he said, “…[T]here is one thing that money doesn’t seem to have bought: an understanding that their fate is bound up with how the other 99 percent live. Throughout history, this is something that the top 1 percent eventually do learn. Too late.” That should give them chills.
You all assume they can read history, do math or have the will to do either. So long as they can buy what they want and hire the muscle or buy the politician, they will proceed. Doug’s right, the middle class aspires to be rich and keep buying this crap that they / we are better than the poor, when most of us are really only a small ledge off from their state.
À la lanterne
Certainly would diminish the 1% numbers.
I remember being in the voting line several years ago when we voted on the property tax cap. All people heard was “tax cap” while not considering a cap in one place would mean higher taxes elsewhere; e.g., the sales tax. While we haven’t had a sales tax increase since the vote I suspect that we are getting squeezed on services due to the cap. Anyone remember when the sales tax was 4%?
Services are without a doubt being squeezed due to tax income lost to local governments. I’ve looked at tax cap losses around the state and my small sample (maybe 25 units) and some are losing up to 30% of their property tax income. There is no way to replace it – the unit has to deal with it. Of course that fits well with Daniels lectures on local government spending too much money.
Yep, way too many police, firefighters and teachers taking advantage of the public and the entrepreneur class. And those garbage men and road workers getting pensions and such? We have to make sure all those government workers get less… And we can cut back all the social services, like domestic violence programs and such. They don’t help the job creators, just the “takers”. If “those people” would just work harder, then they’d have a better life. They’re way more unworthy than those people running the country.