With a net worth somewhere in the neighborhood of $1 billion, venture capitalist Nick Hanauer is very successful at what he does. Among other smart moves, he was an early investor in Amazon.
Like many of his peers, Hanauer has strong opinions about the wisdom of taxing the rich and the importance of what have come to be called “job creators.” Here’s part of what he had to say on the subject in a recent speech (full text available here):
“I have started or helped start, dozens of businesses and initially hired lots of people. But if no one could have afforded to buy what we had to sell, my businesses would all have failed and all those jobs would have evaporated.
That’s why I can say with confidence that rich people don’t create jobs, nor do businesses, large or small. What does lead to more employment is a “circle of life”-like feedback loop between customers and businesses. And only consumers can set in motion this virtuous cycle of increasing demand and hiring. In this sense, an ordinary middle-class consumer is far more of a job creator than a capitalist like me….
Anyone who’s ever run a business knows that hiring more people is a capitalist’s course of last resort, something we do only when increasing customer demand requires it. In this sense, calling ourselves job creators isn’t just inaccurate, it’s disingenuous.
That’s why our current policies are so upside down. When you have a tax system in which most of the exemptions and the lowest rates benefit the richest, all in the name of job creation, all that happens is that the rich get richer.
Since 1980 the share of income for the richest Americans has more than tripled while effective tax rates have declined by close to 50%.
If it were true that lower tax rates and more wealth for the wealthy would lead to more job creation, then today we would be drowning in jobs. And yet unemployment and under-employment is at record highs….
We’ve had it backward for the last 30 years. Rich businesspeople like me don’t create jobs. Rather they are a consequence of an eco-systemic feedback loop animated by middle-class consumers, and when they thrive, businesses grow and hire, and owners profit. That’s why taxing the rich to pay for investments that benefit all is a great deal for both the middle class and the rich.
So here’s an idea worth spreading.
In a capitalist economy, the true job creators are consumers, the middle class. And taxing the rich to make investments that grow the middle class is the single smartest thing we can do for the middle class, the poor and the rich.”
Discuss among yourselves.
– Jay Bookman