Nick Hanauer: The Video TED Didn’t Want You To See?

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Joanna Schroeder is the type of working mom who opens her car door and junk spills out all over the ground. She serves as Executive Editor of The Good Men Project and is a freelance writer whose work has appeared on sites like xoJane, hlntv.com, and The Huffington Post. Joanna loves playing with her sons, skateboarding with her husband, and hanging out with friends. Her dream is to someday finish her almost-done novel and get some sleep. Follow her shenanigans on Twitter.

Comments

  1. This is hard, his core message is correct: consumers are the primary drivers of job creation.

    Back in the 1980s, the Republican party used to listen to economists. Ronald Reagan’s policies were shaped by people like Paul Volcker, and whether progressives like to admit it or not, they were the right ideas at the time (the stagflation of the 1970s went away).

    At some point the Republican party stopped listening to economists and started to find other justifications for their policies. The Bush tax cuts were poorly designed and executed, mostly because they were no longer based in real-world economic thought, but rather in some kind of dogma that had built up within the party that had lost the rigor of Reagan’s advisors.

    But then Mr. Hanauer jumps off the deep end with his additional conclusions.

    For example, there are MANY reasons to justify the differential tax rate on capital gains, most of which have to do with the Middle Class. To gain the preferential rate, a person must experience a capital gain from an investment that has lasted longer than a year, short-term capital gains are taxed at the taxpayer’s marginal rate (35%). This creates unique problems, such as:

    Bunching: The gain from an asset is realized only in the year it is sold, meaning that the gains from all the previous years are “bunched” together and made to look like one big paycheck. This means that, had the taxes been paid on a yearly basis, they probably would have been paid at a lower marginal rate than if they are paid all at once. Congress recognizes this problem by taxing capital gains differently.

    Inflation: Because the asset has been held for more than a year, it will appear to have “gained value” just to keep pace with inflation. Since this isn’t a real gain, the tax code recognizes this and there is a differential rate.

    Penalizing Exchanges: If you held stock in company X for a number of years and you then wish to exchange it for stock in company Y, because company X is going bankrupt, then you have to cash out in order to buy the shares of company Y. This creates income that gets taxed even though you haven’t actually “cashed out” of the market and are still trying to invest. This also isn’t a real gain because you are just switching your investment instead of cashing in, and therefore justifies a lower tax rate.

    Lock-In Problems: When you know the sale of an asset will generate an enormous tax bill, you are less likely to sell that asset. Because we all benefit when people are more willing to sell their assets, there is a desire to prevent “lock in” and make people more willing to sell.

    Double Taxation: When a corporation pays a dividend, that money is taxed first as corporate income, and then again as income to the individual shareholders who receive the dividend. Because the money has already been taxed once, at the corporate rate, the capital gains tax is reduced to reflect a preference against double taxation.

    Disincentive to save: People are better off when they save money, but are less likely to save if their investments are highly taxed. As there is a preference for saving, there is a lower tax rate on investments.

    So, you see, when Mr. Hanauer says there’s “really no reason” to justify differential taxation, he would seem to have not really thought it through.

  2. wellokaythen says:

    I agree very much with his sentiment and somewhat with his economic theory, though I think he’s oversimplified some things and overstated some others. I disagree with some parts of his presentation, but I don’t think he’s being overly partisan. I think TED is being way too sensitive here, which is all the more remarkable because the TED talks are supposed to be mindblowing presentations that are not afraid to approach controversial subjects. If you’re afraid of provoking the hotheaded political trolls out there, then you’ll never be able to talk about anything of any real substance.

    I’m sure TED could find a dozen different charismatic, brainiac economists with Power Point presentations who could give 13 different views of the relationship between tax rates and economic growth. What are they afraid of?

    How about a TED lecture about the fact that two people can develop virtually opposite economic theories and both win the Nobel Prize in Economics one right after the other?

  3. Well, his presentation certainly takes a position and the economy is a political hot topic at the moment. However, many of the presenter’s take a position based on their research findings. It just so happens that rather than it being a TED Talk about experiencing a temporal lobe stroke, or mental health in a third world country, it’s about the wealthy and job creation. I applaud TED for letting the viewers decide.

  4. Robert Martinez says:

    Mr. Hanauer’s talk is partisan but unfortunately the topic is partisan. Robert Reich describes the very same thing in his book Aftershock and citing the theory of Marriner Eccles who served under FDR. Henry Ford stated when he paid his employees a wage of $5.00 per week, that he wanted them to afford to purchase his product.
    I think TED was correct in allowing us to make up our own minds and was a way for TED to have it both ways. Full access to information and obtaining it are paramount for a person to make an intelligent decision. In the political arena, the message is distorted or managed in order to manipulate the average uninformed voter to their argument. Politics in this country has become ideological, rather like religious ideology.

  5. It is partisan…no doubt. But it is also terribly true.

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  1. [...] web is abuzz with TED’s decision not to let a former Amazon.com investor make his case for middle-class job creation. Meanwhile Facebook founder Mark Zuckerberg gets ready [...]

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