On Thursday, entrepreneur and self-described one percenter Nick Hanauer warned Congress that rich people like him aren’t the engines of the economy. In a testimony before the Senate Banking Committee, he explained why, in fact, middle-class workers are the economy’s real job creators:
In the same way that it’s a fact that the sun, not earth is the center of the solar system, it’s also a fact that the middle class, not rich business people like me are the center of America’s economy. […]
As an entrepreneur and investor, 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 would have failed and all those jobs would have evaporated.
He described what he calls a “virtuous cycle” in which middle class consumers have money to buy goods, which increases demand and therefore hiring. The rich, on the other hand, don’t fuel the economy with their consumption in the same way. “I earn 1,000 times the median wage, but I do not buy 1,000 times as much stuff,” he noted.
But the country’s policies pretend otherwise. He included facts that display how skewed America’s policy priorities really are:
- Corporate profits and unemployment are simultaneously at 50-year highs.
- The share of income for the richest 1 percent has tripled since 1980 while their taxes have only risen by 50 percent.
- The rich enjoy a 15–20 percent tax rate on capital gains, dividends, and carried interest while the top marginal rate on middle class Americans is 39 percent.
He concludes, “Tax the wealthy and corporations — as we once did in this country — and invest that money in the middle class-as we once did in this country.”
Facts back up his proposal that taxing the rest and investing the revenues can spur economic growth. The years following the Bush tax cuts were the worst for job creation since record keeping began. Meanwhile, job growth in the post-war period has been stronger when the top income tax rate is higher.