These words were recently spoken by Thomas L Hungerford of the US Congressional Research Service. He said: “The top [US] income tax rates have changed considerably since the end of World War II. Throughout the late-1940s and 1950s, the top marginal tax rate was typically above 90 per cent; today it is 35 per cent. Additionally, the top capital gains tax rate was 25 per cent in the 1950s and 1960s, 35 per cent in the 1970s; today it is 15 per cent. The average tax rate faced by the top 0.01 per cent of taxpayers was above 40 per cent until the mid-1980s; today it is below 25 per cent. Tax rates affecting taxpayers at the top of the income distribution are currently at their lowest levels since the end of the second World War.”
In other words, US taxes right now are pretty much near their post war low. And yet, what do certain US politicians say the cause of all their woe is? Why, taxes are too high of course.
So the big idea is to get the US economy moving and reduce government debt by cutting taxes.
The problem right now is that new technology doesn’t require that much labour. Take the new iPhone. Setting aside problems with its mapping software, this looks set to be the most successful product launch ever. Apple itself is a major contributor to the US economy, except it doesn’t employ that many staff.
According to a study by Analysis Group, Apple has created no less than 304,000 jobs across the US. That’s impressive indeed. Yet Wal Mart, which in terms of market cap is worth only slightly over a third of Apple, employs 2.1 million Americans. Here is the irony: the report produced by Analysis Group was meant to be promoting the importance of Apple to the US economy. See Apple’s own web site creating new jobs through innovation
The truth is that the Luddites have a point. Yes, new technology destroys then creates jobs, but it is much harder to see how really new technology can create more jobs than it destroys.
Some say 3D printing will hand the manufacturing advantage back to the West, as manufacturing is done increasingly by machines, which require highly educated workers to operate them. And let’s face it, 3D printing is automation in its most extreme form, and requires a good deal of skill to understand, and use.
But nanotechnology may have an even more extreme effect on job creation.
One of the effects of new technology is to reward those who understand it and can operate it very well indeed. For those who can’t, wages will be significantly lower.
It is possible that the result of new technology will be a widening in the gap between the very rich and the rest.
At the same time advances in prosthetics, and genetics research, is creating extraordinary opportunities in the world of medicine. But unless the wealth generated by new technology trickles down and benefits everyone, very few people will be able to afford this new medicine.
For the majority of people future jobs will be in services, for example in heathcare, leisure and education.
But while new technology is an extraordinary opportunity, it is also a threat.
And it may be that the only solution lies in a complete re-think in how taxes operate, and wealth is distributed.
PS, This report published after the above article was written, adds an interesting dimension:Resolution Foundation
Who Gains from Growth? Living standards in 2020
©2012 Investment and Business News.
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