Both speeches deal with a stereotyped version of the real world. They talk as though the rich and corporations were not currently being taxed or were being taxed at an incredibly low rate. In reality, by some measures such as the proportion of the tax burden born by the wealthy, we have one of the world's highest tax rates. Our corporate tax rate is by far the highest in the world although it is riddled with exceptions. Even taking those into account, we are one of the highest. Hanauer and Warren fail to recognize this or to say what they think the tax rate should be, just that a higher rate would be preferable since it could be redistributed.
Hanauer starts with a strange concept - that employers do not create jobs, the middle class does.
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.
Hanauer acts as if there is a direct relationship between demand and workforce. The relationship is more nuanced. Sometimes the cost of adding more employees is prohibitive. If an office only has room for 100 employees then the cost of adding the 101st employee includes acquiring new office space. If it takes fifteen workers and a factory line to produce a product then adding one or two workers will not improve production. The point here is that Hanauer is oversimplifying.
Hanauer also rewrites history:
Here is where he really goes off the rails:
[O]ur current policies are … 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.
The extraordinary differential between a 15% tax rate on capital gains, dividends, and carried interest for capitalists, and the 35% top marginal rate on work for ordinary Americans is a privilege that is hard to justify without just a touch of deification.That 35% top rate only applies to amounts above $388,350/year. For the last four years the Democrats have been insisting that anyone who makes more than $200,000/year ($250,000 for families) is rich but Hanauer calls them "ordinary American". Also, a lot of people who make less than that earn some amount of capital gains.
Here is his summary:
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.This sounds good but it is terrible public policy. "Investments that grow the middle class" means spending on targeted constituencies. We just tried that with Obama's stimulus. Guess what? It didn't work. A review of spending by county shows that the money did not go to places where unemployment was highest, it went to places that had well-connected congressmen. This is known as "crony capitalism" and leads to all sorts of abuses. For an example, see the John Murtha Airport where a powerful congressman sent $150 million to a tiny airport. If we adopted Hanauer's proposals then this would be the future of our economy.