Tim Nerenz:

It is a fact that the S&P 500 reported a combined $1.6 trillion in profits in 2011, the highest profits in 50 years, adjusted for inflation.  It is also a fact that unemployment remains above 8%.  Advocates for higher taxes add these two facts together to refute the notion that lower taxes stimulate job creation.

But there are a couple of other facts to consider when evaluating the implications of those first two — first, there are 2.5 million corporations in the United States, and those 50-year record profits are what was reported by 500 of them for a single year.  A record amount of profit posted by .02% of our corporations does not tell us anything meaningful about the profitability of the other 99.98%.

Next, only 21 million Americans work for a Fortune 500 firm, out of the 130 million or so who work.  With something like 15 million Americans unemployed or underemployed, the Fortune 500 companies would have to collectively increase their workforce by 71% to put everyone back to work.  Not gonna happen.

And finally, perhaps most importantly, 52% of the profits of the Fortune 500 in 2011 were earned overseas.  When overseas profits are removed from corporate earnings reports, 2011 was a quite ordinary year in comparison to the previous 49.

Actually, Nerenz’s estimate of 2.5 million corporations (which, by the way, pay the highest corporate income tax rates in the world) is low. According to the U.S. Census Bureau, the number of businesses with employees as of 2007 was 6,049,655. Another 21,708,021 businesses were sole proprietors, businesses without employees besides the owner. So complaining about the profits of the S&P 500 means you’re complaining about 0.0018 percent of American businesses, which employ the 34.9 percent of people who, despite government’s best efforts, as Nerenz put it, “create the wealth that sustains us all.”

About those profits …

It is those new entrants, not the Fortune 500, that are the key to solving our problem of high chronic unemployment.  In a market economy, high profits are a good thing; they attract new competitors willing to accept lower profits for better goods.  That is why prices drop and quality rises in free markets where choice and competition are left to work their magic.

It was the high profits of IBM in the 1970’s that invited insurgent start-ups like Apple and Microsoft.  Henry Ford did not walk to Detroit dreaming of high taxes and low profits; it was the other way around, just as it is for every other entrepreneur whose dreams of today will provide the jobs of tomorrow.  Nobody gets in it for the taxes.

The economics of taxation is not difficult to understand, it is only difficult to accept; in the end, there is no corporate tax – it is all paid for by consumers, every penny of it. …

Higher taxes on “record” profits might sound appealing, but emotion and economics are two very different standards by which to judge ideas.  Raising corporate tax rates means higher prices for consumers and job cuts to offset the government’s larger rake – ask the people of Illinois if it has solved any of their problems.

Next year, a $500 billion tax increase awaits Americans if Congress does not act this year to extend current tax rates, including the infamous “Bush tax cuts” from the last decade.  70% of this will fall on middle and low-income families with an average increased tax burden of $3,800 per family, according to Heritage Foundation.

That is not just a 50-year record, it is the largest tax increase in the history of the world.

The highest tax increase in the history of the world — now there’s an accomplishment for a second presidential term. Actually, “sentence” would be more appropriate than “term” for this country.