Interestingly, the top U.S. tax rate from 1951–1963 was >90%, and it was >50% during the half-century from 1932–1986 – https://en.wikipedia.org/wiki/Income_tax_in_the_United_State...
This is another variation on the "rich people hoard cash" theory, which is completely false. Rich people invest all of their money back into the economy. Even bank deposits are invested back into the economy (when the bank loans it out).
Scrooge McDuck cash vaults do not exist.
So, they do circulate through the broader economy. There's no silo of cash sitting somewhere paying dividends.
"investing" != "giving it out". "growing economy" != "less inequality".
The reason Apple, etc., invest a lot of their cash overseas is not because those are better investments, but because the US corporate taxes are so much higher those foreign investments become more attractive.
Level the taxes, and the money will be reinvested back in the US.
To know what they are investing in, consult the Apple Annual Report, which says. Even if the balance sheet says "cash", what they mean is "bank deposits". Bank deposits get loaned out to others, and those others spend it.
Nobody borrows money in order to hoard a pile of currency.
Of course it is. What do you think those funds invest in? Piles of cash?
> Bank lending is driven by demand, not deposits.
If that were true, banks wouldn't need deposits and certainly wouldn't offer free checking. They're not charities.
> If that were true, banks wouldn't need deposits
That doesn't follow from what I said. Banks are required by law to back their loans up with reserves. So when they don't have enough reserves, they borrow on the interbank lending market or from the central bank.
http://www.bankofengland.co.uk/publications/Documents/quarte...
HF traders don't hold for long, so why are they equivalent?
Of course it is. Buying a piece of a company is investing in it.
> Buy that logic, high-frequency traders are investing in the economy.
And they are - even if they hold a particular stock for a millisecond. The aggregate invested across the market is what matters.
It's a bit like calculus. All those infinitesimal bits add up to real amounts.
> That doesn't follow from what I said.
Maybe you can explain why banks offer free checking.
The original comment was implying that rich people contribute to the economy by investing their spare savings back into it. I'm not claiming that there's no benefit to buying secondary stocks and derivatives on them, just that this is not even remotely the same in terms of creating economic growth as actually investing in creating new business opportunities and such. It's kind of like saying that trust fund kids who don't work contribute to the economy by spending money. And often this "investment" in the stock market is the mere fueling of bubbles.
Money in bank accounts is loaned to others and "thrust back" into the economy.
Money in other investments (stocks, bonds) also funds economic activity.
Your argument only makes sense if the wealthy are hoarding cash under their mattresses, which is not what they do.