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There is a misconception that cutting the tax liability of businesses will create jobs.  In my case: FALSE.

I am a small business owner, and cutting my taxes will not create a single job.  As a matter of fact, if you cut my taxes, it may just eliminate a few.  Why?

Like many small business owners, my family and I run a business in which we employ zero people.  Let me say that again.  I run a business in which I employ ZERO people.  My wife and I handle the sales, web design, shipping, and bookkeeping, while my mother-in-law handles the inventory.  We share all responsibilities and profits equally as a family and a corporation.

We make more than enough to support each of us, but we have no desire to expand beyond our current business capabilities to the point that it would require us to employ non-family members on payroll.  Truth is, I know of 10 to 15 other small businesses in my small town who are in exactly the same boat, employing few if any non-family members.

So my question to Gov. Romney, how does lowering my tax burden create jobs?  If I am given a tax cut of 20% as Romney proposes, that 20% will be taken out of the economy, and will go directly into our savings account.  That 20% will gain interest from my bank, taking even more money out of the economy, and there it would sit, hopefully until I can pass it on to my children.

Giving myself, and the millions of other small businesses like mine a tax break will not create a single job.  I would consider it a bonus, a corporate bonus, courtesy of the government, and in my pocket it would go.

Which makes me wonder, how will giving any major corporation a tax cut result in more jobs?  Businesses only hire when they feel the need to expand, or to raise production.  If a business is strong and sound and does not desire to expand, then there is no incentive, no matter how much money you throw at them to employ any additional people.  Businesses do not hire people because they want too, they hire people because they NEED too.

So if I, as a corporation, would not increase hiring through a tax decrease, then I fail to see the reason a major corporation would increase hiring just because they have more profit on their books.  Wouldn't they just pocket it through bonuses too?  It is the goal of business to provide profit, not employment.

Would that money not be better being collected, providing public employment via state and local governments?  Governments can always create jobs.  There is always work that needs doing, whether this be clerical office work, or even providing funding to private firms to fix our highways and bridges.

That's what I would rather see.  Give my neighbor a job, and let him spend money in my business, instead of just handing me the money like I'm on welfare.  By doing this you not only provide my family with income and self worth, you also provide the worker, the wholesaler, the manufacturer, the delivery man bringing more goods, and yes even the oil companies to fuel those vehicles with profit.  This is how economies should work.  Through the exchange of funds for goods and services, not through corporate handouts.

Would I appreciate keeping more of the money that I earn?  Sure, who wouldn't.  But is it the most responsible and logical way for an economy to work?  No freaking way.

6:37 PM PT: I just want to say thank you to everyone who has commented.  This is my first diary that has received so much conversation, and I really appreciate it.

Originally posted to PRRedlin on Wed Sep 26, 2012 at 08:55 AM PDT.

Also republished by Community Spotlight.


Should I be given corporate welfare at the expense of public sector jobs?

82%252 votes
7%23 votes
10%32 votes

| 307 votes | Vote | Results

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Comment Preferences

  •  Even if you were willing to hire others... (55+ / 0-)

    a tax cut wouldn't help you.

    You would only hire someone if doing that increases your marginal profit.  Lowering your individual income taxes has absolutely nothing to do with that calculation.  If hiring someone else means you are paying more in salary and benefits to that person than the revenue they bring in, you won't hire them regardless of whether you have more money in your pocket.  And if the additional revenues you get from hiring the person exceeds the expense of hiring her, you are going to hire her to get that extra profit regardless of whether or not you have a few extra bucks in your pocket.

    The Republication argument that lower taxes leads to the creation of jobs is total BS.  The only way it might do so is if it reduces the cost of hiring a new employee, such as providing a tax credit for hiring.  In that case, this tax break might make it logical to hire a new employee, because the profits to be earned may now exceed the cost of hiring the employee.  Obama has favored such targeted tax credits to encourage hiring; the Republicans have blocked them.

    •  Yes, yes, and Yes! (32+ / 0-)

      I've been making the same argument for months on Facebook. Businesses will hire when they need to expand (demand exceeds supply/resources). ACA (for those larger businesses), personal tax cuts, etc won't interfere with that.

      When a business expands, it will hire (doing the basic business calculation of expected revenue must exceed salary and compensation).

      I'm not a business owner, but even I know that. Thank you so much for corroborating it.

    •  Exacly my point. (13+ / 0-)

      In my case the ONLY way I'd hire someone, would be if the government paid their salary and they worked for me for free.  And even then, I probably wouldn't because I enjoy all the aspects of my business.

      95% of all life forms that once existed on earth are now extinct. It is only a matter of time until the Republicans follow suit.

      by PRRedlin on Wed Sep 26, 2012 at 09:21:44 AM PDT

      [ Parent ]

      •  Based on what you say about paying taxes.... (1+ / 0-)
        Recommended by:
        Wham Bam

        You would be wise to send MORE in to the federal government.  That would help the economy.  So my question is... why don't you send more taxes in?

        •  Taxes and Charity are two different things ... (11+ / 0-)

          Obviously, if I voluntarily "pay more tax" ... but my competitors do not ... I place myself at disadvantage.

          On the other hand, if I "give to charity" ... I enhance my standing in my community. I garner goodwill from my neighbors, I expand my network of business connections and advantagious potential in-laws.  

          At the very least, I have the satisfaction of seeing the success of projects I approve of .

          And, if I'm not in a position to "give" at that level of philanthropy -- well, does the expression "a piss in the ocean" mean anything to you ?

          •  How does you paying more tax put you... (1+ / 0-)
            Recommended by:
            Wham Bam

            at a disadvantage from your competitors?  Sales are still the same... cost of goods sold are still the same... profit before tax is still the same.. you just send the government more of your money because you believe sending the government more money is a good thing.

            •  you are playing devils advocate (3+ / 0-)
              Recommended by:
              Artryst, ladybug53, FloridaSNMOM

              but often I do pay more than my fair share.  I take less deductions than I could, etc, etc.

              95% of all life forms that once existed on earth are now extinct. It is only a matter of time until the Republicans follow suit.

              by PRRedlin on Wed Sep 26, 2012 at 06:39:46 PM PDT

              [ Parent ]

              •  Have you ever noticed that His Satanic Majesty (0+ / 0-)

                gets so much of his advocacy pro bono ?

                I suppose it's the " treasure in Paradise" strategy  ... but for that segment of the population that is pretty certain it isn't going there.

            •  ??? (7+ / 0-)

              It increases his cost of doing business more than it does for his competitors. Those costs shared by him and his competitors do not put him at an advantage or disadvantage. Costs he undertakes and that his competitors do not puts upward pressure on his prices that they doesn't have.

              Charitable community contributions do put the same upward pressure on his prices, but they also garner support for his company. I patronize a number of local businesses for goods and services even though they are not the lowest cost. I do so because of the fact that they are active, respected, and compassionate community members. I favor good locals over big conglomerates any day.

              A conservative is a man with two perfectly good legs who, however, has never learned how to walk forward. Franklin D. Roosevelt

              by notrouble on Wed Sep 26, 2012 at 07:18:42 PM PDT

              [ Parent ]

        •  An individual sending in more $ doesn't help (7+ / 0-)

          Let's imagine that 50 wealthy people each decide that their taxes should be higher, and each add an average of $100,000 to their federal tax bill. The reason this doesn't work should be obvious. The federal government is much much larger than any charity, even one founded by Bill Gates. Our 50 wealthy contributors don't even make a rounding error in the federal budget and even if the government handed out that money to people it would be about 1-2 cents per person. If a businessperson wants to stimulate the economy around them, they'd be much better off spending that money at a local business, donating to a local charity, or even throwing the cash out their limousine window.

          It is only when you collect money from a large percentage of people in the country, also known as a tax, that you can actually do anything useful on the federal government scale.

    •  However (0+ / 0-)

      Businesses can always leave or not show up at all due to an unfavorable tax climate. They can often easily set up shop in the town or state next door with much lower taxes.

      (-5.50,-6.67): Left Libertarian
      Leadership doesn't mean taking a straw poll and then just throwing up your hands. -Jyrinx

      by Sparhawk on Wed Sep 26, 2012 at 10:16:01 AM PDT

      [ Parent ]

      •  That's neither here nor there (12+ / 0-)

        in  federal discussion.  That would be an issue for state taxation, not federal income tax.  Whether a business sets up in NY or PA, they are still american jobs.

        95% of all life forms that once existed on earth are now extinct. It is only a matter of time until the Republicans follow suit.

        by PRRedlin on Wed Sep 26, 2012 at 10:33:19 AM PDT

        [ Parent ]

        •  They can also set up in Mexico, Canada, China, etc (0+ / 0-)
          •  I'm an american citizen (3+ / 0-)
            Recommended by:
            Calamity Jean, Wood Dragon, ozsea1

            with a small business.  Why or how would I set up shop in a foreign company?   I'm discussing small business here, not international corporations.

            95% of all life forms that once existed on earth are now extinct. It is only a matter of time until the Republicans follow suit.

            by PRRedlin on Thu Sep 27, 2012 at 06:48:19 AM PDT

            [ Parent ]

            •  Depends on your business (0+ / 0-)

              I'm talking right now with some friends in various countries to set up an Internet business.

              A plurality of us are Americans, but since the company can be anywhere we're going to set it up in HK or Singapore.

              o Convenient location to most of Asia (especially HK)
              o Stable business environments
              o Good trustworthy legal systems
              o Low taxes - it's hard to explain to a German, a Russian, or a Kuwaiti (our three non-Americans) why they should pay US taxes for a business that does not need to be located in the US.

          •  Good riddance, then. (0+ / 0-)

            sheesh if the wilting wallflower multi-nationals want to pay a lower tax rate then they literally should just leave. They already abandon a country when its workers dare to exercise their right to unionize. So go away and peddle your merchandise somewhere else.

            Their pleas of poverty are a little hard to believe nowadays, especially when decades of accommodation have left them with outsized profits and workers with wage increases that don't even match inflation.

      •  It's not so easy for small businesses. People seem (17+ / 0-)

        to think that if you own a business you must be rolling in money and that's just not necessarily true. I am willing to bet that most small business have very tight cash flows (like mine). In my case (a brick and mortar retail store) giving up a location where you have an established customer base and paying tens of thousands of dollars to build out at a new location just doesn't make economic sense.

        A society grows great when old men plant trees in whose shade they know they shall never sit. - Greek proverb

        by marleycat on Wed Sep 26, 2012 at 12:10:23 PM PDT

        [ Parent ]

        •  It doesn't make sense (1+ / 0-)
          Recommended by:

          But your business is a service business. It doesn't really bring money into the community (unless people travel from far and wide to come to it).

          The businesses that being money into a community are export related businesses: manufacturing, high tech design, tourism, agribusiness, stuff like that. Your business depends on those things continuing to have a local presence. If Intel or Ford or whoever your big export-oriented local business packs up shop, so do you.

          (-5.50,-6.67): Left Libertarian
          Leadership doesn't mean taking a straw poll and then just throwing up your hands. -Jyrinx

          by Sparhawk on Wed Sep 26, 2012 at 01:44:33 PM PDT

          [ Parent ]

          •  And yet, the reality is that (4+ / 0-)

            the income and access to workers generated by a location is more important than the tax rate.

            You might enjoy The New Geography of Jobs by Enrico Moretti. He opens it with an example of an engineer in the 1960's trying to decide between two desirable cities for his next job: Menlo Park or Visalia.

            Obviously the situation has changed a bit since...

            Fry, don't be a hero! It's not covered by our health plan!

            by elfling on Wed Sep 26, 2012 at 02:58:48 PM PDT

            [ Parent ]

        •  I like to think of it as a " cash ooze" n/t (0+ / 0-)
      •  In the situation described abvoe that's unlikely. (9+ / 0-)

        What are the chances that family in question is going to uproot and move to another state in order to save a couple % on taxes?

        If you have many low wage employees, and you see them as a commodity, then it might make sense to move to a place with lower taxes (and usually wages)
        Then you are faced with a potential skills gap and the need for a customer base.
        You also have to consider the cost of moving.

        2012 Elections: POTUS - Obama; CA-47 (new) - Lowenthal

        by mungley on Wed Sep 26, 2012 at 12:41:09 PM PDT

        [ Parent ]

      •  I remember when my Dad's employer moved (15+ / 0-)

        a 50 employee defense hardware company from New York to Connecticut in search of ... as you say ... "much lower taxes" ...

        Part of the plan was, that the 3 brothers who owned the company felt they had no need for good public schools because they were already committed to private schooling for their kids.

        Sadly for them, however, Connecticut had been actively recruiting LOTS OF medium small enterprises to expand the State's  tax base when the tax breaks that were offered for relocating had expired.

        So ... first came the loss of a couple of key employee engineers who didn't want to swap their paid-for $150K homes for new $320K+ houses.

        Then came the expense of moving all the lathes, millers, tool cribs and so forth into their new location

        But before that could happen ... all those OTHER companies that wanted to avoid taxation had entered the real estate market in Connecticut  -- so  the cost of floorspace zoned for manufacturing had gone up about 25%.

        Now, the influx of new enterprise and the people working in to Connecticut necessitated that the State had to expand infrastructure and services to accommodate a new voting block who were "used to better than this".  So streets widened, sewers connected, traffic lights installed, cops, teachers and firefighters hired.

        And guess what ... the tax rates went up.

        I don't think the full costs of the move were ever actually recovered.

        Now ... if what we're talking about is selling one fast-food chain restaurant in a high tax state and building a new one in a low tax venue -- well, maybe it the numbers would work .   Assuming the local people in the new venue had the spending money to buy McTacos at the same rate as the people in the old location.

        But JOHN GAULT'S REBELLION  is a nice fantasy ... so much more true to life than the FREE LUNA PARTY.

        •  What you describe (0+ / 0-)

          Is exactly how it should work. In theory, competition between localities should eventually even out as the different pressures involved find equilibrium.

          (-5.50,-6.67): Left Libertarian
          Leadership doesn't mean taking a straw poll and then just throwing up your hands. -Jyrinx

          by Sparhawk on Wed Sep 26, 2012 at 02:40:18 PM PDT

          [ Parent ]

          •  Depends on whose point of view ... (7+ / 0-)

            Take for example all the machinists and office workers  (my dad included) whose jobs "left town".

            That's "how it's supposed to work" for them?

            And the owners, who thought they were helping themselves to an enormous tax break they could pocket ... and wound up with a 15 year losing proposition?  

            Good for them?

            I guess it was good for some Connecticut communities which got their traffic lights, sewers and higher taxes ... except for those of their residents who couldn't afford, or didn't much like the industrialization of their exurbs.

            Bat Masterson once observed  "It all evens out in the end: the rich man gets his ice in the summer, the poor man also gets his ice --but only in the winter.  It all evens out."

        •  Rec'd for FREE LUNA (1+ / 0-)
          Recommended by:

          The Moon is a Harsh Mistress is my favorite novel :-)

      •  That ends up as a race to the bottom (12+ / 0-)

        And the problem with a race to the bottom is eventually you hit, you know, bottom.

      •  Depends on the business (5+ / 0-)

        Service businesses, restaurants, NO. The market will only support X Pizza shops, not matter what the tax rate.

        Any business with a high cost to ship items may be better off producing where their customers are.

        So i guess manufacturing might have an incentive to shop around for preferential tax treatment, or possibly research, but small mom and pop businesses, probably not.

        Oh, look.....I get a tagline. I better not waste it. I'd rather have a bottle in front of me than a frontal lobotomy.

        by sd4david on Wed Sep 26, 2012 at 04:03:39 PM PDT

        [ Parent ]

        •  Manufacturing... (0+ / 0-)

          ...high tech design, etc are all utterly necessary for a locality. Without these businesses, there are no local pizza places (or schools, etc either).

          (-5.50,-6.67): Left Libertarian
          Leadership doesn't mean taking a straw poll and then just throwing up your hands. -Jyrinx

          by Sparhawk on Thu Sep 27, 2012 at 03:27:37 AM PDT

          [ Parent ]

    •  Obama sign the HIRE act into law to encourage hire (2+ / 0-)
      Recommended by:
      Sue B, greengemini

      hire-ing that is.

      It had tax incentives but only ran for a year.  I thought it was good in the short-term, though it did take money out of social security

      People, not corporations. Democracy, not totalitarian capitalism.

      by democracy is coming on Wed Sep 26, 2012 at 12:51:24 PM PDT

      [ Parent ]

    •  Indeed, since the cost of the worker's wages (2+ / 0-)
      Recommended by:
      Flying Goat, OhioNatureMom

      are tax-deductible, the net marginal cost of a new worker is actually higher if the tax rate is 0% than if it is 30%.

      Counterintuitive, but true.

      Fry, don't be a hero! It's not covered by our health plan!

      by elfling on Wed Sep 26, 2012 at 02:54:40 PM PDT

      [ Parent ]

    •  I agree with your argument BUT (6+ / 0-)

      If you have an extra $10,000 income, you might spend SOME of it on eating out, going to the movies, buying new furniture, getting new technology, etc. And if each of the people in your family do that, and 50 more people in the same situation do that, it could create enough DEMAND for someone else to hire a worker.

      The point Dems make is putting money in lower income earners hands will increase demand MORE than putting money in higher income earners hands. In aggregate, the wealthy already have their needs covered. People like me, i get a little money, I NEED new truck tires. I could use some new dress clothes. Others would take their family out for more dinners, etc. So the poorer people have  higher MPC, marginal propensity to consume, than wealthier people do. So those people would spend, creating a multiplier effect, creating even MORE jobs. But giving money to Corporations who are SITTING on $2 trillion won't grow the economy. In fact, I would love and idea to get them to give that $2 trillion out as a a one time DIVIDEND. And guess what, RAISING corporate and dividend taxes in 2014 gives companies an incentive to pay out in 2013!

      Oh, look.....I get a tagline. I better not waste it. I'd rather have a bottle in front of me than a frontal lobotomy.

      by sd4david on Wed Sep 26, 2012 at 04:00:09 PM PDT

      [ Parent ]

      •  a little (0+ / 0-)

        more demand for retail sector perhaps, livable wage jobs in US from that $10k ... not likely.

        "History records that the money changers have used every form of abuse, intrigue, deceit, and violent means possible to maintain their control over governments by controlling the money and its issuance." -James Madison

        by FreeTradeIsYourEpitaph on Wed Sep 26, 2012 at 07:04:49 PM PDT

        [ Parent ]

    •  If tax cuts for the rich created jobs, (6+ / 0-)

      unemployment should be under 3% by now.

      The Democratic Party stands for equality for ALL, freedom with responsibility, and a civil and just society.

      by TexasLefty on Wed Sep 26, 2012 at 05:00:39 PM PDT

      [ Parent ]

    •  Corporations sitting on $1.5 trillion (5+ / 0-)

      Why would anyone think further tax cuts will get them to hire.  It is not because they don't have the money, it is because they don't have the demand for their products.  Put more money in the consumer's hands, create more demand and then you will see hiring.  This supply-side BS hasn't worked for 30 years.  Why would anyone think at this point and time that it would start doing so?

      The difficulty lies not so much in developing new ideas as in escaping from old ones! - John Maynard Keynes

      by Do Something on Wed Sep 26, 2012 at 05:18:53 PM PDT

      [ Parent ]

  •  I always love it when (13+ / 0-)

    actual business people refute and debunk the very tired argument that tax cuts create jobs and magically trickle down to the rest of us.  Thanks for that.

  •  And what about lowering capital gains to 0%? (11+ / 0-)

    So that people like Romney, who are not business owner but are merely living off investment growth, end up paying next to nothing? How many jobs has Romney created personally with all of the extra cash he's gotten by using tax loopholes and the downward spiraling tax rates he is under? Has he hired extra maids and gardeners and butlers? Doubtful.

  •  Another fellow "small business" owner here. (28+ / 0-)

    My wife and I work regular jobs full time, I go to school full time after that, and we have a (very) small business beyond that. Uniquely American, as a former president would say.

    Our small business consists of the two of us. We're wedding photographers. We're registered. We pay taxes. There's no freaking way we'd hire anyone regardless of how little we had to pay in taxes, as we have no desire to expand beyond the two of us.

    You know what would make a difference for us? If more people had enough disposable income to spend more money on wedding photography. That means paying people everywhere living wages. That means setting up universal healthcare and childcare. That means attacking income inequality with the fervor normally reserved for attacking poor Middle Eastern countries.

    We're not holding our breath.

    "Growing up is for those who don't have the guts not to. Grow wise, grow loving, grow compassionate, but why grow up?" - Fiddlegirl

    by progressivist on Wed Sep 26, 2012 at 09:14:12 AM PDT

  •  You make the point very clearly. Well done! (6+ / 0-)

    He who can make you believe absurdities, can make you commit atrocities.

    by Sophie Amrain on Wed Sep 26, 2012 at 09:15:05 AM PDT

  •  "cut taxes" is a euphemism. (5+ / 0-)

    The message it is supposed to convey to large employers is, if your employees vote right and re-elect me, then I'll get you a good deal.
    Of course, Republicans sort of undercut their own message when they were content to let whole industries fail because the workers had elected the wrong people in 2006 and 2008.

    The American electorate has become uppity and has to be put in its place.  So, they engineered another economic recession, but this time it went further than they intended and people aren't being bought off by promises of more things to buy. The fact that households continue to pay down their debt, refuse to buy new houses and opt to become more politically involved tells us that.
    People are tired of trading their human rights for property rights. Owning property turned out to be a scam.

    When Dubya announced his home ownership society, I said at the time that "ownership" is not a ship that will take you anywhere you want to go.  And so it was.  It was a trick to get people more into debt so they'd do what they are told.
    After all, a decade before Greenspan had announced that the equity American families had built up in their homes needed to be "liberated for the market"--i.e. for Wall Street to play with.  And so they did until the whole financial bubble collapsed for the simple reason that you can't squeeze blood out of a turnip. When people's monetary income is reduced, they cannot pay their monetary debts.  That's really simple.

    We organize governments to provide benefits and prevent abuse.

    by hannah on Wed Sep 26, 2012 at 09:21:39 AM PDT

  •  A business hires people only when its customers (6+ / 0-)

    create enough extra work that the business needs more people to handle that work.

    It's that simple.

  •  HIGHER Taxes Are the Incentive to Hire. (18+ / 0-)

    Business taxes that is.

    Because wages, like shop expenses, car mileage etc, are all deducted from income before taxes are computed.

    So when business taxes are higher, the write-off you get from paying more wages saves you more tax money than you get when taxes are low.

    Likewise it's HIGHER individual taxes on the owner that are incentive to hire and otherwise invest in the business, especially at upper incomes. When your next million of income was taxed at 70-90% as in the past, it made no sense for you to take millions more out of the business. In those days top compensations were much smaller, leaving money in the businesses to help them grow and provide for a more stable longer term future.

    I too run a sole proprietorship but I do have many business expenses. If a year's end customer surge means I am facing a hefty tax bill, I'll invest in an equipment upgrade or some extra supplies so that my business will benefit from that spending rather than just sending it in as taxes.

    And yes as everyone else here is saying, if I'm producing below capacity because there aren't any more buyers, of course I'm not going to invest in more productivity.

    We are called to speak for the weak, for the voiceless, for victims of our nation and for those it calls enemy.... --ML King "Beyond Vietnam"

    by Gooserock on Wed Sep 26, 2012 at 09:57:25 AM PDT

  •  WAit a minute... (5+ / 0-)

    I too am a small business owner, and everything said here is certainly true.

    But it just occurred to me that the 47% who are not paying income taxes are the perfect example!  They should be creating jobs all over the place since none of their assets are being squandered on the poor and stuff, let alone the elderly, entitlements and defense.

  •  How many jobs did Willard create (2+ / 0-)
    Recommended by:
    greengemini, OhioNatureMom

    with the lower 15% tax rate, saving him $7M?

    I mean, besides employing his wife as the "War on Women" liaison..

    N O N E

    Lower his taxes to $0 will not create a single job...

    Radical Activist Homosexual Agenda: 1. Equality 2. See #1

    by skip945 on Wed Sep 26, 2012 at 12:24:22 PM PDT

    •  The point is not (2+ / 0-)
      Recommended by:
      Calamity Jean, OhioNatureMom

      only that he did not create jobs, but at Bain he destroyed thousands of jobs as well as a good number of good companies. That has to be the meme going forward.

      "Guns don't kill people. People in states without gun-purchase background checks & waiting periods kill people." --John Fugelsang

      by Artryst on Wed Sep 26, 2012 at 08:04:05 PM PDT

      [ Parent ]

  •  A two fer (3+ / 0-)
    Recommended by:
    Old Surgeon, elfling, OhioNatureMom

    Let's eliminate ALL taxes.

    This should result not only in full employment, but so many jobs will be created that we can grant amnesty to all of the undocumented.  We'll obviously need 'em.

  •  Exactly and well said (5+ / 0-)

    My wife and I have a small mom and pop practice with 1.5 employees. Lesser taxes will do NOTHING for us as a business and it will further damage the infrastructure of this country which is what I as a citizen and father and business owner care about.  F.U. Romney, you lying S.O.S. We couldn't make ends meet if I didn't have Social Security and home mortgage deduction.

    I am pro-life. Bring our troops home ALIVE!

    by Doc Allen on Wed Sep 26, 2012 at 12:40:37 PM PDT

  •  Great diary. Thank you. We're in a similar boat. (4+ / 0-)

    2012 Elections: POTUS - Obama; CA-47 (new) - Lowenthal

    by mungley on Wed Sep 26, 2012 at 12:44:21 PM PDT

  •  There is no correlation between tax rate and (4+ / 0-)

    employment. Forget causation, there isn't even a correlation.

    That makes a lot of sense. I've worked in several fortune 500 companies. There is absolutely no way they would hire more people if top executives got a tax cut.

    One reason to hire more people is to fulfill some market demand. That is the reason the best way to increase employment is to create more demand (and thus things like stimulus).

    I wonder why Dems don't talk more about this (or may be they do, I don't listen to campaign speeches).

    Enjoying driving the electric Nissan Leaf as the primary car from Feb '11

    by EVNow on Wed Sep 26, 2012 at 02:41:36 PM PDT

    •  Tax cuts encourage profit-taking (2+ / 0-)
      Recommended by:
      Thestral, OhioNatureMom

      We saw that happen during the Bush years - big companies cut expenses on fripperies like equipment and employee training so they could pay out large dividends... which the executives, who held stock, could pocket as a windfall.

      Fry, don't be a hero! It's not covered by our health plan!

      by elfling on Wed Sep 26, 2012 at 03:04:44 PM PDT

      [ Parent ]

  •  Another business owner--YES! (4+ / 0-)

    This is spot on.  We actually do have many employees, but we hire only because we have demand and the additional capacity will positively effect profit margins.  Period.  Doesn't matter the tax rate (except if it were higher as income goes up we may choose to hire more staff and work fewer hours ourselves).

    We have a minor coup taking place in our local Chamber as small business owners are pushing the leadership out (which has been largely Republican and mid level managers from large corporations).  I'd guess that about 60% of the small business owners we know through professional organizations--the business that produce goods and services outside the realm of financial products--are Democrats or lean Democratic.  The business owner image presented by the media and Republicans is pretty bogus.

  •  Congratulations! (5+ / 0-)

    You have a better understanding of economics than 99% of republicans!

    As an aside, my wife and I both have our own businesses and the same is true for us - we're not looking to hire anybody, and a tax cut will just help us pay off our credit cards faster. Not that we wouldn't appreciate it!

    •  I think that is the difference between the right (2+ / 0-)
      Recommended by:
      Calamity Jean, OhioNatureMom

      and left.

      the right is greedy, and wants everything they can get for themselves all the while touting christianity and good morals, while the left is more than willing to throw more than their share to a problem.

      95% of all life forms that once existed on earth are now extinct. It is only a matter of time until the Republicans follow suit.

      by PRRedlin on Thu Sep 27, 2012 at 06:19:57 AM PDT

      [ Parent ]

  •  Thought experiment: (1+ / 0-)
    Recommended by:
    Calamity Jean

    suppose you owned a small store. You had a single employee: idiot superman. Using his superpowers, he did everything up front: stocking the shelves, ringing up customers, sweep the floors. You hung out back doing the books.

    How many more employees are you going to hire, no matter how low your taxes become, or no matter how many new customers you get?

  •  Tax cuts may actually be a disincentive to hire (2+ / 0-)
    Recommended by:
    Calamity Jean, ozsea1

    So let's say I am trying to decide whether to hire another employee.  If my tax rate is 70% then for every $10,000 spent on that employee, assuming of course that I am profitable and paying taxes, I will have $3,000 less in my pocket at the end of the year ($10,000 less in profit reduces taxes by $7,000).  If my tax rate is 28% then I would have $6,200 less in my pocket.  In either case I have a choice, work harder and make my existing employees work harder or hire someone else to help.  If the choice is between paying taxes and working harder for just a little extra after taxes then the decision is probably to hire.  If on the other hand working harder means twice as much ($3,000 vs $6,200) maybe I will just crack the whip and keep the extra dough.  If you think about it, this explains a lot about the last 30 years.

    The difficulty lies not so much in developing new ideas as in escaping from old ones! - John Maynard Keynes

    by Do Something on Wed Sep 26, 2012 at 05:14:59 PM PDT

    •  This assumes a non-competitive market for labor (1+ / 0-)
      Recommended by:
      Calamity Jean

      In a competitive labor market, it should be more difficult for an employer simply to "crack the whip" on employees rather than paying the employees a higher salary.  To the extent this does not occur, the problem is not with the tax rates, it is with the dynamics of the labor market itself.  

  •  That (2+ / 0-)
    Recommended by:
    Calamity Jean, OhioNatureMom

    is the dirty, little secret that Sir John of Orange and his ilk don't really want people to figure out.  That a tax cut doesn't really create jobs, it just creates profit.

    "Without deviation from the norm, progress is not possible." -- Frank Zappa

    by SaintDharma32 on Wed Sep 26, 2012 at 05:30:10 PM PDT

  •  PR Redlin, thank you for proving my analysis (3+ / 0-)
    Recommended by:
    Russycle, ozsea1, OhioNatureMom

    I am also a small business owner.  My business is organized as an LLC (a pass through entity).

    Here is an explanation why tax cuts for the 1% DO NOT generate jobs. I will also explain what might generate more jobs.

    PR Redlin just agreed with this part:
    Low tax rates do not cause anyone to invest, because just holding the profits costs the low tax percentage, and there is NO RISK.  At a 10% tax rate, $1.00 profits pays $0.10 tax, and owner keeps $0.90.  At ZERO tax rate, as Paul Ryan would institute for capital gains, there is ABSOLUTELY NO INCENTIVE to invest any of the gains in a business, when you can spend them on YOURSELF, and pay NO TAXES.

    And here is the argument for higher taxes:

    During the Eisenhower, Kennedy, Johnson and Nixon Administrations, the top individual income tax rates ranged from 92 % in 1952 to 70 % in 1980, and the economy grew.  Link:
    In the same time period, the top corporate rates ranged from 52 % to 46 %.  Link:

    HIGH tax rates, (say 50% or above) would force a business owner to make the following decision:

    A. Hold $1.00 in profits and pay $0.50 in tax, keep $0.50; or

    B. Invest some of the profits in growing the business (new equipment, additional wages, additional advertising, whatever additional business expense), deduct the expenses from profits, and pay taxes only on the remaining profits.

    Example: $1.00 in profits, less business expense of N percent of profits (say N = 30%) leave $0.70 taxable. Tax at 50% = $0.35. That leaves $0.30 invested (tax free) plus $0.35 cash profits remaining.

    Investing all the profits (assuming the owner takes a salary which is already subtracted from profits) runs the business tax bill to ZERO.

    Pass through entities (S Corps, partnerships, LLCs) already pay no business tax.  All the profits flow through untaxed to the owners.  Investing some of the profits cuts the owner's personal tax bill in such an instance.

    So, to summarize:

    If you are in the 1% and make a bundle and you get a tax cut, there is no risk involved with putting aside the EXTRA money the tax cut provides in as RISK-FREE a vehicle as you can find (for example in a nice, safe investment like a T-bill or a tax free government guaranteed municipal bond).  Why invest in a business unless the investment will generate additional income?  But a business investment involves RISK.  You might invest in a loser. (Facebook stock, anybody?)  If there is insufficient demand, there is no reason at all to invest in business activity, if you will increase your risk.

    However, if tax rates are raised, there is an incentive to shelter income or profits by investing that extra money in business activities (i.e., buy property, buy equipment, hire more workers, etc.) because only PROFITS net of business expenses are taxed.  But then you take on RISK.  The question then becomes whether the tax savings are sufficient to take on the extra risk of the investment. But at least there is a reason to look for some useful application of the money, because letting it sit as profits only guarantees that you are subjected to taxes.  

    The higher the taxes on income and profits, the bigger the incentive to invest, so as to avoid paying the taxes that would be due.

    The Republicans have their argument UPSIDE DOWN. Under their argument, the owner wins, and does not have to invest ANYTHING to keep his profits (which generates NO JOBS). And THEY want to run the business tax rate to ZERO.

    "The battle, sir, is not to the strong alone; it is to the vigilant, the active, the brave." -- Patrick Henry November 6, 2012 MA-4 I am voting for my friends Barry, Liz and Joe (Obama, Warren and Kennedy)

    by BornDuringWWII on Wed Sep 26, 2012 at 05:57:01 PM PDT

    •  This is not correct at all (1+ / 0-)
      Recommended by:

      I don't disagree with the diarist, but your comment is not factually correct.  A business cannot simply deduct the "investment" it makes in the business.  Some expenditures are deductible: payroll, insurance, property taxes, marketing expenses, etc.  Many other expenditures are not, including: purchasing new equipment, renovating buildings, purchasing new store fronts, and research & development.  The latter expenditures (so-called "capital expenditures") may be depreciable; some are subject to special accelerated depreciation schedules, but the schedules are rarely so accelerated as to render them akin to ordinary business expenses.

      For the most part, it is capital expenditures that will grow a business.  I suppose that in some cases a business has untapped growth potential simply because it has not hired enough (or skilled enough) workers.  For example, a restaurant that is only open for breakfast and lunch could expand simply by hiring.  But under no scenario would a higher tax rate provide a greater incentive to the business owner to make the expenditure.  Consider a case where the business's tax rate is 30%.  Spending an extra dollar on payroll saves 30 cents in taxes.  So, $1 spent on payroll truly leaves the owner out of pocket only 70 cents. For the extra expenditure to be rational, it must make the owner more than 70 cents after taxes, which means that the extra $1 in payroll expenditure must yield at least $1.01 in additional earnings.  The same math would apply if the business's tax rate were 0%.   Put another way, the tax rates are irrelevant to the business's decision to increase non-capital expenditures.

      As for whether lower tax rates increase hiring, they clearly will to the extent that business are willing to use the additional money for capital expenditures.  That's the problem nowadays, of course: busines are hoarding cash rather than engaging in capital expenditures that would not be immediately deductable but may result in growth of the business.  Why are businesses not investing in capital?  It may be because businesses are out of ideas; it may be because we lack skilled workers; it may be because selfish and conflicted boards of directors are making decisions at odds with the actual interests of shareholders (e.g., paying out huge salaries to executives rather than investing in capital); or it could be because they fear future hikes on income taxes (which would require capital expenditures to generate more pre-tax income to be profitable than under lower rates).  

      All else equal, a business is more likely to create jobs under a lower tax rate regime.  This, of course, does not mean that lower tax rates will create jobs, or, more importantly, whether lower tax rates will create more jobs and/or more social value than the government could create with the additional tax revenue.  That is the real crux of the issue when we talk about tax rates.

      •  I'll have to disagree (2+ / 0-)
        Recommended by:
        ozsea1, OhioNatureMom

        "Many other expenditures are not, including: purchasing new equipment, renovating buildings, purchasing new store fronts, and research & development."

        I can choose whether or not to claim these as deductions right away (a 1 time thing) OR I can choose to claim them as depreciating terms.  

        Most businesses will chose to claim it over a multiple of years so they can maximize their deduction over a period of time, rather than right away, but you can do either.

        "All else equal, a business is more likely to create jobs under a lower tax rate regime.  This, of course, does not mean that lower tax rates will create jobs, or, more importantly, whether lower tax rates will create more jobs and/or more social value than the government could create with the additional tax revenue. "

        Again I will have to disagree.  The lower the tax rate, the less the incentive to expand, because the more profit is gained earlier on.  Over all businesses will expand through necessity, not through want.

        Why expand to make that first million if you make it sooner?

        95% of all life forms that once existed on earth are now extinct. It is only a matter of time until the Republicans follow suit.

        by PRRedlin on Thu Sep 27, 2012 at 06:53:57 AM PDT

        [ Parent ]

        •  ?? (0+ / 0-)

          1.  You can't generally deduct capital expenditures "right away."  There are exceptions (see IRC 179, which contains both restrictions and caps), but the general rule is that capital expenditures are depreciable and not deductible.  

          2.  I disagree with your claim that business "expand through necessity, not through want."  Is it a "necessity" to live in a nice home?  Is it a "necessity" to have an iPhone or a television?  Is it a "necessity" to take a vacation once a year?  Is it a necessity to eat more than rice and beans for dinner?  Not in any strict sense.  These are things that you want (and, quite frankly, things that you should want).  I certainly agree that, for all business owners, the hassle of creating an additional $1 in profit is simply not worth it: after all, while our tax forms might not reflect it, the stress associated with a larger business has a "cost" associated with.  In such circumstances, the business owners will not "want" to expand.  Where the lines intersect will, of course, depend on the business and the ownership.  It sounds like your lines intersect very early.

          Note the sheer perversity of your argument, by the way.  If your position is that we should keep tax rates high in order to give businesses a "need" to expand, that same logic would suggest that we should keep wages down in order to incentivize workers to work harder and longer.  Moreover, your argument would suggest that marginal rates should decrease as one's income goes up.  After all, if you want to create both a "need" and "incentive" to work harder, you should, for example, tax the shit out of the first $100,000 in income and then tax income above those levels at progressively lower and lower rates.

          •  necessity has a different meaning for us (0+ / 0-)


            the necessity of expansion means that either you decide you want to make more profit, by which you would need to hire more people in order to make that happen, OR you decide as we have, to let a few sales go in order to keep it a private family affair.

            You're confusing the results (what I do with my profit) to the running of the actual business.

            I am perfectly fine with the level of profit I am making, however if I WANTED to make more, it would be a NECESSITY to hire more people.

            as for your deductions statement, if it is feasible to within a start up write off capital investments, then you can, otherwise, you can depreciate them.  

            Your entire argument of a regressive tax structure has been proven wrong on countless measures.  I believe you are on the wrong site myfriend.  Perhaps you'd feel more at home over at drudge.

            95% of all life forms that once existed on earth are now extinct. It is only a matter of time until the Republicans follow suit.

            by PRRedlin on Thu Sep 27, 2012 at 11:05:16 AM PDT

            [ Parent ]

            •  I'm not in favor of a regressive tax structure (0+ / 0-)

              I'm not in favor of a regressive tax structure.  My point was that your argument re: high business tax rates -- namely, that high tax rates give businesses a greater incentive to expand because, without expansion, the business would not bring in enough post-tax earnings to satisfy the owners -- is a very close cousin of the argument that individual tax rates should be regressive.  Or, put another way, be careful what you argue, lest you give conservatives ammunition.

              As a general matter, it is simply not plausible that raising taxes stimulates business growth because it takes more money out of the business owners' pockets (thus forcing them to expand to make up the difference).  That does not mean that raising taxes won't stimulate business growth, of course: if the tax revenues are put to good use, it can stimulate business growth by stabilizing and growing the middle class, and thus growing demand.

              As a thought experiment, assume that we raise tax rates but that the government uses all the extra revenue to buy incredibly expensive European wines for the enjoyment of ambassadors living abroad.  Do you think that the tax hikes under this scenario would encourage business growth?  Of course it wouldn't!!  Does this not prove that tax rate hikes are alone stimulators of business growth?  Do you not agree that what matters is how the extra tax revenues are put to work?

              See, this is the difference between liberals (like you and like me) and conservatives like Mitt Romney.  I, like you, believe that government can, if run properly, sometimes make more efficient use of money than private businesses and/or taxpayers.  So, I have no problem with raising taxes.  But to say that raising taxes is what stimulates business growth is ridiculous.  Raising taxes allows the government to improve the demand-side equation, which then allows businesses to grow profitably.

  •  You are a class act (3+ / 0-)
    Recommended by:
    Artryst, ozsea1, OhioNatureMom

    Keep speaking out.  The nation needs your voice.

  •  it (1+ / 0-)
    Recommended by:

    seems trade policy is never discussed for actually creating jobs by either party.

    "History records that the money changers have used every form of abuse, intrigue, deceit, and violent means possible to maintain their control over governments by controlling the money and its issuance." -James Madison

    by FreeTradeIsYourEpitaph on Wed Sep 26, 2012 at 07:07:09 PM PDT

  •  PRRedlin (1+ / 0-)
    Recommended by:

    I suggest you change one thing that was mis-stated.

    "Businesses only hire when they feel the need to expand, or to raise productivity."

    I don't think you meant raise productivity, you meant increase production. To raise productivity, you crack the whip over current employees and make them produce more, or lay off employees and force the remaining workforce to continue production at current levels. They hire new employees when sales or sales forecasts increase and require increased production as a result.

    •  you are correct. (0+ / 0-)

      however my only means of access at the  moment is my droid phone, which seems to be lacking the edit button (does not show up for some reason).

      95% of all life forms that once existed on earth are now extinct. It is only a matter of time until the Republicans follow suit.

      by PRRedlin on Thu Sep 27, 2012 at 11:06:41 AM PDT

      [ Parent ]

  •  DEMAND creates jobs (2+ / 0-)
    Recommended by:
    ozsea1, OhioNatureMom

    if you suddenly had a lot more business than you could handle, you might create a job then, wouldn't you?

    nice diary.

    "Politics is like driving. To go backward put it in R. To go forward put it in D."
    CALL EVERYONE YOU KNOW in OH, PA, FL, NC and TX. Make sure they have the ID they need to vote, and make sure YOU are registered and ready to vote!

    by TrueBlueMajority on Thu Sep 27, 2012 at 10:40:28 AM PDT

    •  Quite honestly,no. (1+ / 0-)
      Recommended by:

      There have been days from open to close that we are busy with a line waiting to be helped, and sadly some customers have walked out without being served.  But other customers, most customers actually, are willing to wait.

      Without revealing my actual type of business as I'm not looking for a free plug here, I can say that we are the only type of this distinct business in the area that carries these products with such a large selection that I really do not fear competition moving in (nothing illegal, don't get that idea).  And if competition did move in, all the more merrier, because I know with my client base we could easily beat them in price and service.

      We have a 15 year history as being the only business within a 100 mile radius with our selection of product, and quite honestly for another company to try a start up to compete wouldn't likely be profitable, as we survive by volume sales vs individual sales.

      95% of all life forms that once existed on earth are now extinct. It is only a matter of time until the Republicans follow suit.

      by PRRedlin on Thu Sep 27, 2012 at 11:11:46 AM PDT

      [ Parent ]

  •  Exactly! A biz will hire more, to make more... (0+ / 0-)

    ..product, and/or to provide more service.  That will NEVER happen unless there is demand for the product or service.  I fail to believe that so many educated repubs are so ignorant to basic macro-econ.  Some are, for sure, but most are just lying, dangerous assholes.

    Aldus Shrugged : The Antidote to Ayn Rand. Buy ALDUS SHRUGGED on amazon, and ALL royalties will be donated directly to HELP ME TO HELP THE BIG O!!! And follow the fun: @floydbluealdus1

    by Floyd Blue on Thu Sep 27, 2012 at 12:10:56 PM PDT

  •  I thought of writing a similar Diary (0+ / 0-)

    My small business employees two people - me and my spouse. If our taxes were cut to zero and that still wouldn't be enough money to pay for another employee. And if it would, why would we hire someone with that extra money if their labor would not result in a net gain in profit?

    There is something that the Federal government could do to get us to hire more people. They could skale back on the H1 Visa program which has cut into our ability to find enough work to support ourselves, let alone get enough additional work to justify us hiring additional people. But nobody is discussing that. The Democrats in Congress along with Obama continue to expand that program and  allow skilled IT workers to pour into this nation which results in more Americans loosing their jobs.

    We would love to be able higher kids out of college and train them for what should be a solid Middle Class career. Instead we can barely manage to find enough opportunities to keep us going.  

    •  I agree with that statement (0+ / 0-)

      i think both parties lose site of helping americans first, and the rest of the world second.  It's an altruistic (if motives are good) stance, but we really do need to help ourselves first.  If we do that, we can do more good in the long run.

      95% of all life forms that once existed on earth are now extinct. It is only a matter of time until the Republicans follow suit.

      by PRRedlin on Thu Sep 27, 2012 at 12:22:31 PM PDT

      [ Parent ]

  •  On The Other Hand... (0+ / 0-)

    There are cases where tax relief can create a critical margin of profitability, especially in more capital-intensive industries.  Think the wind credit: many existing wind energy manufacturers (blades, turbines, etc.) have said that letting the current credit expire will force them to lay off a lot of folks or go out of business.  I've seen this cited in many posts, here and on other liberal sites (and obviously not knowing the internal budgets of these companies).  I say "liberal sites" only to distinguish us liberals from the conservatives for whom tax breaks are absolute orthodoxy.

    Obviously tax breaks are not needed to make the fat cats fatter. The Waltons are doing just fine, and don't need tax relief, however much they might protest to the contrary.  Increased profits mean more tax paid by the business. But it's still (generally) a higher net.

  •  The two best sentences for your elevator talk to (0+ / 0-)

    "cut business taxes more" undecided, independent and repub folks:

    "Businesses do not hire people because they want too, they hire people because they NEED too."
    If a business has no customers and no sales, it has no reason to hire anyone.
    "It is the goal of business to provide profit, not employment."
    If a business can make a profit without hiring anyone, it will. If a business can make more profit by not even providing a good or service, it will do that, too. Prime example: health insurance companies.

    That is precisely why it makes no sense to look to the private or for-profit sectors to fulfill roles that the government or non-profit organizations can do so much better and for less money. A private prison or for-profit school has too many conflicting missions to serve the purpose that is needed by the society.

    Non-profit single payer health care. Next question?

    by terran on Thu Sep 27, 2012 at 02:41:50 PM PDT

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