How Do Low Taxes Create Jobs When Wages Are Deductible Expenses?

[jberryhill]

That's the thing that puzzles me.

[mrcheerful]

1. The same way that Tax cuts to the weathy pay for themselves of course

its voo doo.

[krispos42]

2. Well, they create lots of jobs.

Polo-pony trainers, yacht crews, private pilots, butlers, nannies, housemaids, dog psychiatrists, personal shoppers, interior decorators, masseuses, personal trainers, and all the other people the top 1‰ employ in such extravagent numbers.

[OhioBlue]

3. me too.

I've been trying to follow this "raising taxes on the rich means less investment/hiring meme..." How? I wonder.

To me, basic accounting, finance and logic would be that when taxes are lower business owners would extract money from the business and squirrel it away. Higher tax rates would mean welcoming tax deductions like payroll and re-investment in the business....

[happyslug]

4. We have been a FINANCE driven economy since 1980

And as such Labor is a Minor Cost compared to other sources of Income. If I buy a home at $50,000 and sell it at $100,000, the labor involved is Zero, thus I have a $50,000 profit.

If I was MAKING something, the base cost may be $50,000 but labor to make it into something may be another $40,000, thus gross profit is only $10,000.

Thus any cut in taxes increase profits of companies (Mostly Banks) who are lending money on "things" as oppose to making "Things". In the minds of the Bank any cut in taxes increase their profits and that is all their are concerned about. It may mean they have cash to buy a "thing" and thus create a job when that "thing" is made, and it is this indirect cur in taxes the banks used to say a tax cut increase employment.

In real life a tax policy that encourages making "Things" as opposed to just buying "Things" makes even more jobs, but the effect of the tax cuts does NOT go to the Banks so the Banks oppose them. Just a comment that the "Job Creation" of low taxes only exist in the minds of bankers not in real life.

[Beartracks]

8. Good description. n/t

[scarletwoman]

5. Owner Class: "Because we say so." (nt)

[Angry Dragon]

6. From an old French sayong

"Off with their heads"!!

[OHdem10]

7. That top tier 2-3% Group Taxpayers are Big Corporations. They

create Jobs in China, India, Asia, S.Am., you get
the picture.

Small Businesses create jobs here and they are getting
tax breaks---if the Republicans will just vote for
them. Of course the GOPers get on TV and wax eloquently
about how they are looking out for Small Business.

[notesdev]

9. Couple of reasons

1 - deductible or not, you still pay 15% FICA as well as all the other non-wage expenses associated with keeping an employee. A company still needs to find a way to increase their earnings by that amount in order to hire that employee, including the byzantine accounting, which alone is not cheap.

2 - thanks to free trade and other countries not having that FICA tax, IF a job is going to be created it is more likely it will be created overseas than here. Just look at IBM - laying off US workers left and right but ramping up like nobody's business over in India.

3 - in terms of non-employment taxes, lower taxes mean lower prices that a company can charge for its services and products. On any normal supply/demand curve that company will be able to increase the amount of business it does at a lower price, which provides more incentive to hire new workers, and a lower profitability threshold to make that a sound move. The flip side of that is that lower prices allow buyers to buy more things which increases overall economic activity to the extent that they can buy more, which in turn creates new jobs to supply those new things that would not be bought and sold otherwise.

[lolly]

10. FICA, Schmica

They relocate to go to places where there are no minimum wage and no worker protection laws.

[AdHocSolver]

13. In a stagnant economy with high unemployment, demand decreases.

Decreased demand provides no incentive to hire more workers, and the the economy enters a vicious downward spiral.

Lowering corporate taxes does absolutely nothing to increase hiring if the public has reduced income or expects layoffs. Such expectations reduce demand (people postpone buying) so merely lowering taxes does NOT provide companies with an incentive to hire.

Targeted investment by the government (not tax breaks for the wealthy) can increase demand and provide businesses with incentives to hire workers.

Tax breaks for the rich merely encourages them to use the extra "free" money to gamble in real estate and the stock market.

[TheWebHead]

11. cost of business deductions

still leave a lot of profit to be taxed, especially in industries were business is mostly intellectual property. The argument of eliminating corporate taxes and solely taxing individuals would be that it makes the U.S. more attractive to businesses around the world to locate here and for those based here it would lower prices because their net profitability would skyrocket and they could still make money even they cut prices and no taxes would cut a lot of administrative costs.. so you'd no longer have the pass-thru costs to pay for the taxes. Not to mention equities would skyrocket and the wealth effect of stocks moving up 20% or more would mean trillions of dollars added to U.S. wealth.

[JDPriestly]

12. How indeed?

They don't. It's just a slogan. And people who think that low taxes for the rich create jobs in the U.S. are simply either lying to themselves or lying to others.