Can someone explain to me how tax cuts "create jobs"?
 

I'm a business owner, and I know lots of business owners, and whether or not we hire new people is a function of how well the business is doing.

If business is growing and we need more workers to meet the needs of our business, we hire people. If business is contracting and we need less workers, we lay people off. The tax rate we pay on the profit our business makes has no bearing on how many employees we need to run our business. An astute business person is going to run an efficient operation and keep their labor costs as low as possible.

If the government cuts my taxes, that increases my take home pay, but it doesn't mean I'm going to create a make work job because of that. That wouldn't make any sense. Also, employees are paid with pre-tax dollars anyways, so it's not like lower taxes makes it cheaper for me to hire people.

As for the capital gains tax argument.....the one that says lower capital gains taxes encourages investment, encourages businesses to expand, etc......capital gains taxes are paid when you sell an investment, not when you make one. So lowering the capital gains tax rate encourages people to sell their investments, not to make new ones.

Taxes may be low today when I make an investment, but I have no idea what the rate will be when my investment has run it's course and it's time for me to sell, so a low rate today doesn't encourage people to make investments.

If anything lower capital gains tax rates depress asset values because it floods the marketplace with more sellers than would otherwise be there.
Besides, if you invest your money in stocks, bonds, your own business, someone else's business, real estate, or a savings account at a credit union.....you're going to pay capital gains tax on the return......so at the end of the day, capital is going to go where it will earn the highest return, regardless of the tax rate.

So I'll end this post where I started it, can someone explain to me how cutting capital gains taxes or cutting the top marginal tax rate "creates jobs"?

Most of the money in the Obama plan is going to create new jobs not cutting taxes. It's actual job creation like in the new deal.

lower taxes means people have more cash in their pocket, so they can buy more crap at walmart...which means they will have to hire an additional person on the check out...

If he cuts taxes and you make an extra $20k a month, you might decide to higher another worker or 2 that really you could use but couldn't afford before.

Atleast that is what I understand it to be. Owner of business makes more profit, means they can try to expand or ship/sell more things by having an extra worker or 3.

That I understand, but doesn't really have much to do with capital gains taxes or taxes on the highest earners who don't spend anywhere close to 100% of their income anyways.

I just keep hearing the republican robots on TV talking about how we have to do more to help (i.e. cut taxes for) small businesses because they're the ones who create all the jobs.

I fail to see how the taxes paid on profit correlates to how many employees they need to run their operation.

it doesnt do shit basically to help the economy but it helps republicans get reelected.

You mention SMALL BUSINESSES! Those are the ones that if they make an extra $20k a month can hire people.

Exactly right.

That bullshit is just economic theory that does not work, especially in an economy like ours currently. Much less for SMALL business. I think BIG business would actually care more about such things.

You want to actually do something? Change the fucking tax laws. Eliminate capital gains, death tax all together. Tax the rich. Base taxes more on the 'sales' then income. If the economy is rocking, lots of money. People are not buying? Neither is the government.

That is how it works for the average Joe. If you do not have money, you can not spend it.

Then hammer companies who took their operations over seas, and import. Eliminate ALL tax shelters for corporations so they actually HAVE to pay their taxes. Give breaks to companies in the U.S. and on U.S. soil.

You will see a mass influx of jobs coming back to the states.

thats what i gathered too, its not to the employee but the employer

:thumbsup

Taxes generally have a "punishing" effect. When you lower taxes, you reward business and investment, thus increasing the size of the pie.

For an example, look at the Regan tax cuts. They actually INCREASED government revenue (tax) receipts because they boosted the economy.

In practice, if you encourage a businessman to make a million dollars by lowering his taxes, he will do that... and more. In the process, he will hire people. If you punish him by raising his taxes, he will shut his business and move to a friendlier jurisdiction.

"trickle down economics", i.e., give the rich and businesses big tax breaks because the money they spend will "trickle down" to the lowly commoners doesn't work...period.

The GOP is so fucked up. They should just disband or just deal in state politics (and continue to govern the states they run..you know...successful states like West Virginia, Mississippi, Arkansas, South Carolina).

That is actually false and I challenge you to provide data to back that up.

Revenue did eventually go up but that was because the population (tax base) and the economy grew. There is no empirical evidence that the economy grew because of the tax cuts, and it's likely that revenue would have increased more had tax rates remained higher.


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As for what Shemp said, I agree 100%. If people have more money in their pockets, they'll spend more, and that has a stimulative and a multiplier effect throughout the economy.
So therefore, the tax cuts need to go to the people most likely to spend all of it, and that would be the working poor, and seniors on a fixed income.

So why are the republicans against the payroll tax rebate for lower income workers and pushing for capital gains tax cuts and cuts to the top brackets? (and/or making the Bush tax cuts permanent)

Seems like, based on the spending more money argument, that the solution would be to do things like raise the minimum wage, expand the EITC, exempt low income seniors on social security from payroll taxes and things like that. :2 cents:

Extra taxes are used for states to collect money to make public infrastructure work. That work need people, usually those people who are the first to lose their job. So after new people get back to the job chain, the consume start working again (people with low salary usually don´t save money, the consume everything). That consume active the economy, it´s a cycle very well explained by Keynes.

Businesses hire people with pre-tax dollars. They are going to hire people based on the needs of the business and they get to deduct the wages and benefits given to that employee.

If business had to pay taxes first and THEN pay their workers with what was leftover, then what you're saying would make sense....but they only pay taxes on what's left over after all expenses, so your example would just increase the business owner's take home pay by 20K/month. It doesn't "encourage" him to hire someone else.

I also love the phrase "encourage someone to be successful". As if there are really people out there going "I could be a millionare, but not with tax rates at 39%....if they drop the top rate to 35%, then I'll go make a million bucks" :1orglaugh

I think states have the most right to the theory that if you cut taxes on a business, you MIGHT prevent it from moving out of state, or out of country. But usually you can't cut enough to make it worth it, and even if you do, you're losing that revenue. But at least a few workers might still get to buy a chinese toy from Xmart for their child at christmas.
hmmm..

That just about sums it up in a basic nutshell.:2 cents::thumbsup

obama needs too start fining USA companies that have all their production outside of the USA, the fines alone from that will bring in tons of money back to us, and if the fines are high enough it will bring jobs back

Yes, a rework of the tax law is needed, but have you noticed that everyone always changes it to benefit just themselves and no-one else.

tax the rich how? Worse than they are right now? Just because they are wealthier than someone else? Where is the equality and justice in that type of logic? That would be akin to giving you a 5 day sentence for stealing a car and I got 20 years for the same crime based on our financial positions. Treat a dollar equally, no matter who earns it. It doesn't earn votes, but it's the only fair way to tax a population.

Agreed 100%. It also taxes visitors and illegals without prejudice whatsoever. If you use a service, you get taxed (this would include utilities, rent, money wiring services.... anything!!! The funny thing is, people go apeshit over something like this, but in the end, the tax wouldn't be all that different than what we have now if EVERYTHING was taxed.... something like 10-15% on sales and nothing else!!! No income tax, no death tax, no capital gains, no fuel tax (well the sale of the fuel, but no state and fed fuel/road taxes). This would require states and the fed to actually budget based on their receipts from the previous year though, and you know that ain't gonna happen.

Partial agreement here. Yes I believe that companies outsourcing beyond the US should be penalized, but at what level? So many directions that discussion could take.

Taxation on corporations should be identical to individuals as they are considered an "entity." Since I think we should eliminate income tax altogether, I would suggest the tax be no different than the sales/service tax above.... 10-15% on what they use/consume. No tax breaks, no nothing. But this would mean they are paying taxes on their employees services (not all that different than the 6.2% tax they pay for employment anyway). Cut the breaks for meals and supplies and depreciation and all that other bullshit. An individual can't get those breaks individually (only in the course of business and then with certain caveats) so why should a "entity" ?

Treat a dollar as a dollar. If someone wants to hoard theirs and never spend them... they will never get taxed (so unlikely it's just silly). Your dollar, my dollar, Jefe the illegal's dollar, George Soros' and Donald Trump's dollars, and a company's dollar should be treated the same.

And how nice it would be to have the IRS just reviewing your receipts to make sure the proper tax was collected, instead of dropping a 7500 page tax code in front of you and saying...... what, you didn't know the rules? Well you are fucked then!!!

just my :2 cents:

political suicide. Voters aren't the only ones with power at the polls.

There you go......pretty simple really.....

Trickel down doesn't work... those companies just use their tax savings to move operations elsewhere or decorate their office.

The best bang for the buck will come from infrastructure spending.... bottom line.

poor people spend a greater portion of their income, save less, so taxes on sales hurt them most.
And you say your not a republican.

right it not like that would cause a trade war with the foreign countries that would result in tarriff that would cost even more jobs.

PLEASE STOP QUOTING SHEMP

We're past that now. Yes, cutting taxes on people who will spend the money (read: low income people) does stimulate the economy.

Now can anyone explain to me how cutting capital gains taxes or cutting income taxes for wealthy small business owners "creates jobs"?

This is what republicans are arguing the stimulus bill should be about. Let's cut taxes for investors and small business owners because that will "create jobs"....I fail to see the correlation.
For whatever reason, the republicans are actually against the tax rebates to low income workers.

This thread is testimony that there are no C students in college economics.

The theory is that by cutting taxes for the rich they are encouraged to invest capital in business ventures that will help the job market and spur on the economy. It's not unreasonable.

However, in the current economic climate anyone saving money via tax breaks is more likely to stash that money in the bank, or under their mattress, rather than risk it investing.

The reason republicans are against the tax breaks for low income workers is because a large segment of them didn't have to pay taxes. They got a full refund due to their income level. Giving them a tax break on top of a full refund is like giving them free money. That's how I understand their argument.

Not only is the economic climate what it is, but we also live in a global economy...so you can cut taxes for the rich and they can invest their money, in China, or Russia, or Brazil or India etc.

If you want a guarantee that the money will be invested here, the government can keep that money (instead of cutting taxes) and invest it here in roads, bridges, high speed rail, broadband lines, etc etc etc.

That's their argument, but it's bullshit.
Those people pay payroll taxes. As a matter of fact, a majority of Americans pay more money in payroll tax than they do in income tax.
They may as well say these people don't deserve a rebate because they didn't pay capital gains tax or dividend tax or excise tax. Just because they're exempt from one certain kind of tax doesn't mean they don't pay a big share of their income in taxes.

And even if that weren't the case, isn't the purpose of this bill to stimulate the economy? Last I checked it wasn't a bill about making the tax system "more fair". :2 cents:

during the Bush admin there were lots of tax incentives (cuts).
For example if you bought a brand new airplane then you were allowed to write off nearly 50% of the value the first year, same deals on new technology (computers and such).
These type tax breaks stimulate economy and makes business thrive..
I am no fan of Bush but this is fact.

simple macroeconomics.. you're being to cynical and analytical to understand right now

tax cuts mean more money in people's pockets which means more spending which means more demand for "stuff" which equates to more people needed which means more jobs

The problem with that theory is it's never the "employee's" whom get the tax break. It's the employer and the rich.

Wow, and since taxes under Bush were lower than at any time since before the Great Depression, we should have a booming economy and virtually zero unemployment right now.

Also, FWIW, the depreciation acceleration is a tax deferment, not a cut.

When things BOOM again, they'll say it was because of Bush's policies. You know it, I know it, they know it, everyone knows it.
:error


I mean, I'm all for a break on a truck that I use for business, but ONLY if it's like a delivery van.. the loopholes before (maybe still) would allow you to buy a Hummer, use it to drive 1 paycheck to the bank once a month and qualify it as a business truck with the associated tax break.

less taxes=more circulation of money....simple which equals more jobs

And you're being too quick to respond, just like 80% of the other people here who read the thread title but apparently didn't read any of my initial post....or any of my other posts in this thread for that matter.

I've already conceded that tax cuts for lower and middle class people are stimulative because they have a 100% propensity to spend.
This conversation was meant to be about capital gains tax cuts and tax cuts for small business owners creating jobs. (you would know that if you read my first post)

I guess I should have counted on the hit and run people trying to get their post counts up without having to actually engage in thoughtful conversation, and titled the thread accordingly. :(

It makes the same amount of sense that relying on bank loans to stay in business does.

The government cuts taxes, so people have more money to buy shit made in China, the Chinese factories then have to get more workers to make the shit people want to buy. The Chinese government then buys US Treasury bonds, giving the money back to the US government, which then wastes it in Iraq and Afghanistan (as well as propping up Israel, Egypt and Columbia).

Economics 101

Cutting your taxes (via payroll taxes or fed tax rate) is essentially cutting your expenses. This means your business would be doing better. This is more money that you can invest in growing your business. Maybe it means you don't lay off people that you were going to because you now have additional working capital. That, in a simple nutshell, is that lowering taxes does.

Exactly! I agree 100%...and yes I read all of the orignal post....and all of the other emotional posts this week - thanks!

simple macro economics
the act of lower taxes increase the money supply in the economy.
it doesn't matter if the money supply is spent or saved it still directly in the economy.
Capital gains is targetted because it provides the secondary effect of spuring investment which allows companies to get financing without having to borrow the money.

the end result is that there is more money in the banks (which means lighter lending requirements which minimized the credit crush the current failures is causing)

if it is spent shemp already cover that point.

if it is invested then companies can shift debt based (which is hindered currently) to equity based capital, which allows them to maintain or expand their business. Which protects jobs /creates jobs.

that and the fact that whenever taxes are raised on the rich (boat tax) it results in people not purchasing that luxuary and putting the people who make that stuff out of work. The assumption is that if you do the reverse, it will have the opposite effect. Convincing people to risk their money in the stock market, needs some sort of external insentive and that is what a capital gains tax cut does.

The "trickle down" theory is bullshit and never has worked. Because a guy saves $10 million in taxes doesn't mean he'll go out and spend $10 million on a boat. Rich people stay rich because they are smart with their money, not because they throw it around like rappers. Sure a small portion of their savings will make it back into the economy, but a much smaller portion than just injecting it directly into the middle and lower class.