This tax cut/increase is getting twisted out of hand

I keep seeing people arguing about whether tax cuts kill or create jobs, with mouthpieces from both sides of the argument saying that making taxes go one way or the other will make jobs happen. Lots of people are pointing to this graph showing that lower taxes don’t lead to job growth. Pat Buchanan on MSNBC just now shot back with “so do tax increases create jobs?”

Wrong fucking argument. Tax cuts don’t make jobs, tax increases don’t make jobs. Tax increases increase government revenue. Making jobs is another can of beans entirely.

If you own a business, your hiring practices are not going to be based on your tax file. A small business owner who needs six guys to run his shop isn’t going to hire a seventh just because he got a tax cut. He only needs to pay six guys, why bring on a seventh? Altruism? The only way a seventh is going to come on board is if the business itself grows in such a way that necessitates extra employees, and a little tax cut isn’t going to make his business expand. The only time taxes will have a tangible effect on jobs is if you were to cut them outrageously low or spike them into the stratosphere and either choke the business into trimming down or give it so much extra money they can afford to expand.

As for the giant corporate bodies, we’ve seen what they do with extra government money. We gave them bailouts, and they turned that into… CEO bonuses and outsourcing.

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3 responses to “This tax cut/increase is getting twisted out of hand

  1. Economics. You need to be able to establish that business has reached a point where not having an additional employee is costing you more money than paying for the employee, AND you need to have the capital to pay that employee when his paychecks become due, which is probably going to be before his employment starts turning a profit.  Taxes are one of the variables that determine how big the loss has to be before it’s worth taking on a new hire, since taxes increase the minimum cost of the hire.

    Tax increases always decrease economic activity, for the simple reason that the added cost of the tax means some deals which were marginal before the hike will become unprofitable after the hike.  This means sales taxes are collected at the cost of some sales, minimum wages are imposed at the cost of some hires, and income taxes are collected at the cost of some work not being done.  Eliminating taxes will always increase economic activity somewhere.  People tend to consider their own situation more readily than they can imagine the marginal case, but the marginal case always exists somewhere.

    CEO bonuses are not given in lieu of hiring or paying other employees.  Employees are hired because they’re expected to make the CEO’s bonus bigger.  The question is why isn’t it profitable for the CEO to hire more employees — or more American employees, as may be the case.  Focusing on how much the CEO gets is a rookie mistake.

  2. The goal of a business is to meet demand with the fewest employees paid the least that you can get away with. That’s how you make profit. 

    • The goal of a business is to maximize profits.  If it’s profitable to hire more employees — or to hire more expensive employees — then a business will do it.

      When the economic environment makes it consistently profitable to reduce employees, then it’s time to evaluate the environment — not the businesses.

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