Myth: Tax Breaks CREATE jobs......

[ranosgol]

The idea that Tax breaks ‘Creates Jobs’ is a distortion of the truth.

The job is created cause there is a demand for something or an increase in demand for something. Tax breaks may help to determine WERE those jobs may be created but they are not the reason they WHERE created.

The only reason why states give tax breaks is not to CREATE JOBS but to secure the location of those jobs. If one state offers more of an incentive than a company may be more included to put those jobs there. The job will be created its just a matter of WHERE it will be created.

Now Tax breaks may ‘Save or delay the loss’ of jobs already in the state but tax breaks have NEVER CREATED a single job.


I know I am not a Harvard Business Major but am I wrong?

[geek tragedy]

1. There is something resembling an optimal balance--the right level of

taxation. Tax cuts may sometimes be helpful, sometimes harmful.

Also depends on whom you cut taxes.

[Langis]

2. I believe you are wrong, but maybe not I'm not a Busness Major either

If you give Tax breaks to people who will spend the money. Low to middle income people, they spend the money and that creates more demand and that creates mote jobs. Am I wrong?

[ranosgol]

4. I am talking about tax breaks for a business not a person.

[noiretextatique]

6. no...you are right

giving tax breaks to people who will spend the money does stimulate the economy.

[noiretextatique]

3. tax breaks create jobs

for mercedes benz and yacht dealers, plastic surgeons and jewelers.

[ranosgol]

5. Tax breaks for a BUSINESS not PERSON.

[Nikia]

7. It could in some cases

Let's say that a small manufacturing company is not fully meeting demand. They are getting more orders than they can fill. They cannot fill any more orders because they are located in a relatively small building with little or no room for expansion. They are still making a small profit continuing as they are. If they built a new bigger plant, they would hire more people, creating more jobs, and eventually make a higher profit. If they were owned by a bigger company, the plant would get built regardless because other facilities continue to make profits while this new facility would take several years to recover the cost of building. A tax break does encourage the small company to make their move to a bigger facility. A larger company probably would anyway. With how things are now, tax breaks do usually encourage a company to locate one place over another. It may be good for a particuliar locality, especially if they have lost other companies.

[izzie]

8. It seems to be a mixed bag.

If you have more money you do things and fix up your home etc.That is all a hire of people and making jobs. I am not so sure about the real rich as they just live as they always do. They have what they want before the tax cut and I am willing to bet they give no one a new job. But you may do a little more. Then with this tax cut came the tax increase on property and the cost of every thing going up in price.I do not know about you but I am thinking most people are not better off but for the really rich.

[ranosgol]

9. I said Tax Breaks for a BUSINESS not Personal

[Lydia Leftcoast]

13. Izzie, see my post #12

Hiring people and investing in equipment and R&D actually reduces a company's tax bill.

[AP]

10. Evidence: Last four years.

In fact, I'd say the tax breaks actually discourage job creation becaue businesses are now making profits (to announce to market, which gets stock prices up) soley based on getting tax cuts.

If they had to work for their profits, then (1) they'd be asking the government to engage in policy-making which creates wealthy consumers, and (2) they'd be adding jobs to service and sell products to those wealthy consumers.

[AP]

11. The debate over taxes should address TAX ALLOCATION, rather than "up/down"

First you decide how much money you'll need to do everything you want to do (provide the social safety net, build infrastructure to grease skids of capitalism, educate people so we can keep reproducing society productively, provide for the common defense). Once you decide how much you need, then we should figure out how we allocate that burden.

You can't make the middle class endure the whole yoke of taxation, which is what we're doing today. You have to spread it arround. The rich need to pull their share too. And then you have to make sure that you don't make any one place money changes hands suffer teh full resistance of taxation. Tax does create resistance. It's not good. It's something we have to do so that we can get richer. So, you put a little resistance on the transfer of money for work, a little resistance on the realization of capital gains, a little on dividend income, etc. And the things you think are best for society, you put the least resistance on (like wealth from work), and the things that aren't as good for society, you put a little more resistance on (wealth from having a rich parent). None of those taxes should be punitive (expcept for maybe sin taxes -- like cigs, alcohol and gambling -- because you DO want to discourage wealth changing hands for those things).

After all, this is how businesses operate. They decide how much money they need to invest to make more money, and then they go about getting that money in a logical manner. With gov't, all we do is talk about raising less and less money, doing less and less, and then we can't figure out why everything is so crappy when we don't have money to do things we need to do, and the money we do get, we get in a way that is breaking the backs of people from whom we take it.

[Lydia Leftcoast]

12. What most people don't know

Unlike individuals, businesses pay taxes on what's left over after they have met all their legitimate expenses.

The measly $5,000 per person deduction that most individuals get doesn't begin to cover their living expenses, but businesses can deduct ANY expense that has to do with making money: employee wages and benefits, rental or purchase of buildings, land, and equipment (on a depreciated basis), acquisition of raw materials or inventory for sale, insurance, advertising, travel, office supplies, and a host of other things that are not available to individuals.

Only after their legitimate expenses have been met are businesses subjected to income tax. If they don't make a profit, there are no income taxes.

So for example, if a company has $1 million in sales and $999,000 in expenses, it pays income tax only on the $1,000.

There are legal accounting tricks that make expenses seem larger than they really are. I remember from my accounting textbook back in the 1980s that when General Electric changed the way it reported its inventories, it saved several millions in income taxes.

I don't have any inventory, but I was pleasantly surprised at the way becoming a sole proprietor rather than a wage earner affected my tax bill.

[noiretextatique]

15. right...the only way for individuals to get a break is to become

businesses.
clarification: land usually is not depreciable only the structures on the land.

[AP]

21. Everything a business does practically is an investment in making more $

so it's deductible as a business expense.

But most of the things people do are done just to live and enjoy life, so you have almost nothing that's deductible, unless the gov't decides they want to encourage a certain activity (like home ownership or saving for retirement).

It's one of the big ways that the tax burden is shifted from corporations to individuals.

[cosmicvortex20]

24. Buisnesses dont pay taxes, they collect them.

We have wiget X that sells for 100 dollars.
We have 5 companies that can make a wiget X
Normal profits from wiget Xs is 3% to the buisness that makes them.

now...

5% tax is imposed on all companies
Naturally, they all cant absorb a 5% hit to profits as they would be losing money.
They all must adjust their prices upwards ~5% and normal competition returns to balance the price back at the higher level equilibrium.

Who pays the tax? The end consumer. Tax as a percentage of profits? Its still the same. Each company is still making their 3% (or less if the price pushes down demand for the product!).

Buisnesses collect taxes for the IRS, we might as well just exempt them and put the taxes explictly where they already are - on the end consumer. Then, at least we would have some idea of actually how much we were being taxed.

[AP]

25. corps pay taxes because it's too easy to switch between operating as a

partnership and operating as a corporation. If corps paid no taxes, nobody would operate as a partnership. Everyone would operate as a corporation, and the wealth that a corp accumulates would all pass out to insiders as dividends taxed at 15%.

Oh, wait. That's what's happening now. We barely tax corps. They're mostly vehicles for delivering low-taxed wealth to lucky insiders.

I'm not a fan of sales taxes, but to not tax the income of corporations would be crazy.

Corporations are in the business of making money. Most of the wealth in America changes hands between corporations. If we only taxed the money that passed into the hands of individuals, we'd just be giving corps an even greater license to accumulate wealth and power, and even less wealth would pass into the hands of individuals (and especially not into the hands of people who aren't corporate insider).

[cosmicvortex20]

26. Did you not read the entire post?

The buisnesses have the same profit level before and after the taxes are imposed generally, unless you hurt the demand because the increased prices.

Ill repeat that another way just to make sure you get it.

The companies paying the tax will remain just as wealthy - the just pass the tax on to the consumer.

Pass out to insiders? You mean all those working people with 401ks? How is that bad?

One last time for good measure -- the corps dont pay it, they pass it on to you...

[RichardRay]

14. For tax policy the issue is net revenue change

When the government gives a tax break to help create jobs or stimulate the economy they lose revenue. The question for policy makers is whether or not the additional activity in the economy created by the tax break creates more revenue than was lost through the original tax break.

There lies the argument between the 'supply siders' such as the Regan folks and others who say that you get the economy growing through stimulating the demand side. The supply siders say that giving breaks to the wealthy provides more funds to the folks who invest in plant and equipment so that they will create more jobs that will create more income and wealth that will be taxable at the lower rate such that the net revenue goes up. The only problem with that model is that it doesn't work. Never has, probably never will. It's made espicially harmful since most supply side tax breaks are long term so that the harm never sunsets.

Demand side tax breaks can go to any or all income groups, but providing them to middle and lower income folks is more likely to improve the movement of money through the economy and provide a boost. These tax breaks tend to be short term so that as the economy picks up speed the tax cut returns to its previous level and the government's revenues go up.

Any permanent or very long term tax break needs to be accompanied by spending reductions. The fact that our government spending is already in deficit and sadly misapplied makes such cuts unwise as well as incorrect.

(OK, Prof GAC, go ahead, I know, I know, I'm just a dilettante.... :-)

Richard Ray - Jackson Hole, WY

[Veggie Meathead]

16. In simpler days, such a direct correlation between tax breaks and

jobs may have been true.In these days of increasing globalization, tax breaks for a GE may actually wind up creating jobs in China or India rather than Ohio or Kentucky. In this scenario we become losers in two ways.First,we give out tax breaks for which we do not get any returns.Second, GE and other corporations wind up becoming tax payers in China or India, robbing us of tax revenues.As this globalization spreads to other industries and other countries, the dwindling tax base in this country will make it impossible for us to sustain the myth of job creation through job cuts.Probably some local industries may survive but the days of massive jb creation through these strategies appears over.

[SarahB]

17. Tax breaks create a larger profit margin for the shareholders.

That's the only thing businesses "care" about. It's up to unions and the government to protect workers. Unfortunately, unions aren't as powerful as they used to be and the government is in bed with the corporations.

[ranosgol]

18. Lets face it Unions are all but dead.

They make up less that 13 % of the entire workforce and if you take out government unions i think it is less than 8 %. Unions died in the 1980's thanks to Reagan and they are never coming back.

[Veggie Meathead]

19. As Leona Helmsley said once " Only the poor people pay taxes."

Bush confirmed it this week when he said that the rich will not pay taxes and use attorneys to avoid them through legal loopholes. These loopholes have also been used by many corporations such as GE to avoid paying corporate taxes.Finally a man like Warren Buffett says he has never invested money on tax`considerations alone.With all this wisdom and facts available, if the Republicans keep peddling tax cuts it speaks to the gullibility of Americans that they continue to buy this BS.

[many a good man]

20. Tax Cuts Stimulate

Cutting taxes is one form of fiscal stimulus, as is government spending. Putting more $$$ into the economy will warm it up. Directing the cuts in certain places will determine how the $$$ gets spent.

Tax cuts to the bottom 90% will increase consumer spending. Cuts for the top 10%, the investor class, will increase investment.

The problem with supply side economics is we don't have a problem of people needing money to invest in companies that can't sell anything because the bottom 90% doesn't have spending $$$ to buy the companies' products.

[Digit]

22. Who wants to expand their business?

When one report after another shows troubling or at least conflicting data on how our economy is doing?
Instead, I would be looking for ways to economize.
Looks to me this is what has been happening with all the layoffs.
So much for *'s economic theories.

[leesa]

23. If the tax break goes into their Swiss Bank account how does it

create jobs?