| irstupid said: here is a simple way to think. Lets say you own your own business. Now you make 1,000,000 in revenue in one year, ignoring expenses. You have 10 employees you pay 50,000 each. And you pay yourself 100,000. This leaves 400,000 for the year left the business made. Now what is corporate tax rate? probably 35% roughly. so 350,000 of tax. That now means you only have 50,000 of money for the business. Now simple thinking. If you had 400,000 or 50,000. In which scenerio are you most likely to hire someone new? buy new machinery? expand? ect. And don't forget that buying new equipment or expanding means JOBS for those business that make the equipment or build the expansion, ect. THere was something on 60 minutes not long ago talking about companies going over seas to austria or something becuase the tax rate is only like 11% there. Many say they would and want to come back to U.S. but the tax is too high to have any incentive to. They are running a business here, they are not charities. regardless how harsh that sounds, that is business. So lowering tax rate could potentially bring back companies and thus MILLIONS of jobs. Not to mentino a lower tax rate could bring companies that were never here here. Hell just look at in the states of america. Copmanies move all the time to different states that have better tax laws. |
Well, what you are saying is nice, in theory. Lets look a little closer. (this is of course, all simplified as well) Taking into account the way corporations are actually taxed, as mentioned previously, they would be paying $140,000, not $350,000, and assuming the company's founder both works for the company pulling that 100k salary, and also made his company public, so there are shareholders (he also being one, with a large stake)
The founder could take and invest the $400,000 into the company, buying new equipment, hiring new people, expending the $400,000 on growing the business. This created jobs and is great for the economy and nearly eliminates what the company needs to pay in taxes. This in turn allows the company to grow, boosting revenue and profit, and causing it's stock price to rise, making additional money for the shareholders. He makes a small additional profit on the rise of stock prices.
He could also decide to spent the money on company retreats,an expensive company vehicle etc, get the exact same taxes because the company is posting minimal profit, while essentially spending a large portion on deductible things that benefit only himself (or himself and other execs).
The point is, though it gives them more money to play with, it gives a taxbreak "to create jobs" without guaranteeing any jobs are created. If creating jobs is the reason for a tax cut, there should be a way to control that. Some companies, this tax cut is just "new company jet for the execs, business as usual for employees." I have no problem with companies having extra leeway to hire - I DO have a problem with essentially handing these companies a bunch of money back with a "well, hope you do something that helps the economy, rather than yourselves!"
