Can anyone debunk this Liberal claim thank you ?

[southernmissouri2007]

Can anyone debunk this Liberal claim thank you the Liberal is saying higher Income Tax create Jobs ?

A corporate tax rate that is too low actually destroys jobs. That's because a higher tax rate encourages businesses (who don't want to pay taxes) to keep the profits in the business and reinvest, rather than pull them out as profits and have to pay high taxes.

http://www.altweeklies.com/aan/9-things-the-rich-dont-want-you-to-know-about-taxes/Story?oid=3971382

[Krugerrand]

Can anyone debunk this Liberal claim thank you the Liberal is saying higher Income Tax create Jobs ?

A corporate tax rate that is too low actually destroys jobs. That's because a higher tax rate encourages businesses (who don't want to pay taxes) to keep the profits in the business and reinvest, rather than pull them out as profits and have to pay high taxes.

http://www.altweeklies.com/aan/9-things-the-rich-dont-want-you-to-know-about-taxes/Story?oid=3971382

What is the basis of the assumption that money put back into the business will go towards new jobs and not towards new equipment, etc.

What does this person think happens to profits after they are paid to the owners? Do the owners not use that money to:
a) make free market purchases -> jobs
b) invest the capital which can then be used by others to create -> jobs

[erowe1]

Profits are the incentive for starting a business, maintaining a business, and reinvesting in a business. Making it harder to make profits disincentivizes all of those things. If higher corporate taxes caused companies to invest more in capital, then why not set the rate at 100%?

Also, how do you determine what is the right amount for a company to reinvest, and what is the right amount for it to take as profits? Here's how: you keep the government out of the picture, and whatever level of reinvestment happens in that situation is the right amount. If central managers try to make them invest more than that, it would be too much.

[southernmissouri2007]

I don't agree with the article because what is the incentive to create Jobs and reinvest if the Business Owners get paid less money paying themselves less or are making less money and you are keeping money inside your Business and not pulling your profits out as income to avoid higher income taxes means you are paying yourself less money a smaller paycheck what is the incentive ?

Thom Hartmann: But it seemed, just common sense. I remember back in the ‘80s, I owned a business, International Wholesale Travel in Atlanta, Georgia. That business has, since we sold it done over 200 billion dollars in business. And there was a year when we were doing really, really well and I could either write a big check to myself or not. And I decided not to, because I didn’t want to pay the increased taxes. I put it back into the business. How can cutting taxes on rich people, on high income people, do anything other than encourage them to take the money out of their companies, out of their businesses, and buy fancy paintings or yachts or put it in Swiss bank accounts? How conceivably could that help the economy?

http://www.thomhartmann.com/blog/2010/10/transcript-thom-hartmann-asks-curtis-dubay-keeping-bush-tax-cuts-will-create-jobsreally

[southernmissouri2007]

Im tring to debunk this claim thanks.

[Krugerrand]

Im tring to debunk this claim thanks.

Pardon my skepticism, but I'm not convinced.

[Bossobass]

Tell whomever it is that the US has the highest corporate tax rate in the developed world (remember, in the US you have to add federal plus state corporate tax rates), then ask that person how that's been working out for US jobs.

Also mention that taxes fund government and its ability to tax fuels its ability to borrow. As the largest employer in the US the federal government is allowed to operate with multi-trillion dollar losses continually while sucking up all of the available capital which starves small businesses (90% of all US corporations) and it pays ZERO tax and will eventually bankrupt the entire USA, and most US corporations with it.

I've been incorporated since 1978. Here is what my accountants have said every one of those years when there was a profit at the end of the year: "It's cheaper to bonus it (profits) out and pay the personal tax rate than to pay state + federal corporate taxes"., so it's simple enough to draw a conclusion as to where the profits will go as corporate taxes increase.

Finally, tell this person for me that it's people like him/her who beg for higher taxes that make me want to move to a country where the average IQ is above double digits.

Bosso

[wannaberocker]

Do such claims even need to be debunked? I mean such claims are likely to come from people who absolutly know nothing about basic economics. You can have "GOD" stand and tell them "hey higher taxes reduce employment" and they will still claim that "Higher taxes create jobs".

One of the basic economic fact that this idea ignores is related to Capital investment and employment.
1. What does that business reinvest the capital in? Well most businesses that invest capital will likely invest it in technology that will make the business more efficient.
2. We know that when more capital is invested in technology. That results in less need for human capital. I mean why would you hire 10 people if you can invest in a machine that does the job of 10 people?

We know in economics that there is always a trade off between human capital and technology. When a business invests more money in technology. It invests less in human capital. It would be foolish for a business to invest money in technology and new employees at the same time.

So yes this claim that higher taxes means more employement because businesses reinvest the money is foolish. Higher taxes actually result in lower employment because if the business is reinvesting the money. It is going towards making the business more efficient throguh technology which automatically means less employees are required.

[PaleoForPaul]

A corporate tax rate that is too low actually destroys jobs. That's because a higher tax rate encourages businesses (who don't want to pay taxes) to keep the profits in the business and reinvest, rather than pull them out as profits and have to pay high taxes.

Avoiding taxation isn't a good reason to hire people, that encourages malinvestment. The reason a business should want to "create jobs" is because those jobs will increase profits. A business that hires strictly based on tax breaks will hire incompetents which ultimately hurt the business and the economy in the long run.

On top of that, let me give you an example based on current facts.

You own a small corporation. You have $100,000K. With that $100,000K you can either hire an employee at about 50K and use the other 25-50k to pay his healthcare, social security match, 401k match, etc. Or you can pull out the 100k and take the 39% hit on it. (ie end up with 61k at the end). Which is a better move? What is the risk of hiring a new employee? (lawsuits, cost of employees if business goes south, etc).

If you want to really look at what is going on, corporate tax policy causes all types of corruption as private businesses buy politicians to get waivers. It also causes capital flight, businesses already keep enormous sums overseas to avoid US taxation.

http://www.investopedia.com/articles/economics/11/impact-corporate-taxation-cfcs.asp#axzz1YnqhNc5J

Finally "The Rich" don't just take money out and keep it in the bank. They take the money and spend it themselves or invest it. The biggest loophole that is not addressed is the payment of CEO's in stock options which I believe are taxed at the capital gains rate rather than the income tax rate. That is rarely discussed because congress does pretty well in the stock market.

http://www.huffingtonpost.com/2011/05/24/members-of-congress-get-a_n_866387.html

[StilesBC]

1. Some businesses should be investing less. Homebuilders, for one. But they were incentivized to keep investing via low interest rates, high taxes and regulations. And it crippled the entire industry. Rather than there being a steadily increasing amount of jobs, there was a boom in construction employment, followed by a bust. Not only did the boomtime employees lose their jobs, but the long-standing ones did too and left them with a skillset that could hardly be transferred to another industry. It'll be a decade before that industry recovers and starts hiring again.

2. To expand on the above, what would have happened otherwise if that investment in new houses had not been artificially encouraged? Perhaps it would have led to some being siphoned offshore, yes. But some would have surely been invested elsewhere - perhaps in domestic infrastructure or clean energy. We don't know and never will.

3. Not all investment leads to domestic employment. As the above poster said, this investment could be used on technology purchased either domestically or abroad. Some of that foreign investment leads back to domestic employment opportunities (like a processing facility to make exports more competitive). But some could also take away the need for a domestic job. So you can't just unilaterally mandate that investment be done domestically. That would kill just as many jobs as it would create.

In summary, encouraging or discouraging behaviour in the private markets leads to numerous unintended consequences that can be even more disastrous than if everything were just left alone. Saying that, on a net basis, "we need more private investment" is just like saying "the world needs more food." Well, it doesn't help us to have more food in North America when the rest of the world is starving. Just like more investment in housing and shopping malls is not needed.

What is needed is more investment in long-term projects that are inherently risky and have uncertain outcomes. Infrastructure, energy, medical treatments for the elderly, etc. People are not willing to lend to those wanting to make these investments because a) interest rates are held too low for the lender to be compensated for their risk and b) people don't want to lend for longer than very short periods, so they can rest assured that their loan will not be diluted by understated inflation by the time it is paid back.

To achieve a higher level of investment and employment in areas that it is needed most, two things are required: market interest rates, and an alternative measure of account so that lenders are not spooked by the prospect of inflation.

[Sola_Fide]

How can cutting taxes on rich people, on high income people, do anything other than encourage them to take the money out of their companies, out of their businesses, and buy fancy paintings or yachts or put it in Swiss bank accounts? How conceivably could that help the economy?

http://www.thomhartmann.com/blog/2010/10/transcript-thom-hartmann-asks-curtis-dubay-keeping-bush-tax-cuts-will-create-jobsreally


Are you kidding me? This guy doesn't understand how rich people buying things helps the economy?

Why are you even taking this seriously?

[AlexMerced]

I will create a video for you later on.

[StilesBC]

Are you kidding me? This guy doesn't understand how rich people buying things helps the economy?

Why are you even taking this seriously?

I'm assuming tho OP is taking it seriously because collectivists will read it and, through cognitive dissonance of the paragraph you quoted, think, "yeah, high taxes are good!"

[dannno]

Um, actually it encourages the company officers to pay themselves more money just as much as it encourages them to create more jobs..

You could probably blame the CEO high salaries on the same mechanism.

[dannno]

Um, actually it encourages the company officers to pay themselves more money just as much as it encourages them to create more jobs..

You could probably blame the CEO high salaries on the same mechanism.

I mean, who cares if a "corporation" profits if none of the people in the company get the money to spend on themselves?

If they took away corporate taxes, then the company would have to decide between paying the officers (taxed) or keeping the profits (savings/no tax/invest back in company)

[wannaberocker]

Capital complements labor in the production process, but it also competes with labor for employment. In other words, many goods and services can be produced either with much labor and little capital or much capital and little labor.

As i pointed out before. When more capital is invested into the business it often results in less employment. You will rarely find a situation where capital investment in the business also results in a large investment in the labor force. So as professor Sowell points out in his book, capital investment in the business often means less employment.