How do Lower Taxes/Tax Cuts/Tax Breaks ?

[missouricitizen2007]

How do Lower Taxes/Tax Cuts/Tax Breaks give the Job Creators an Incentive to Invest in Job Creation ?

[eduardo89]

People pay less -> have more disposable income -> invest in companies -> companies create more jobs

[CaptUSA]

The first thing it does is that it encourages businesses to keep the jobs here instead of overseas. It encourages them to invest their capital. Also, it keeps more capital in the private sector instead of transferring wealth to the government. The government does not make wealth; it consumes it. So when you have less consumption of wealth, it begins to grow at a faster rate.

[VBRonPaulFan]

capital investments are what creates wealth. somebody spending their own money to build a manufacturing plant to make widgets at a lower price than we'd import them for increases the standard of living for anyone here that uses widgets. someone investing in technology to make stronger bridges at a lower cost increases the standard of living for anyone who might save time and gas on a commute from a bridge built because of the technological investment/advancement.

allowing people to keep more of their money allows them to invest money in the kinds of projects like these that they hope to get a return on investment on. these types of projects generally create jobs in some form or another, and everyone benefits in the long run.

[Bordillo]

every increase is taxation decreases the attractiveness of all Capital investment. It decreases the profits the investor stands to make, while his risk on the investment remains constant

[lx43]

The more money a company can keep of its own whether its in the form of tax reduction, tax breaks, credits, etc is good for the company. It allows the owner to reinvest this capital back into the business, spend it for personal use, pay off debt, hire more employees, give raises.

Name one business that has ever given its employees raises or hired new employees that is consistantly a money loser.

[missouricitizen2007]

Do tax cuts also give our Job Creators an Incentive to Invest since they are taking home more take home pay bigger paychecks ?

[Bordillo]

(expected profit)(%chanceOFsuccess) - (cost of investment)(%chanceOFfail)- Taxes= Expected Payoff


As you can see an increase in tax will draw the Expected payoff towards a negative value. The break point for when an investor would choose to invest would be when Expected payoff > 0. In a recession or if entrepreneurs expect taxes to increase, people will tend to become more risk averse.

[CaptUSA]

Do tax cuts also give our Job Creators an Incentive to Invest since they are taking home more take home pay bigger paychecks ?

Even if this was the case, (it is like this in some cases, but not all. A lot of businesses are sitting on money right now rather than re-investing it. It goes to cash-on-hand) then we'd still be better off than taxing it. It's like this: Taxes take money out of the economy for a non-productive use. Sure the money could do some good, but it will never create more wealth, it will just consume it. But even if the "job creators" gave themselves bigger paychecks, what do you think they do with that money? They usually invest it where they get the most return. In a freer economy, that would be the private sector. Other businesses.

The more taxation, the less capital will go to job creation. And if you have uncertainty about your investments, you will not make them.

[CaptUSA]

Here's another way of looking at this. It's the most simplistic explanation I can think of to describe how wealth is created.

Let's say I have a hat I want to sell. It costs me $4 to make it and I sell it for $5. + $1 wealth for me.
The buyer of that hat buys it because he values the hat at $6. He's got a $6 hat for $5. +$1 wealth for the buyer.

That's an increase of $2 of wealth from that one exchange. This is how wealth grows (don't think of it as money, but utility)
Now if the government taxes that money, it reduces that $2 increase in wealth. This is how government slows wealth creation.

But how does it consume wealth? The government will spend $50 on something that is only valued by the people involved at $5. It would be like the government making a hat for $50 and selling it for $5. So the government experiences a $45 loss in wealth, and the buyer does not value the hat at the original $6. Since he can get one anytime he wants, he now only values that hat at $4. So even for the buyer, there's a loss in wealth. (think about roads, education, welfare, unemployment, health care) That's not to say the government is always doing things of no value, there's some, but you need to realize that wealth is being lost each time.

Hard-core libertarians will tell you that you should never accept these losses since, if there's a true need, it will be filled by the private sector. Some of us can accept some of this wealth loss for important things (like a real war of self defense, or roads, or exploration), but I think we can all agree that we should keep this wealth loss to a minimum and only on extremely limited things like those spelled out in the Constitution.

[IBleedNavyAndOrange]

My business profits $100/ day before taxes.
The govt takes 10% of my profit.
My personal daily expenditures come to $80.

This leaves $10 a day to do as I wish.

I have a need for someone to sweep my floors at the close of business each day.

Will I be more likely to hire someone to sweep my floor if you raise my tax rate or lower it?

[oyarde]

I am willing to pay the small percentage of my income that would be needed for Federal spending authorized by Article One , Section Eight . The rest belongs to me .