Lowering Taxes for Business

Every election, I hear someone say: "We need to lower taxes for business to create jobs, stimulate the economy, etc..."

On the surface, this seems like a really good idea.  Businesses employ people and we could use more jobs.

But would this really do any good?

I don't think so.  Businesses only pay taxes when they generate a profit (or in the case of some large corporations, work the system to avoid taxes even when they make a profit)

Most of the businesses I've worked with focus on EBIT (earnings before interest and taxes) as a key metric.  No EBIT?  No taxes.  

I've never heard someone say:  "Wow, the corporate tax rate just went down.  Let's get serious about making money now -- we were just playing before."  

Have you?






Here's a good article on how corporations are the real "moochers".

http://www.southernstudies.org/2012/09/corporations-are-the-real-moochers.html

How to stimulate the economy

Everyone (well, not everyone actually) wants our economy stimulated. You hear quite a bit about it on the news, but no one seems to have an answer.

I don't claim to have the answer either (but keep reading anyway) but I would like to recommend a few things and refute some of the ideas I've heard one too many times.

Before I go any futher... here is my pet peeve.

"Letting the tax cuts expire on people who make more than $250,000
will hurt small business."

THIS MAKES NO SENSE!

I've heard this enough that someone must believe it!

Here's reasons why those people are either purposely misleading the public (lying) or ignorant of economics and human nature:

1) We are talking income taxes, not business taxes. Having been a business owner, I know the difference between the two, and can explain about LLC's vs. S-corporations.

2) What small business person have you ever hear say "Wow, I have this great opportunity, but I just don't think I'll do it because I might have to pay a bit more in taxes" ?

3) If a small business owner is lucky enough to clear $250,000 as income after all their business expenses, they have ample opportunity to reduce their income to lower their tax rate. Two methods to do this (that I can think of off the top of my head) are paying their employees higher wages or a bonus, or investing to grow the business. Both of these would help the economy.

4) The people that are fighting against letting the Bush era tax cuts make over $250,000 and usually work for the government or a political party.

So, the next time you hear this, please note who says it, and let me know!

Thanks,

Tracy