10/16/2012 8:44 PM
Companies don't add or not add jobs because of the tax rate on their profits. They decide to add or not add jobs based on the demand for their product.
10/16/2012 8:49 PM
Posted by bad_luck on 10/16/2012 8:44:00 PM (view original):
Companies don't add or not add jobs because of the tax rate on their profits. They decide to add or not add jobs based on the demand for their product.
I would think their overall financial situation would play a part in that as well.  With taxes being a part of that.
10/16/2012 9:11 PM
He just doesn't understand how business works. Neither does Obama. And they are unwilling to learn.

If your product is selling well, and you must now open a new facility to keep up with demand, you will have many things to weigh in determining WHERE to build that new facility. One of the biggest factors will be the tax-rate in the towns, states or countries on your short list.

There are numerous examples of companies building new facilities in a particular locale almost solely based on the tax-rate. We lost out on a company expansion here locally, because a neighboring state offered tax-based incentives to that company. You have to make America an attractive place for businesses to build here. The highest tax-rate in the world isn't very attractive.

10/16/2012 10:31 PM
Posted by tecwrg on 10/16/2012 8:49:00 PM (view original):
Posted by bad_luck on 10/16/2012 8:44:00 PM (view original):
Companies don't add or not add jobs because of the tax rate on their profits. They decide to add or not add jobs based on the demand for their product.
I would think their overall financial situation would play a part in that as well.  With taxes being a part of that.
A profitable company operating below capacity isn't going to hire more employees, even if their income tax rate is zero.
10/16/2012 11:00 PM
Jeez.  Businesses operate mostly on bottom line.

Is it better to make $30 and be taxed 30% or $25 and be taxed 20%?  Bottom line is the same.   Less risk in making $25.   What does a smart business do?
10/16/2012 11:18 PM
Posted by MikeT23 on 10/16/2012 11:00:00 PM (view original):
Jeez.  Businesses operate mostly on bottom line.

Is it better to make $30 and be taxed 30% or $25 and be taxed 20%?  Bottom line is the same.   Less risk in making $25.   What does a smart business do?
yeah that prior comment was asinine.  solar powered cars are in high demand but the cost of making them is a losing proposition,  just because there is demand does not mean a business will hire more employees.  demand plays a part in the equation but so does profitability.... and taxes deduct from that figure. 
10/17/2012 10:06 AM
It's just a case of someone trying to "prove" that tax rates don't matter to businesses.   They do.  Businesses explore every option to increase the bottom line.
10/17/2012 10:40 AM
It really depends on how you define the bottom line and what kind of company you're referring to.  An LLC or S-Corp?  These companies pass through their bottom line to the owners as K-1 income.  Most small businesses are in this category and the owners attempt to decrease their tax obligation by REDUCING their taxable bottom line by any means necessary.  Tax rates on individual income too high and there's too much potential taxable profit this year?  Take advantage of the IRS allowing companies to fully expense some capital expenditures.  Push some sales into the following tax year.  Submit some anticipated reimbursable expenses in the current tax year.

Notice how I didn't mention employment in there at all?  That's because (for most companies) employees are a cost of sales.  Meaning that it's a variable expense that when increased, increases revenue, and when decreased, decreases revenue.  Tax rates don't enter into decisions on hiring for these types of companies....merely demand for their products.  Of course, certain tax breaks will stimulate hiring, but no company says "I know it's really busy and we can't meet demand with our current workforce.....but I can't hire people because income tax rates are too high".  If hiring people will increase revenue by more than the cost of employees, they do it.

Now, if we're talking about a capacity issue in a production facility require a new building, that comes down to local tax credits or incentives....not federal taxes.  In fact, if adding a new building (and employees) will increase revenue, companies will always pursue that avenue regardless of income tax rates.....because the depreciation (or increased lease payments) will reduce their tax liability (assuming the growth will increase EBITDA....otherwise the growth wouldn't make sense).
10/17/2012 10:45 AM
Tax rates are not affected by increased revenue or cost of employees?
10/17/2012 10:45 AM
No, but tax liability is.
10/17/2012 10:46 AM
Just using last night's debate as an example, it would be wise to stop at $249, 900 unless you can substanially go over that number.   That just goes back to $30 at 30% or $25 at 20% example. 
10/17/2012 11:01 AM
Posted by MikeT23 on 10/17/2012 10:46:00 AM (view original):
Just using last night's debate as an example, it would be wise to stop at $249, 900 unless you can substanially go over that number.   That just goes back to $30 at 30% or $25 at 20% example. 
Why?

Let's say you're the owner of an LLC that profits (after interest, depreciation and amortization) $240,000 per year.  Let's say that your effective tax rate is about 19% at that point, so you net about $195,000 per year (for sake of this discussion I'm leaving out taxes other than federal income tax).  But you have a problem....you can't meet the demand for your products.  You think about hiring someone, but that will increase your taxes to the point where you make less money, right?  Wrong.  You hire someone for 40K per year (including payroll taxes, benefits, etc)  and he produces 80K more of revenue, of which 20K goes to other cost of sale.  So 20K goes to the bottom line (before taxes).  Subtract 35% for the tax rate at that point and you still make 13K more than the year before.
10/17/2012 11:11 AM
Isn't that what I said?    Is it worth the risk to go from 195k to 208k?   I don't think so.   You have to hire/manage another person.   Increase expenses and hope he produces 80k and not 60k.    All to make what amounts to a poverty level increase?
10/17/2012 11:13 AM
Going the other way with jvford's example. Say you own an LLC and half of your employees are sitting around doing nothing all day because there isn't a huge demand for your product. Even if you have a large enough margin that you are still profitable, you aren't hiring more employees no matter what your federal income tax rate is.

That's the problem we have with the economy now. Tax rates aren't blocking jobs, lack of demand is. I don't think we should raise taxes on anyone, but focusing on lowering upper bracket tax rates is pointless if your goal is job creation.
10/17/2012 11:15 AM
Posted by MikeT23 on 10/17/2012 11:11:00 AM (view original):
Isn't that what I said?    Is it worth the risk to go from 195k to 208k?   I don't think so.   You have to hire/manage another person.   Increase expenses and hope he produces 80k and not 60k.    All to make what amounts to a poverty level increase?
Even if he only produces 60k you don't lose money because the tax rates are marginal. You only pay the higher rate on the first dollar earned over X.
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