How Does Lower Taxes Increase Jobs?

Discussion in 'Politics, Religion, Social Issues' started by bobber205, Jun 13, 2011.

  1. bobber205 macrumors 68020

    bobber205

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    #1
    Watched the GoP debate and they said this constantly.

    I just don't understand how it creates jobs. Aren't corporations awash in cash?

    How does less regulation create jobs? Poor regulation caused the '08 crash. :( Which cost thousands of jobs.

    How does anyone believe this nonsense?
     
  2. StruckANerve macrumors 6502

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    #2
    I guess the idea is that the company has larger profits to re-invest back into the company for growth and more jobs. Not really sure if it works or not. Switzerland has the lowest income tax rate and the lowest unemployment rate so maybe we need to take a look at how things are done over there. I think the biggest thing that could help the U.S. right now would be a major overhaul of the tax code.
     
  3. mrkramer macrumors 603

    mrkramer

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    I think it's because every time we give corporations a tax break they create jobs in china. :rolleyes: basically though republicans believe that if you get to keep more of the money you earn you have more incentive to invest that money and create new jobs. It's true to an extent, nobody would waste time working with a 100% tax rate, but we are really far onto the low side of the curve where lower taxes do nothing but decrease government revenue.
     
  4. freeny macrumors 68020

    freeny

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    Ive never heard of a company creating jobs based on a tax break, ever.
     
  5. miloblithe macrumors 68020

    miloblithe

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    It's economics 101 that companies with more money will reinvest and add new jobs or increase productivity.

    Of course, it would be nice if our politicians had gotten beyond ECON 101.
     
  6. balamw Moderator

    balamw

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    Finally watched "Inside Job" last night.

    It would also be nice if our corporate leaders compensation and incentives were still tied to the long term success of the companies they lead and not just short term revenue/profitability goals.

    What incentive do "they" have to create jobs if their own compensation will be larger if they don't? Or if they preferentially create jobs elsewhere?

    B
     
  7. maflynn Moderator

    maflynn

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    #7
    Putting more money into the economy means people (and companies) tend to spend that extra money. Its the inverse of less money, slowing the economy.

    I like everyone else has less money because of inflation. It costs me more money to fill my tank on a weekly basis so that means I have less money to go out to eat. Restaurants have to pay more money for their products because of inflation and so they raise their prices. So now there's less people going there and costing them more money. They have lay people off.

    Having more money means I can use that to eating out, and thus the restaurant is now busy and can maintain or hire more staff, who in turn will spend their money etc, etc.
     
  8. Huntn macrumors G5

    Huntn

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    It depends on where the motivations of company leaders lie. Today as compared to post WWII, many (most?) seem intent of filling their pockets and shafting their workers. Any jobs that pop up are viewed as an evil necessity. ;) The philosophy of enriching the team (of a successful company) is still there. Unfortunately only management is considered part of the team. All the rest are expendable.

    The conservatives constantly argue that lowering taxes on the rich create jobs. This is complete utter BS. I'm not speaking of corporate taxes.
     
  9. miloblithe macrumors 68020

    miloblithe

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    #9
    Where does this more money that we can "put" into the economy come from? Are you suggesting the government print more money? Won't that cause inflation?
     
  10. leekohler macrumors G5

    leekohler

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    #10
    It doesn't and never has. If it were true, we should have more jobs than ever right now. Taxes have rarely been lower. Trickle down does NOT work and never has.
     
  11. citizenzen macrumors 65816

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    #11
    Today we call it "trickle down"

    In the 1890's it was called "horse and sparrow theory."

    'If you feed the horse enough oats, some will pass through to the road for the sparrows.'
     
  12. mstrze macrumors 68000

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    #12
    Lower tax rates on businesses will in some cases lead to job growth. Do a search for news about Caterpillar and Illinois and their threatening to move out of the state and into Wisconsin, where the taxes are lower. That sort of thing is happening all over. Businesses want business costs, including the taxes that they pay, to be as low as possible. States that have lower tax rate or breaks for start-up businesses have been able to hold their own in the economic downturn while the high tax states are hemmoraging.

    Of course looking for the lowest possible costs may also mean outsourcing as well. But, I would imagine that non-union labor costs in the U.S. will start looking more and more affordable as inflation (up 5.5% this past quarter!)continues to eat away at China's bottom line and workers over there start demanding much higher wages.

    Developing nations won't want to stay 1st or 2nd-world for long. Once their appetite for goods comes in line with Europe and the US and other first-world economies, their days of taking jobs from those locations will come to an end as well, since labor costs there will be prohibitive unless their government intervenes.

    By then, we are likely to be moving on to Africa for our outsourcing. I believe that Africa is on the verge within the next 20 years of a huge economic boom.

    But...yes...taxes can increase job growth, but not as well as one might like to see. The biggest problem right now is that businesses are still being squeezed by high commodity prices and there is still uncertainty of the health of the economy. So, businesses are holding on to HUGE amounts of surplus cash to help them weather a downturn. When it becomes clear that the economy is strong enough, they will spend and hire....of course, the one thing that would spur a recovery faster would be these companies spending and hiring. So, it's a vicious cycle. :(
     
  13. *LTD* macrumors G4

    *LTD*

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    #13
    Less of a need to outsource.

    Though "lowering" union control would be much, much more helpful.

    Unions have killed manufacturing in North America.
     
  14. miloblithe macrumors 68020

    miloblithe

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    #14
    Keep in mind, the U.S. has virtually the lowest taxes in the world already:

    http://anepigone.blogspot.com/2008/03/government-spending-as-percentage-of.html

     
  15. maflynn Moderator

    maflynn

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    By lowering taxes you leave the tax payer (or corporation) with more money on hand. With that money they can then spend it.

    If I have more money after paying bills, buying groceries,etc and putting some in the savings, I'd treat my family to night out. If taxes were high or gas was high, then I cannot do that and struggle just with the staples, i.e., food
     
  16. WestonHarvey1 macrumors 68020

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    #16
    If you're unhappy with how many jobs tax cuts create, you'll be really, really unhappy with how many jobs tax hikes create.
     
  17. Huntn macrumors G5

    Huntn

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    #17
    Lowering taxes as a standalone solution is the big lie. It takes an integrated system, not just lowering taxes and then hoping the rich do good things with their cash for the rest of us.

    I disagree. Any wage above $1 per hour killed manufacturing in North America.

    But we need more reduction to help out the poor rich.

    It's the Middle Class masses on the verge of extinction that has the power to drive the economy, not the few rich folk. Keep in mind that all this talk of lowering taxes comes from those with money with the intention of providing the biggest benefit to themselves, not average working class citizens.
     
  18. miloblithe macrumors 68020

    miloblithe

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    #18
    But if you lower taxes, doesn't the government have less money on hand? What's the difference between the effect of a corporation (or individual) spending money and a government spending money?
     
  19. Mac'nCheese macrumors 68030

    Mac'nCheese

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    #19
    Depends on who you are taxing of course. If you cut the tax rate to a big oil company, they will keep the money. They are doing fine right now, why would they create jobs with the money they are saving? If they needed the workers, they could afford to hire them already. Cut tax rates to the poor and the middle class, and as others have pointed out, they actually can use the money and will....maybe get to eat out or buy presents or take a vacation or fix up their homes. Enough people start spending again,small local businesses start to make more money and they can hire more people to grow their businesses and make more money and create more jobs for people who then spend that money, etc etc.
     
  20. leekohler macrumors G5

    leekohler

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    #20
    BS- the cost of free market health care and other benefits are what killed manufacturing in the US. If we would move to single payer, a lot more employers could afford US employees.

    Prove it. Never once in my 44 years on this planet have I seen trickle down work- NEVER. Ronald Reagan turned this country into the biggest debtor nation in the world. Before his term, we were the biggest creditor nation. Trickle down has caused a disaster in this country. It will be our downfall.
     
  21. CalBoy macrumors 604

    CalBoy

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    The problem is, a corporation that gets a tax break need not spend it on more jobs. Indeed, since the recession many companies (a famous example being General Electric) have received fantastic tax benefits from the Stimulus Plan and local state attempt to spur growth. The problem is that the companies have been investing more heavily in equipment, not employees. In fact, a week or two ago The Economist outlined this very problem. As the 21st Century presses on with technological gains, companies are finding that it makes a lot more sense to invest in equipment and forgo more labor since labor is a lot more expensive for the same productive impact.

    In fact, the idea that more money in the bank=more jobs is an insidious one. Companies don't hire people only because they can afford it. The formula is one that involves the ability to pay for the employees, the ability to make productive use of those man-hours, and the ability to grow the company as a result of those man-hours. During a recession, companies are frequently able to make their production elements more efficient (out of necessity), but they aren't necessarily able to both find the financing for new employees OR (and this is critical) find the market potential to justify an expansion of their footprint.

    During this recession there have been plenty of efficiency measures already taken (in fact per hour productivity has continued to increase despite the bad economy) and financing, while tight on the part of the private banking sector, has been moderated by generous tax breaks and other government programs seeking to grease the wheels of the economy. The real problem that remains is that the potential to expand the market is limited. Ironically that's the case because people are either out of work, or are working at underpaid jobs to avoid starvation.

    Then there's also the ticking time bomb of America's skills gap. Un and underemployment for those who have no STEM (Science, Technology, Engineering, Math) skills is at very high levels, while those who are STEM qualified are actually enjoying fairly low unemployment. Not all of these jobs require a college degree, but they do require extensive training and experience. Our ability to retain STEM immigrants has been on the decline since we shifted to a family-focused immigration policy, and we need to seriously reconsider immigration policy so that it allows us to bring in more qualified immigrants, because we certainly don't have the ability to teach our own children in the STEM very well. Hell, half of the country doesn't even comprehend the basic fundamental mechanism of biology.
     
  22. kavika411 macrumors 6502a

    kavika411

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    #22
    My concern about lowering taxes is that the government would be less capable of funding the three wars in which we are currently engaged, and we'd have to pull out. That would be just awful. It is much harder for the average person or average company to spend $1T on three wars. Therefore, we should not lower taxes. The government is a better steward of this money.
     
  23. ratzzo macrumors 6502a

    ratzzo

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    #23
    It's all a chain of events. Lowering of taxes incentives the person to consume/buy. There's a law in economics that explains how lowering of taxes actually yields higher profit to the government rather than high taxes. When people buy/consume more, the government ends up receiving more money. Stores and companies do better because they have more income (they sell 2 items now instead of one) and so they require new job openings, etc. The government can ultimately also invest that money into creating new jobs.

    This is the VERY shortened version, there's a lot of theory behind this.

    edit: also, less regulation is the main concept of capitalism-- the state not interfering in the free market is the ideal of capitalism itself.
     
  24. leekohler macrumors G5

    leekohler

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    #24
    How's that working out for you?

    Ok, then explain why we have no jobs and taxes have not been lower in decades. The theory isn't working.
     

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