Explain the Higher Tax = Layoffs Argument to Me

[Jhhnn]

I'd say you're 100% wrong.

The problem is most Liberals/Progressives/Dem here do not understand how businesses are taxed.

The vast majority of businesses here in the USA are flow-thru entities, meaning the business's profits are taxed on the owners personal tax return.

Any half-way decent discussion requires that personal tax rates and business taxation must be CONFLATED.

In this specific case, the Congressman who owns Subway restaurants, I'd say there's a high probability he owns the restaurants in an S-corp (if his advisers are even half-way competent). That means the business profits end up taxed on his personal return (Form 1040).

Fern

Yeh, Fern, but businesses whose stock is traded on exchanges are not pass-throughs, at all. While S corps may be a majority in numbers, they're certainly not a majority in terms of cashflow, assets or capitalization. Fortune 500 companies are not S corps.

That's the level of conflation I referred to earlier.

 

[Fayd]

LOL no he doesn't, some of that money comes back to the company. Just because the government taxes the money doesn't mean the money goes out of circulation out of the economy (in fact, the direct opposite happens, see GDP multiplier). Add to the fact that most companies hire based on DEMAND. If someone wants your product and you don't have enough workers to meet that demand, you hire more people.

You idiots need to learn econ and stop with this armchair quarterbacking.

edit:





No it doesn't, assuming you have competition you can't arbitrarily raise prices. Also, you're taxed on profits, not revenue. My business unit measures it's performance based on EBIT (Earnings BEFORE interest and taxes).

all of your competition gets taxed, then all of you have to face the new higher equillibrium price. there might be some holdouts, but eventually everybody will raise their price to move to the new equillibrium.

 

[ShawnD1]

My uncle runs a restaurant. Here's how he explains it. Taxes determine whether or not he takes an extra vacation to the bahamas, it doesn't determine whether he hires an employee or lays one off.

This is because employee salaries are tax-free. You only pay tax on net income, not gross income.
Hiring an extra person would actually mean you pay LESS tax overall. Your profit would still go down because it's an extra business cost, but it's a tax-free business cost.

all of your competition gets taxed, then all of you have to face the new higher equillibrium price. there might be some holdouts, but eventually everybody will raise their price to move to the new equillibrium.

Yep. This is why mcdonalds in canada can stay in business even though the shit is twice as expensive in the US. It's not just mcdonalds that is twice as expensive, it's EVERY business that is twice as expensive. A damn Honda Civic will set you back a good 22k up here.

 

[1prophet]

Since most people don't run businesses and are generally stupid (as exemplified in this thread), they don't understand that many companies re-invest after tax income in order to maintain and/or grow their business. Let me illustrate with an example. Let's say a company has $10 million in "income" and after tax they are left with $6 million. In order to maintain and grow the business, assume the company has budgeted to spend $5 million in equipment and services, and the remaining $1 million to be passed to the owners as a dividend.

Assume there is a tax increase, where now the after tax cash flow they are left with is $5 million. They still need to spend $5 million in order to keep the ship running and moving, and the owners require the $1 million in maintain their yachts and vacations. What do you think management is going to do in order to find the additional $1 million? It will be a combination of reductions in headcount (lay offs), savings in expenses and reduction in the planned $5 million capital expenditure spend.

Hopefully this helps open up your mind a little bit. Or you can continue your class warfare populist rabble.

And there are owners that would sooner mothball their yachts and postpone a vacation before they ask of their employees to sacrifice.

Sacrifice like Leadership starts from the top not the bottom.

 

[1prophet]

Well, then, we had better not only slash rates to zero 'to compete', we had better pay them every penny of the citizens' money as incentives! Otherwise they'll leave!

Your post explains why high tax states, like New York, are the lowest business activity in the nation, in contrast to our lowest tax states, which are the leading producers.

Not always, there is much more than the mentality of cheaper is better and some companies understand this.
http://www.globalfoundries.com/malta/


http://www.timesunion.com/business/...-move-into-Global-Foundries-Fab-8-1392332.php