YESTERDAY’S COLUMN COULD HAVE BEEN SHORTER
Mark Budwig: “The irony is that, on most things, it’s the Republicans who go for the simple — generally simplistic — argument, while Democrats say, “No, it’s more complicated than that.” Here it’s VERY simple: 1. No amount of tax cuts will induce a business owner to hire a new employee he doesn’t need to handle demand, because the employee will be unproductive so reduce profit, regardless of taxes. 2. No tax increase will dissuade a business owner from hiring a new employee he does need to handle demand, because doing so – if his business is profitable to begin with – will increase his profit, regardless of taxes. Full stop.”
NEW COMPANIES VS. SMALL ONES
Tom Anthony: “Time to stop worshiping small businesses, says MarketWatch. Only NEW companies create jobs. SMALL companies per se don’t. Another red herring of the Republicans to divert our attention from their real object.”
☞ In part:
. . . [I]t’s entrepreneurship we want to cultivate, not some nostalgic memory of Floyd the barber as the hero of the economy. We need to get away from the idea that smaller is better. In fact, newer is better.
☞ And I defy you to find a hungry young entrepreneur (or greedy old venture capitalist) who ever decided not to start a business because the $50 million payout he dreamed of cashing out with someday might be taxed at 20% instead of 15%. Did Steve Jobs and Steve Wozniak take this into account when they started Apple? Fred Smith when he started Federal Express? Robert Noyce when he founded Intel? Mark Zuckerberg when he started Facebook? Get real, people.
Republican leaders are spreading another myth about small businesses [the MarketWatch piece continues]. They say that if the tax hikes are allowed to go through for the 2% of taxpayers who earn more than $250,000 a year, it’ll keep small-business owners from hiring.
Their claim is nonsense. The tax rate that business owners pay is irrelevant to their decision whether to hire another worker.
The main point to remember is that money spent on hiring new workers isn’t taxed at all.
Think about it from the viewpoint of an owner who’s making $250,000 a year from a business and who’s thinking about expanding.
If I hire more workers, my business costs will increase. I’ll have to pay their wages and benefits, train them, and buy the materials and the equipment they need. In order to turn a profit, I need to be able to sell the goods or services they produce for more than the cost of employing them.
If I cannot sell their product for more than it costs, I won’t make a profit and I shouldn’t hire them. My decision is based on two factors: Costs and revenues.
Notice that the decision does not depend on my tax rate. I pay taxes on the profits I receive, not on the costs of doing business.
MUST SEE TV
Yes, I’m posting this a third time, because you may not yet have found time to watch these two segments:
Here is why we have a huge problem making our already messy democracy work. It’s Rachel Maddow on the $200 million a day we are spending on the President’s trip to Asia . . . except that we’re not,. But it doesn’t matter: the right wing has made it fact for a huge segment of our population, an increasing number of whom will now be sitting in Congress.
And here she actually agrees with Rand Paul on something . . . and makes the fundamental point that adding $700 billion to the deficit by extending tax cuts on income above $250,000 will make the deficit bigger. Not smaller. Bigger. Not smaller. Bigger. Not smaller. Bigger. And yet it is the Republicans’ number one priority. And we really, really, really need to fight it.
KNOW ANYONE WITH KIDS IN HIGH SCHOOL?
Rick Sparks: “I read Debt-Free U over the weekend (I read your promo for it a few weeks ago). An outstanding book by an extraordinary young man confronting a rising problem in our nation. Thanks for the tip.”
Quote of the Day
That I'm their competition.~Famed hedge fund manager Michael Steinhardt, when asked the most important thing an investor could learn from him.
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