Businesses do not exist to create jobs.

[Spike89]

70. True, but business 101 says hold down expense

The simplified (repub) meme that businesses create jobs is true, but because it is so simple, it is also true that businesses kill jobs in that every business person is looking for ways to minimize expense and increase efficiency. Incredible, but nuance is the key.

It isn't the golden ticket, but government can help spur employment. A high marginal business tax coupled with generous tax credits for payroll goes a long way in encouraging businesses to invest in employees. Of course, as some have pointed out, pushing this too far will only encourage business to offshore. The key is to get the tax rates up and boost the credits in balance. You don't actually hurt the companies at all--in fact, because there are more workers/consumers, the company can benefit.

A simple example: Company X makes widgets. They can sell 1000 widgets a year at $1000/widget for a gross of $1 million. To make 1000 widgets, company X needs 10 employees who average $40K ($400,000 annual payroll). Other operating expenses are basically fixed at $400,000/year (utilities, materials, machinery). Company X nets $200,000/year in taxable profit. Let's assume Company X has mediocre tax lawyers/accountants and pays 15% taxes ($30K). The owner gets to put $170,000 in their pocket. Lower the taxes to 10% and the owner will put another $10,000 in their pocket, but nothing else changes.

Raise the marginal rate to 50%, and the owner only gets to keep $100,000. Again, nothing else changes. There are still the same number of employees and demand is unaffected. The government of course gets $70K more and "might" spend that money educating students, fixing roads, or funding research into enhanced widget technologies. Those things may benefit the owner, and maybe even raise demand for widgets slightly, but essentially, the equation isn't much changed. Under this scenario, the owner has an incentive to move overseas.

Couple the tax hike to an agressive payroll credit perhaps equal to the salary and things do change. Adding 2 new employees costs $80,000, but also increases capacity to 1200 widgets for a total of $1.2 million (new employees=more money in circulation=more widget demand). Costs of course go up a bit (but many are fixed), so figure $250,000 in taxable profit. The government wants 50% of that, but first gives the business the credit for the new employees so $80,000 goes right into the owners pocket and 50% of the rest also goes into their pocket ($85,000). The net amount going into the business owner's pocket is $165,000. The business returns almost the same amount, tax revenues go up, and there are more people working (which raises demand). The business is also worth more so the owner really doesn't even lose the $5K.