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TMFFlushDraw (95.56)

What Is A Job Creator?

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July 21, 2011 – Comments (22)

When did rich people become the pillar of our economy? When did it become common knowledge that if you own a business you deserve to pay less for social services than the rest of us? 

Nothing has driven me more crazy than the Republican mantra of "job killing tax increases" being their calling card in the debt debate. It's a great soundbite but the bite doesn't hold when facts are introduced. 

Last time I checked business owners paid less taxes than most of their employees. As a business owner you have choices about how you're paid, what rate you pay, and when you receive it. You would have to be a fool to not work the system to your advantage.  

As fellow Fool Morgan Housel points out it's NEW businesses that create most jobs. So we should be asking, "How do we get unemployed people to start a business?" instead of saying"Existing business owners are job creators." 

In fact, large businesses (which are getting most of the attention) are largely job destroyers. What's the first thing a multi-national company does when it acquires another company? Slash headcount. That's not what we need more of. 

So lets at least frame the problem in the correct manner. I hope job creators get all the benefits in the world from the government but I know enough to realize that those in the highest tax bracket aren't the ones we should be focused on. It's the 20-year old in the garage with an idea and a dream that needs our help.

Travis Hoium 

TMFFlushDraw 

22 Comments – Post Your Own

#1) On July 22, 2011 at 1:29 AM, drgroup (68.37) wrote:

Don't you understand that when a business owner of any sizehas to worry about initiating this illegal obamacre, has to meet epa/osha standards and guidelines, he has to contribute to each employees unemployment tax and collect irs taxes ;just to name a few : he is not going to hire more personel because he does not know if the nazi unions will be forced down their gullet'

This is the most oppressive government the US has ever fought or seen. People with high tax brackets spend their disposable income on the service sector, vacations... hundreds of other secture are affected when the rich spend and are not taxed. You get 100% of the money when rich people spend,butonly table scaps from the fed gov if any at all. Lay of the rich and get down on the waste spent by ali polititicians(especially obama)

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#2) On July 22, 2011 at 3:16 AM, imobillc (< 20) wrote:

I hate it too!

Mars

 

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#3) On July 22, 2011 at 9:40 AM, TMFFlushDraw (95.56) wrote:

@drgroup

You realize the EPA/OSHA were enacted under Republican presidents right? They aren't Obama's fault.

You can hate Obamacare all you want but I don't think the Massachusetts economy took a nosedive when the same kind of thing was passed. It's a great excuse but I don't feel bad that companies have to put something into an employee's healthcare. 

As for trickle down boosting the economy. We know that doesn't work. Gucci, Tiffany's, and Learjets don't exactly provide a huge boost to the economy. Plus, the rich just save their money when they get it, or buy expensive real estate. It's the middle to lower middle class that boost the economy.  

TMFFlushDraw 

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#4) On July 22, 2011 at 9:42 AM, edwjm (99.83) wrote:

Read the original post and then read the first comment.  What a contrast in intellegence!   The former contains logical thought; the latter is nothing but political posturing and propaganda.

 

"People with high tax brackets spend their disposable income on the service sector, vacations ..." is exactly the reason more money for the rich is contraproductive.  No value is created by such spending.  It is pure consumption of resources that could be diverted to produce food, clothing, shelter, infrastructure, and more useful services such as police, fire protection, protection of workers, protection of our food supply and many other expenditures which the origininal poster would probably consider "government waste"!

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#5) On July 22, 2011 at 9:48 AM, catoismymotor (67.75) wrote:

Godwin in effect as early as #1? Happy Friday.

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#6) On July 22, 2011 at 9:58 AM, outoffocus (24.51) wrote:

It's the middle to lower middle class that boost the economy

 

Agreed, and yet its the middle class thats being milked dry by the big business and government.  Its the middle class thats being taxed to hell, not the upper class.  Yet its he middles class who's income remains stagnant while cost of living goes up.  The middle class wants to start businesses, but its becoming increasingly hard for the middle class to get through all the Federal, State, and local red tape and onerous taxes just to make any semblance of a profit.  

Simple fact is the government and big business is killing the goose that laid the golden eggs all in effort to maintain the status quo.  If this trend does not reverse soon this country is headed down the toillet.

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#7) On July 22, 2011 at 10:11 AM, dbtheonly (< 20) wrote:

Travis,

 You saw Jon Stewart?

"Job Creator" is "rich person" in Republican.

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#8) On July 22, 2011 at 11:37 AM, chk999 (99.98) wrote:

The UK had high tax rates after WWII. Did the UK economy prosper mightily, or stagnate? Which political leader changed the tax rates and what happened after that?

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#9) On July 22, 2011 at 12:08 PM, leohaas (93.62) wrote:

The US had high tax rates after WWII as well. And yet, it is exactly in those years that this nation built itself into the powerhouse it is. Economically, militarilly, socially, and educationally!

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#10) On July 22, 2011 at 12:32 PM, amassafortune (30.02) wrote:

Exactly, Flush. The woman who just registered her business name with her state (or Delaware if she did some research), got an EIN (Employer Identification Number), bought a vacuum and other cleaning supplies, had a cram session with that new QuickBooks program, and put a magnetic company sign on the side of her 2008 Honda Fit, just created more jobs than GW Bush, Obama, and Jeff Immelt combined. In fact, she's about 13 million jobs ahead of them and is more likely to have a positive jobs count increase than the administration.

Every business should get a write-off of $30K, after deductions, to help generate jobs in this market.

Rumor is, an offshore profits repatriation provision will be in the budget agreement. As under G.W., the last time the gift was offered, the rate was less than 6% vs. the normal top corporate rate of 39%. Nearly a trillion dollars are eligible to be repatriated, but, of course, a good chunk of profit dollars need to remain offshore to fund ongoning operations.

The point is, these repatriated dollars, taxed at a much lower rate than the head of household making $12/hr has to pay, are not needed to support domestic jobs at this time, and are not likely to go toward much in the way of jobs creation. 

As Flush and virtually every study shows, small businesses generate jobs. Targeted federal programs only skew segments at which money is thrown. A simple tax credit will create the types of jobs needed in niche markets and geographical areas that a public policy person or program administrator could not even imagine. Federal efforts to grow jobs are usually just an exercise in malinvestment.

People who work for someone else, including public employees with "safe" jobs, should have a small business on the side, even if it only makes a few dollars per year. Have the structure and experience in place in case you need to ramp it up to a full-time occupation. Depreciation and other tax advantages can help you keep more money from your regular job in many cases. Tie your side business into something you enjoy so it doesn't seem like a second job. Keep it fun. Involve your children so they grow up seeing business ownership as a viable choice in their careers.

The longer this recession lingers, the more the unemployed will be blamed for their situations. Nearly all are capable, motivated, and willing, and if they could turn the clock back a few years, would take steps to change the one factor that holds them back even more than employers who are not hiring - undercapitalization. 

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#11) On July 22, 2011 at 12:38 PM, TMFHousel (95.70) wrote:

"The UK had high tax rates after WWII. Did the UK economy prosper mightily, or stagnate? Which political leader changed the tax rates and what happened after that?"

To be fair, I think being reduced to a pile of rubble had something to do with the UK economy post WW2. Further, top tax rates in the US were 90% in the '50s.  

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#12) On July 22, 2011 at 12:42 PM, TMFHousel (95.70) wrote:

Also, real GDP growth for the UK and US was not terribly different from 1945-1970: 2.5% vs. 3%. 

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#13) On July 22, 2011 at 12:49 PM, smartmuffin (< 20) wrote:

As fellow Fool Morgan Housel points out it's NEW businesses that create most jobs. So we should be asking, "How do we get unemployed people to start a business?" instead of saying"Existing business owners are job creators." 

We must distinguish between "taxes" and "regulations."  It is an overbearing and unpredictable regulatory environment that discourages 20-somethings from wanting to start a business, not necessarily the taxes.  Regardless of how large your business is, why would you go out and hire people when you have no idea what taxes will be next year, what the health care requirements will be next year, what the minimum wage will be next year, what the available interest rates for loans will be next year, etc.

 In fact, large businesses (which are getting most of the attention) are largely job destroyers. What's the first thing a multi-national company does when it acquires another company? Slash headcount. That's not what we need more of. 

No company exists to "provide jobs."  None.  Regardless of size.  Small business and multinational corporations have one thing in common, they are not charities.  If a large company comes in and cuts jobs, it's because those jobs were not necessary in the first place (or at least, not necessary anymore).  It might not be popular, but it IS proper resource allocation, and shows a company delivering on its fiduciary responsibility to shareholders.

 I hope job creators get all the benefits in the world from the government but I know enough to realize that those in the highest tax bracket aren't the ones we should be focused on.

Well, just because large corporations don't create the most jobs doesn't mean they don't create any jobs.  You seem to be obfuscating the argument.  I don't know any republicans who are arguing for higher taxes on small businesses, or lower-income individuals for that matter.  Furthermore, I don't know of any who are arguing for lower taxes only for the rich.  I'm only in my 20s, so my political knowledge doesn't go much farther back than the 90s, but I can't for the life of me remember any time when the republican platform was anything other than "lower taxes for everyone."

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#14) On July 22, 2011 at 12:53 PM, TMFHousel (95.70) wrote:

" It is an overbearing and unpredictable regulatory environment that discourages 20-somethings from wanting to start a business, not necessarily the taxes."

The percentage of small businesses today who say red tape is the largest impeidment to growth is the same it has been for the past 15 years.  It was twice as high in the '90s. 

http://www.fool.com/investing/general/2011/03/18/lies-damned-lies-and-ayn-rand-groupies.aspx 

 

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#15) On July 22, 2011 at 12:56 PM, TMFHousel (95.70) wrote:

"Regardless of how large your business is, why would you go out and hire people when you have no idea what taxes will be next year, what the health care requirements will be next year, what the minimum wage will be next year, what the available interest rates for loans will be next year, etc."

There has never been a single day in history when the future was predictable. No one has ever know what taxes will be in the future. Congress has always (in modern history) had the ability to raise taxes. Minimum wages have changed constantly over decades, and interest rates have never been constant. 

 

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#16) On July 22, 2011 at 1:12 PM, devoish (98.76) wrote:

Customers create jobs. When I first started a business I thought that everybody with a car was my customer. Then I learned that customers were people who could pay to have their cars fixed. One day I realised that a large enough group of my customers could no longer afford to pay me to fix their cars. Then one of mechanics lost his job too.

Best wishes,

Steven

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#17) On July 22, 2011 at 1:28 PM, chk999 (99.98) wrote:

The US had high tax rates after WWII as well. And yet, it is exactly in those years that this nation built itself into the powerhouse it is. Economically, militarilly, socially, and educationally!

This was due to the US being the only major power that didn't have its industrial base bombed into rubble. Short of another world war, this won't be repeating. 

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#18) On July 22, 2011 at 2:37 PM, whereaminow (73.77) wrote:

Customers create jobs.

Holy crap. Praise be to the Heavens.  For the first time in at least a year, I have found myself in agreement with Steven.  I am going to mark this occasion by ceremoniously peeling back each of my fingernails as slowly as my toughness and manhood will permit.

"Go into the home of the average American family and you will see for whom the wheels of the machines are turning." - Ludwig Von Mises, Consumer Soverignity, p. 22

David in Qatar

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#19) On July 22, 2011 at 2:56 PM, Rehydrogenated (35.26) wrote:

Interesting personal story about my father's small construction business. After arguing for weeks with his sales managers about prices and overhead, he had everyone in the company guess how many full time employees the company employed in 2007 (what everyone assumed was his best year) and currently has in 2011, guess revenue and guess profit.

Average Guesses - 2007

20 employees, 2 Million, $200K Profit

Average Guesses - 2011

12 employees, 1.6 Million, $50K Profit

Answer - 2007

9 employees, 2 million, $0 Profit

Answere - 2011

28 employees, 2 million, $0 Profit

I found this experiment very entertaining. His conclusion was "Raise prices or you'll all be fired. I don't make enough to put up with this crap."

But I think the real story is obvious. If we want unemployment down, we need to allow our small businesses to grow.

 

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#20) On July 22, 2011 at 3:00 PM, Rehydrogenated (35.26) wrote:

Addendum to the above...

expected 2011 revenues are $2.3 million for the year. So basically a $300,000 revenue increase for this small business enabled them to hire 11 workers.

It would have been really nice if small businesses had been given even 10% of that sweet sweet bailout.

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#21) On July 22, 2011 at 3:12 PM, smartmuffin (< 20) wrote:

The percentage of small businesses today who say red tape is the largest impeidment to growth is the same it has been for the past 15 years.  It was twice as high in the '90s. 

Well, I wasn't really talking about existing businesses and growth, I was answering your question of "how do you get the 20 something to start a business."  I myself am a 20 something who finds the idea appealing, but have no interest in jumping through the bruearucratic hoops.

 There has never been a single day in history when the future was predictable. No one has ever know what taxes will be in the future. Congress has always (in modern history) had the ability to raise taxes. Minimum wages have changed constantly over decades, and interest rates have never been constant. 

Yet again, you're twisting the argument.  It is not an issue of "can you perfectly predict the future or not?" but rather an issue of "how stable is the current system?"  Furthermore, this line of reasoning ends up becoming a confidence game.  It doesn't matter whether the government really is going to change everything next year, what matters is that people think they might which scares them away from investing.  It's not ALL political either, some of it is just the environment.  I have no idea where we're going from here, the best I can give is somewhere in between "complete recovery and new boom cycle" to "total financial armageddon,"  Given that, why the hell would I take out a huge loan to start a business right now?

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#22) On July 22, 2011 at 5:57 PM, eldemonio (98.81) wrote:

"Job Creator" means anyone who has the capital to hire more people, but is choosing not to right at the moment because they want to hoard cash or pay absurd compensation packages to their top tier management.  "Job Creator" has been adopted because "Rich A$$hole" doesn't inspire the independents.

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