Tax Cuts HURT Small and Medium Businesses

[JohnWxy]

http://institute.ourfuture.org/blog-entry/2010020608/tax-cuts-hurt-small-and-medium-businesses

by Dave Johnson

Much of the public believes that tax cuts "create jobs." A recent Rasmussen poll found that 59% of voters believe cutting taxes is better than increasing government spending as a job-creation tool. This proves that repeating a slogan over and over can effect what people believe.

But here is some news: Corporate taxes are on profits. So a tax cut means that the more profitable companies -- the Wal-Marts, Exxons, and other giants -- benefit. They pay back less to the government for their use of the roads, schools, courts, police, fire & military protection and all the other services that helped them get so big and powerful. So the giant monopolistic corporations that are chewing up small businesses, destroying local and regional retailers, take those tax cuts and use them to turn themselves into even better small-business-destroying machines.

For example, giants like Wal-Mart are destroying local and regional retailers. But it is the Wal-Marts, not the local and regional retailers that are the beneficiaries of tax cuts. They already have every advantage in the world and tax cuts are just more ammunition helping them destroy the small and medium businesses that are the job engine of our economy. This is why the "usual suspects," the politicians who get their campaign funds from the giant companies and work with lobbyists for the largest corporations and the right-wing talk show hosts who always advocate what the largest companies want are the ones who always advocate corporate tax cuts as the solution to everything.

Meanwhile, since smaller businesses that are struggling don't pay taxes, the tax cuts do nothing for them. They're already being walloped by these giants, then walloped by the government giving their competitors even more advantage with these tax cuts, and then they get the infrastructure they depend on cut out from under them. When taxes are cut the infrastructure that supports building new businesses is weakened. The services these companies need are cut back. The schools get worse, the government services are cut back.
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[baldguy]

1. Also: Since corporations & the top 1% account for 50% of all the income in America

and the majority of tax cuts favor them, rather than everyone else - any resulting deficits & inevitable out-of-proportion tax increases will tend to hurt the middle class and the poor.

[Go2Peace]

2. Absolutely. When tax rates are low the rich do not have to invest or give as much

High tax rates with charitable donations like we used to have. If people will be taxed they will instead invest money in ventures, they won't let it sit or spend it on obscene $5000 a night lodging.

There is so much false info out there on how these things work. Thanks to conservatives.

[Name removed]

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[winyanstaz]

5. Tax cuts for the small business and taxpayers are good...

But the tax cuts for big business HURTS us all.

[Dr.Phool]

6. Not true.

Tax cuts for the rich just give them more money to buy politicians and favorable laws. A tax dollar "appropriated" by a politician can be used to hire a teacher, build a school, fix a road, or any other endless possibility. This spending affects the economy directly, by creating jobs, which has a multiplier effect, thus creating wealth.

[mwooldri]

7. This argument makes no sense.

If all the money goes to the private sector, then the profit motive will take over. That's why we are having situations like Anthem Blue Cross Blue Shield hiking up premiums 39% in California, whilst making massive profits. All the roads would be privatized. Fire, Rescue and Police services would all be privatized. Imagine having to call 1900-911-HELP with calls costing $3/min. You see enough beggars out on the street as it is... there'd be lots more if government support were to go. All our war veterans, all our present disabled, all our present very low income people would no longer have healthcare, so they'd be dying off early. Parents would be faced with huge school bills they could no longer pay and as such there would be a huge rise in illiteracy. Churches that presently help out non-members will either have to discontinue their services, ask for much more money from the general public, or limit services to tithing members.

You want a country with no income taxes and no functioning goverment? There is such a place, and it is called Somalia.

For all its faults, the United States of America is a far better place to live IMO than Somalia. It's far safer. It's a much better standard of living. Plus there are lots of government programs that do generate wealth for every $1 spent.

Plus if you pay $0 in income taxes already, and income tax is abolished and not replaced with any new tax, then how is that going to benefit you personally? You are not going to see any extra money. The big corporations would benefit the most, they would use that extra money to either give it back to shareholders (Warren Buffett would definitely get richer), or use it to obliterate the competition. Once they have a monopoly (well remember there is no government now to break up any monopoly) they can then jack up prices for the goods and services which they sell and you can do nothing about it.

I will agree with you on one point: our government does spend money on programs that do not make a good return on their investment. Unlike private companies, we can actually do something about the government, since there are elections periodically and it is possible to get organized and kick the incumbents out and put new politicians in place. With private corporations, there are only two ways to change their method of business (provided there is no government regulation in their business) - which is to stop purchasing their product, or purchase enough of the company so you can replace the present management with new management. We have some monopolies in our country as they are: I can only purchase my electricity from Duke Energy, I don't have a choice. Water is from the municipality, if that's done away with it would be a private company. Telecommunications on fixed landlines are governed by one company. Take away government regulation and see those prices skyrocket, and people can't exactly live without water, life is harder in today's world without electricity and communications (like this very here Internet).

Bottom line - we need government of some form, certainly some of their spending is questionable, but the good that government is doing right now far outweighs the bad IMO.

Mark.

[Name removed]

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[Lydia Leftcoast]

11. Sounds like you have more reading of libertarian propaganda under your belt

than actual life experience or careful thought.

[CLANG]

15. Taxing is not stealing

"we, the people..." agreed to this in the 16th amendment to the US Constitution.

You should do some basic research before posting...

[winyanstaz]

4. exactly...ty..good post...

[D-Lee]

8. Agreed! Thanks for looking at the illogical underbelly of this argument n/t

[Lydia Leftcoast]

10. I think most Americans believe that companies are taxed like individuals,

and that makes them sympathetic to calls for corporate tax cuts.

They think, "Oh my God, the poor company has to pay 35% of its gross income in taxes. No wonder it can't hire anyone!"

They don't realize that

1. All businesses pay taxes only on PROFITS, i.e. gross income minus all business expenses. The costs of wages and benefits, leases, purchases of supplies and equipment (whether expensed or depreciated), purchases of inventory, research and development, advertising, outside contractors, and every other expenditure that helps them run their business is taken out of pre-tax income. If a business doesn't make a profit, it pays no income taxes.

2. In a corporation, some of the profits go to the shareholders, where they are taxed as personal income for the shareholders. In a sole proprietorship or partnership, the profits are taxed as personal income for the owner(s). (I am a sole proprietor, and except for having to pay all my own Social Security, it's a good deal because of the deductions allowed.)

A corporate tax cut does NOTHING for sole proprietors.

[Name removed]

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[Lydia Leftcoast]

13. Ah, I see you've swallowed the corporatists' lie. You're even quoting it

in almost the same words that it's usually quoted to me in the online comments of my local paper. You must have learned that in business school, and in my opinion, the proliferation of business majors indoctrinated in Friedmanite economics is one of the worst things that ever happened to this economy.

A company can reduce its taxes by hiring more people, giving its existing employees (including executives) more wage or benefits, modernizing its equipment, building a new plant, or otherwise investing in the business.

However, with the low corporate tax rates that have prevailed since the Reagan administration, corporate shareholders have come to DEMAND high dividends. They forget that investment is supposed to be a gamble, and that you win some and lose some. As such, they pressure management to raise profits by any means necessary. This includes cutting the number of employees (even if it means over-burdening the remaining employees), outsourcing to cheap labor countries, hiring illegal immigrants or H-1B workers, not contributing to community charities, shutting down older plants instead of modernizing them, or playing the stock market itself.

It becomes ALL about more and more money for the shareholders. There's no more responsibility to the customer, the community, the employees, or anyone but the shareholders and executives.

Yeah, yeah, yeah, I know that management is supposed to maximize profits for the shareholders. However, the idea that they have to screw all the other stakeholders in order to do so is relatively recent.

And everyone who isn't a major shareholder is suffering for it.

[bertman]

14. Desire for higher profits has as much to do with raising prices on consumer goods as does

taxation. Most corporations will raise their selling price as high as they can before they see a negative sales effect.

In your imagination, every neighborhood is going to have a neighborhood association that will hire paving contractors to come and pave their roads, sewer contractors to come and put in sewer lines to remove the waste, fire-fighting companies that will come and put out fires, police who will patrol the streets, capture offenders, and run the jails.

That's just fantasy.

Taxation evolved as a way for human societies to provide the services that those societies need to function. Of course it was done by force. If it hadn't been, only a few would have seen the benefits and voluntarily "chipped in" for the common good.

Every major civilization since the beginning of recorded history has levied taxes. That's not about to change because you haven't thought this through.

Sure, there's abuse by politicians when they spend our tax dollars. The fucking bailout was the biggest one in the history of the world. But that doesn't mean that we shouldn't pay taxes.

[Name removed]

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[CLANG]

17. Anarchy is just, efficient, and peaceful.

And you are insane.