Tax Cuts And Basic Economics
I’ve been fed up with the junk that goes on in Washington for some time now. I usually manage to keep my mouth shut, but there is only so much stupidity I can stand.
This week the President, Barak Obama, gave a speech about the economy and tax policy. He proposes that we keep the Bush-era tax cuts, but only for those Americans who make less than $250,000 a year.
Let’s go back to simple basic economics and see if I can explain this. There are many entrepreneurs in this country who are sole proprietors or in simple partnerships in the businesses. Most of these business owners make more than $250,000 per year.
At the most basic level of economics, which by the way almost nobody in Washington seems to understand, there are only 3 things that small business owner can do with his profits.
First of all he can save it. There’s a novel idea. By saving and investing part of his profits, He puts part of his profits to work to build the economy. However, the Congress and the President have made sure that they will get their share of the profits of those investments in the form of taxes.
Secondly, he can spend his profits on personal bills, a new car for his wife, light bill, phone bill, put food on his families table. He can also use that money to expand his business and hire more employees.
Finally, he can pay taxes. Of course there are tax consequences with the first 2 items. As I’ve already mentioned, there are taxes on the profits from investments. Then there are taxes on spending in the form of sales taxes. Lastly we have the dreaded income tax. The President wants to raise taxes on everyone making more than $250,000 per year as I’ve already mentioned.
The effects are clear. If you increase the amount of taxes there is less money to save and spend. This means for the small business owner that there is less money to invest in the business which translates into fewer jobs.
I’ve had several jobs in my life. Some of those jobs were with large corporations. Some of those jobs, however, were working for small business owners. There are more jobs provided by small businesses than the larger companies. The bottom line is this. I’ve never had a poor man hire me for a job. I’ve always been hired by a business owner who was wealthy enough and successful enough to create jobs and hire me. Mr. President if you want to take more money from these job creators, then it is obvious to me that you fully intend to completely tank this economy.
I hope the American voters have better sense than to reelect this President!
As always your opinions on this subject are welcome. I try to read all responses even though I will not be able to respond to all of them.