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Wed Nov 28, 2018, 09:05 AM

The idea that tax breaks buy jobs is a fallacy

Corporations exist only to serve themselves and their stock holders. It should be illegal for politicians to buy their loyalty with our tax dollars.

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Reply The idea that tax breaks buy jobs is a fallacy (Original post)
Ohioboy Nov 2018 OP
beachbum bob Nov 2018 #1
unblock Nov 2018 #2

Response to Ohioboy (Original post)

Wed Nov 28, 2018, 09:41 AM

1. targeted tax breaks can create NEW JOBS, but we rarely see those.

 

And yes, business is to serve business owners to have profit as they take all the risk

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Response to Ohioboy (Original post)

Wed Nov 28, 2018, 12:42 PM

2. It's complicated.

But it's certainly true that the right-wing notion that tax cuts automatically means more jobs is vastly optimistic and misleading.

First, cutting tax *rates* merely increases net profit or net loss, it doesn't turn any losses into profits. And that's critical, because businesses hire based on whether it *is* profitable to hire, not based on *how much* net profit there is in it.

Moreover, the net employment effect of a tax cut should really be compared to the alternative of the government spending tax same amount of money, rather than the government doing nothing. If the government spends money on goods and services, it is increasing demand, which encourages businesses to hire to supply that demand. So even if a tax cut produces some jobs, it might still be worse for employment than just spending the money.


However, tax breaks in other forms can encourage hiring, e.g., a tax credit per new worker. That may directly turn an unprofitable hire into a profitable one.

Your focus appears to be on the competitive "race to the bottom" among states and municipalities. There, tax breaks usually don't create jobs, but they do *move* jobs. So it's one way to lure a business to bring jobs to a town in need of jobs instead of letting that town decline further. So it's not all bad, but it is a somewhat random government policy, where more coordinated planning might make more sense. Plus it is obviously prone to corruption.

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