Tuesday, March 22, 2011

Realize the Profits

Hey! Your business just received a tax cut! What are you going to do next?

First of all, you admit that the whole premise of "low taxes = jobs" wasn't really all it was cracked up to be...
But the link between lower taxes and job creation is shaky at best according to the Small Business Association of Michigan and Business Leaders for Michigan, which represents large corporations.

Fewer than half of small businesses say the tax cuts mean new jobs, according to a Small Business Association survey. About 50 percent say they will use tax cuts to "realize profits."

And then you say "thank you" and put the money in your pocket. Interesting. Don't seem to remember that being mentioned in any campaigns last fall. Oh well. Johnny, tell them what they have won...

Here is the question and answers the Small Business Association received from 431 members:

"If Gov. Snyder's 6% Corporate Income Tax Plan becomes law, and your small business no longer pays businesses taxes, will your company"

• Add employees (48 percent)

• Expand your business (52 percent)

• Buy new equipment (51 percent)

• Raise wages and benefits for your current employees (50 percent)

• Realize the profits (50 percent)

So even with very favorable tax cuts, 52 percent of small businesses plan no additional employees. It's pretty discouraging. Rob Fowler, president and CEO of the association, says most job growth traditionally comes from small business.

Some of the above sounds like they have good intentions, but the admission that less than half will hire is disturbing - especially when you consider what it will cost the rest of us.

Raises and benefits are nice for those that receive them, but in the big picture economy, it's hard to believe that they will make up for the decade of previous cuts, stagnant wages, or increases in the cost of living. Not to mention any small business hiring will probably be off-set by cuts in the middle-class jobs, pay and benefits that cities and schools are going to be forced to make. The continued competition for jobs, with unemployment still an issue, will keep wages and benefits low as well. Figure it's a wash at best, and a loss at worst. Maybe someone will follow up on the numbers after the fact to give us a solid picture of jobs created vs. jobs lost under this plan.

And as to the rest of the price tag, the facet of this that is rarely mentioned - perhaps we should do a survey of seniors and anyone who was receiving the EITC or other tax credits to determine where they are going to cut back on spending. Snyder's plan will take $1.7 billion out of the hands of the consumers that buy products or services from these businesses - which may act to depress the need to "expand business" or add those new employees in the first place. And "buying new equipment", depending on what that is, could mean the elimination of jobs as businesses move towards more automation.

No guarantees at all out of small business. How about the major employers?

Jobs aren't likely to happen with the big boys. Only about half of the state's 76 largest businesses will benefit from Snyder's business tax cuts, says Doug Rothwell, president and CEO of Business Leaders for Michigan. Their decisions about job growth don't hinge on changes and seem only loosely linked to more favorable tax treatment in Michigan.

So, we are going to raise taxes on the working poor and seniors, as well as destroy our schools, public safety, and major economic development efforts, for a theory that business professionals admit is "shaky" and "loosely linked", and that the majority of small and big business owners admit won't increase hiring.

Well then. Let the protests continue...