The Real Mitt Romney

[ZenGum]

Never mind the math(s).

4.a is explicitly contradictory with 2. Slipping in "also" and "end up" doesn't help.

[Flint]

Originally Posted by BigV

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I find it *counterintuitive* to say the least that the first thing a business would want to do with newfound cash is to hire new people. Business are built to increase profit, not to expand employment opportunities. Their reason for existence is to increase profits and they take the path or least resistance to do so.
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This is true--as people will follow human nature, businesses will do what it is natural for them to do. This is the fundamental idea behind policies designed to 'piggyback' on people's natural tendencies--as opposed to 'engineering' results.

For example, business A. pays slightly less in taxes, they will invest this in growing their business, thus growing their profit (assuming the same margin, getting 'bigger' produces more revenue). So, they add production, increase output, and service new customers. Every part of the industry they are a part of incrementally increases in capacity.

Is it a direct a direct correlation--they made enough extra to justify hiring a set amount of additional staff? No, probably they will try to get more productivity out of their existing employees, have them work longer hours and such.

But the point is that when business capacity grows, at some point you will need additional workers to do that work. The industry certainly doesn't exist just to hire people, but all of those businesses will need to hire people to get that extra stuff done. The bigger they are, the more they make, the more workers they need.

That's the basic idea--businesses WANT to grow so they can make more money!

Oh, and when they make more money, there is more to tax.

Originally Posted by BigV

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How can households pay the same amount of tax if they have fewer deductions, meaning their taxable income is greater?

The way I understood it is because the rate is lower.

Originally Posted by ZenGum

4.a is explicitly contradictory with 2. Slipping in "also" and "end up" doesn't help.

My apologies, I couldn't figure out a good way to diagram that Point 1. and Point 4. happen at the same time. If the tax rate going down and the deductions being eliminated happen at the same time, they cancel each other out--there is no net effect.

Theoretically, mind you. I'm just trying to explain what I thout the idea was, since I did not find it to be confusing, but rather simple.

[xoxoxoBruce]

Originally Posted by Flint

For example, business A. pays slightly less in taxes, they will invest this in growing their business, thus growing their profit (assuming the same margin, getting 'bigger' produces more revenue). So, they add production, increase output, and service new customers. Every part of the industry they are a part of incrementally increases in capacity.

I question this line of thinking because American (non-financial) corporations are sitting on $5 trillion, yes that's a T, in cash reserves.

[Stormieweather]

You need more customers in order to expand. Businesses don't just expand because they have extra money, they expand because demand is higher for their product/service (and they can't squeeze any more out of their current resources).

And that means more cash is needed in the consumer's pocket. In most cases, small business customers are the middle class. Give the middle class more cash and they will buy more with it which will give small businesses reason to expand.

Right now, corporate cash is at an all time high. Why? Not enough demand for products to justify expansion. Why? Not enough cash in the middle class's pocket with which to buy more products.

[Happy Monkey]

Originally Posted by Flint

For example, business A. pays slightly less in taxes, they will invest this in growing their business, thus growing their profit (assuming the same margin, getting 'bigger' produces more revenue). So, they add production, increase output, and service new customers. Every part of the industry they are a part of incrementally increases in capacity.

But business expenses are deductible, so if they want to invest in growing their business, they can do that pretax anyway.

Plus, if a "small business" is not only making $250,000 in taxable income, but making enough over $250,000 that the extra money taxed at that rate is significant, they are not the local corner store that politicians want you to picture when they use the phrase "small business".