Will corporate tax breaks create more jobs?

Last night while watching The Rachel Maddow Show on MSNBC, a former Presidential Economic Advisor, Jared Bernstein, was the guest to discuss the notion of reducing corporate taxes in order to stimulate the economy and encourage corporations to hire more works.  From that conversation, this quote really stuck with me…

Corporate profitability does not create jobs.

So what does that mean?  So many legislators are focused on reducing the taxes that corporations pay, however, this segment hosted by Melissa Harris-Perry provided a very interesting concept to me.

Corporations, contrary to Mitt Romney’s thinking, are not people.  They do not have feelings nor are they concerned about the human condition.  Corporations exist to make a profit and many of them do so by continuously finding ways to become more efficient through reducing expenses and increasing revenues.  With that being said, the corporations that these legislators want to reduce taxes for, are not inclined to hire more workers just because they are paying less in taxes.  In fact, most of the corporations, when publicly held, do not pass on these “savings” to the consumers or unemployed, these savings are generally passed along to executives in the form of bonuses for a job well done and/or stockholders in the form of dividends.

Honestly, ask yourself… if I owned a corporation and my business was operating efficiently – creating enough widgets with the current level of workers to supply consumer’s demands, what would be my incentive to hire more workers just because I am paying less money in taxes?  Hiring more workers creates more expense and more liability.  What incentive is created by paying less in taxes to increase expenses AND liabilities?

As Congress begins to debate how to stimulate our economy, do you really believe that corporate tax breaks is the answer?

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4 thoughts on “Will corporate tax breaks create more jobs?

  1. You raise a great point. Job creation is a complex issue on everyone’s mind; whether or not tax cuts will stimulate job growth is a good question, but great point in clearly stating corporations are not people..

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  2. I never thought about it before but Jared Bernstein makes a good point. Simply reducing taxes is not going to encourage corporations to hire more employees. Corporations hire when there is a need to hire not when there is a surplus of cash. If they can do fine with a smaller workforce then they will.

    Government has always worked from the top down instead of the bottom up. The key is to work from the bottom up and make it easier on consumers to purchase items. When the everyday American is purchasing more goods/services, corporations have to provide more of that good/service and in turn have to hire more people.

    A classic example of the politicians ignoring the power of the everyday American consumer is what you tweeted earlier today about John Huntsman wanting to get rid of tax credits for home mortgages. Tax credit for homeowners is a major incentive to purchase a home. By reducing the advantages of home ownership there will be less of a demand to build new homes and less of a need for companies involved in real estate and construction to hire more people.

    Help from the bottom up..not the top down.

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    • I totally agree! I wrote a post last year about the failure of trickle down economics. That theory only works for the people at the top. For those on the bottom, the trickle feels more like a light mist that quickly evaporates (i.e. $250 stimulus checks).

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