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?