January 29, 2010

Credit vs. Break... Neither does the Job...

One of the problems with the President's proposed Tax Credits, or Tax Breaks is they don't do anything for small businesses that have, until now, suffered due to a slump in revenue from poor sales. So far the recession has destroyed employment. Small businesses are the biggest source of employment in the country, and they've been shedding labor hours and boosting productivity of those left in order to just stay above water. Many have gone into debt or folded completely due to the flagging economy. Tax Breaks or Credits don't do much for small businesses in a bad way for the short term because in order to hire someone you must have capital available to be able to meet payroll while your new hire's productivity is tuned into a revenue stream. This takes time, and most small businesses have been operating on the borrowed variety of this commodity for a while.

The most effective way to incentivise small businesses into hiring more employees is to eliminate their immediate tax burden for the new hire, as well as existing employees. Small businesses who end up having to pay quarterly estimated taxes that are lower than current levels will have capital on hand in order to re-invest in growth. This can take the form of asset aquisition (generating sales tax revenue) or headcount (generating income tax revenue). The hard part is that Liberals don't get that. When you reduce income and capital taxes for individuals they spend more money instead of saving for tax day, which generates sales taxes. When you reduce income and capital taxes on businesses they invest the increased revenue in more assets and employment, thus increasing all tax revenue across the board. Tax breaks do nothing in the short term because businesses continue to operate at the same revenue level due to tax breaks not taking effect until the business files their tax return.

This delaying of revenue generation does nothing to drive growth in the private sector, and should seriously be re-evaluated. No real growth is going to be felt for years if this is the "fix" that is put in place, and by then countless more job losses and small business failures will continue to cripple our economy.

I was at : 6942-7298 San Leandro St, Oakland, CA 94621,

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