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Investment Analysis Clubs / Macro Economic Trends and Risks


Subject:  Re: If Date:  10/11/2012  3:06 PM
Author:  mmrmnhrm Number:  405812 of 538751

The problem I have is that the questions are thrown out there and seem intended (to me, at least) to goad responses towards tax policy, which of course can only end in a political quagmire with barely four weeks to go before election day.

To your OP, you don't specify which taxes you're talking about. Personally, I don't think personal income taxes (which seems to be where you're headed) play any role whatsoever in a business' willingness to hire. Walmart doesn't care whether their employees are paying 1% or 80% on their income, they only care whether or not their customers have money to spend. Sure, they'd appreciate lower personal rates as it puts more money in customers' pockets, but it doesn't directly affect their cash flows.

Likewise, I've always felt the idea of corporate tax rates affecting willingness to reinvest to be something of a red herring as well. Businesses will whine and moan about paying anything at all (and let's be honest... if the idea of "corporate personhood" were taken its logical conclusion, they they should be paying personal income tax rates rather than corporate tax rates), but their decisions on whether to expand, contract, or just play wait-and-see really comes down to whether or not expansion will be ROI-positive, or if shrinking will improve margins in the remaining areas. If anything, higher taxes might encourage expansion, since sitting on a taxable cash pile rather than reinvesting or paying dividends will honk off shareholders.
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