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Author: jerryab Big gold star, 5000 posts Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: of 1966743  
Subject: Re: Fiscal Cliff & Debt Ceiling Date: 12/13/2012 10:44 AM
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I would add the following, which I wrote and posted some time ago. It does exactly what you stated needed to be done IF the claim "the wealthy create a lot of jobs in the US" is actually true. Perhaps that claim is NOT true? That would explain why conservatives do NOT want their claim to be tested and then exposed as a lie with irrefutable facts documented by the IRS over a number of years....

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Use tax benefits (= "tax cut") to offset tax increases exclusively on the the wealthy only if they create jobs in the US (additional benefits can be offered at the state level by the states if they should choose to do so). Tax benefits are only available for full-time jobs, hiring part-time workers will not be rewarded with this tax benefit.

The obligation of the government is to take in enough income (fees, taxes, etc) to cover the cost of running the government and providing public services.

The claim by conservatives is tax cuts (especially to the wealthy) create jobs. Ok, "We, the People" will you up on that claim--and tie tax benefits to jobs created by those specific alleged "job creators".

Here is how to do it responsibly:

Step 1: Create a new tax exclusively on the wealthy--enough to help with the current budget. Result: The government is now getting substantially more tax revenue. Say it is $150,000 per year per wealthy taxpayer.

Step 2: Create a new tax benefit of $XXXX/year for each new/additional job created for a minimum number of months (to be determined, i.e. 36 months? 48 months?). The benefit can be used for up to 2-4 years (as long as the new/additional job still exists), depending on the economy and government policy. Benefits need to be tiered by the year so no one is able to run a scam. Tax benefits are paid after the year is over, so it is only for real businesses that last a significant length of time.

Example of how the tax benefit works (numbers are for illustrative purposes only):

Rates:

Year 1: $2000
Year 2: $3500
Year 3: $4500

First year: $2000/new employee who worked the entire year (no benefit for new employees less than 6 months, pro rate for 9+ months?), 100 new employees = $200,000 benefit ($2000 x 100). Business has 100 total full-time employees. Hires 50 new employees to start the second full year.
Second year: $3500/employee who worked the entire second year. Original 100 employees work second year = $350,000 tax benefit. The 50 new employees worked that full year, they count for the first-year deduction and the amount is 50 x $2000 = $100,000 additional deduction. Now 150 total full-time employees.
Third year: $4500/employee who worked the entire third year. Same 100 employees work third year = $450,000. Same 50 newer employees work second year = $175,000. 150 total full-time employees. Hires 100 new workes to start the fourth year. Total employees = 150.
Fourth year: Benefit ends for the first 100 employees. This is third year for those same 50 employees who started the second year= $225,000. If the 100 new workers work all year, that is another $200,000 deduction for fourth year, $350,000 the fifth year, and $450,000 the sixth year. Total employees = 250.

Total tax benefits paid = $200k + $350k + $100k + $450k + $175k + $225k + $200k + $350k + 450k = $2.725-million vs a tax increase of $900k.

Analysis: $2.725-million tax benefit less $900k higher taxes over six years = net cost of $1.825-million to govt. Cost per job created = $1.825-million/250 = $7300.

Can not fire existing workers and hire new workers to restart benefits. Must be *additional* jobs created. No additional jobs created = no tax benefit.

Given the above information, the business is obviously successful (hired more people and kept them on), so the business venture is also profitable.

Because the wealthy create large businesses with many new employees, the tax benefit more than offsets the tax increase and will help fund the cost of new workers. Hiring new employees is a business decision made by the business. The tax benefit is designed to help in the first few years of adding new workers, when business needs the most help with expansion.

This is the "put up or shut up" point in the entire discussion:

If the wealthy actually create a lot of new/additional jobs in the US (as claimed by conservatives), then they will create more jobs in order to take advantage of the tax benefit. They can choose to create many more jobs in the US--which would create an even bigger tax benefit for them than was available previously.

The only jobs eligible for the tax benefit would be additional jobs created by those who pay that higher tax rate, not replacement jobs (i.e., transferring jobs between companies to get the tax benefit would not count). This would also be available to all those "small/medium" business owners who do create jobs AND pay the higher tax rate on the wealthy. If they do not pay the higher tax rate for the wealthy, they can not get the tax benefit of the deduction.

If new jobs are created by the wealthy who pay the higher tax rate, the country will receive additional taxes, spending, and a nice stimulus from the new employees to offset the tax benefits issued. Net cost to government: Reasonably close to zero over the long term because new jobs generate taxes and additional new jobs.

Now the arguing can commence over the amount of the tax benefit, how long it would last (for each job created), and how much taxes on the wealthy go up.

The budget deficit is smaller--and we can get on with our lives.

If the wealthy do create additional jobs (as alleged), they will be rewarded with tax benefits and profits from their business ventures. That is the definition of a "business friendly" environment.

If the wealthy do not create additional jobs in the US, that is their choice. They simply pay more in taxes here to offset their choice of creating jobs elsewhere (or not at all). That is fair for everyone.

It's not personal, it's business.
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