While it is indeed a PART of the decision making process, the part he fails to comprehend is all other parts being equal (meaning they remain the same regardless of income tax rates) higher taxes mean LESS money the business owner has to pay in terms of salary etc...
No, it doesn't mean that. A business owner is not going to hire someone unless that person is "self-supporting", meaning bringing in sufficient revenue to cover his/her salary and benefits. The tax is levied on the profit, after all the employee expenses have been met, so taxes are not a primary consideration.
The taxes are levied on the profit the company/owner realizes from the employee. I explained this in a prior post. If the viability of hiring an employee rests on a 5 or 6 percent increase in taxes on the profit he/she generates for the company then the company can't afford an extra employee. No business person is going to cut it that fine. If an entrepreneur is determining the necessity of hiring employees based on a 5 or 6 percent increase/decrease in the profits they will generate I highly suggest that entrepreneur get the hell out of business before it's too late!
He also ignores the fact that the benefits of an employee are not normally immediate to the company bottom line because of the learning curve of the job. This is not always the case, but most times the new employee is not going to be as productive as one with experience.
Again, we come back to the 5 or 6 percent increase in taxes. While a new employee may require a short training period no decent business person is going to base a "hire/don't hire" decision on a 5 or 6 percent spread. Simply stated if the company/entrepreneur can not afford an employee due to paying an additional 6% in taxes they can't afford an employee. Normal fluctuations, from the economy to the employee's health, will have a much greater impact on profits than the 6% tax increase.
When you factor in the uncertainty, a small business owner presented with the fact that they may pay higher taxes in the future will typically hold off on hiring until the uncertainty becomes clear.
Nonsense! Again, 6% is not going to be a determining factor.
The economy. The training (taking a chance on an employee's ability to do the job). The expense of firing an employee. Those factors have a bearing on profits, far above the 6%.
Either it's worthwhile to hire an employee or it isn't and no employer is going to base that decision on the slight increase in taxes being discussed. That's why I previously said some folks must think small business is altruistic if they believe it when businesses say taxes prevent them from hiring more employees.
In this economy the tax savings are going to go directly into the entrepreneur's pocket. No entrepreneur/small business is going to say, "Hey, we save on taxes. Let's take a chance and hire an employee."
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While it is indeed a PART of the decision making process, the part he fails to comprehend is all other parts being equal (meaning they remain the same regardless of income tax rates) higher taxes mean LESS money the business owner has to pay in terms of salary etc...
He also ignores the fact that the benefits of an employee are not normally immediate to the company bottom line because of the learning curve of the job. This is not always the case, but most times the new employee is not going to be as productive as one with experience.
When you factor in the uncertainty, a small business owner presented with the fact that they may pay higher taxes in the future will typically hold off on hiring until the uncertainty becomes clear. Given that any freshman taking Econ 101 can tell you that raising taxes in a recessionary environment will retard growth of the economy, most business owners (small and large) will put a halt on hiring due to the expense of training and more importantly the expense of firing an employee.
So if a business owner knows:
1) Hiring a new employee will require training to get that employee up to speed
2) Taxes are going up
3) Tax increases retard growth
4) retarded growth could impact his/her bottom line
5) lower bottom line means potential layoffs
6) firing employee is expensive
then that business owner is NOT going to be hiring in the above environment