Taxes and Job Growth
- Posted by Leigh Drogen
- on November 12th, 2012
I love listening to people argue over taxes. Most of them seem to believe that there is some empirical evidence supporting their specific philosophy around who should be taxeed, how much, and why. It’s always hilarious listening to these arguments as both sides completely ignore the reality that discussions over taxation are simply differences in philosophical viewpoint, there is no right and wrong answer because it’s often the goals of taxation which aren’t even the same on each side.
But as our country, and most of the developed world, struggles with how to provide jobs for its people as automation, robotics, and software literally eat the economy, the tax question does come into play in this conversation.
It comes down to a pretty basic premise for me. When it comes to corporate taxes and job creation, would you rather see large multi national companies which are on the margin firing people versus hiring people get to keep more profit, or, would you rather see them taxed at a higher rate in order to provide better infrastructure and services to startups which by all measures have created 100% of new jobs in this country over the past 13 years (per the WSJ).
It’s about mature businesses which attempt to achieve scale and maximize profit versus startups which attempt to achieve growth. It’s about entrenched interests versus new disruptive companies. It’s about those with money to lobby the government versus those who don’t. It’s about those creating new industries versus those trying to simply maintain their own hold.
Startups don’t give a shit about taxes, it’s literally the very last thing we think about, it couldn’t matter less. At the end of the day if we’re paying a lot of tax it means we’re not spending enough money to grow. We shouldn’t be operating with huge positive cash flows every quarter, we should be spending that money on hiring and building things.
So given the fact that startups create all the jobs, and we need to create more jobs in this country, for me at least the answer is pretty simple, raise corporate taxes and use the tax money you get from the large companies to provide infrastructure and services (like healthcare) to startup companies so that they can grow faster and one day turn into the large companies that pay a lot of tax.
We need to get away from this mindset that we’re going to somehow piss off large companies and that they aren’t going to grow and hire, or leave the country. It’s all completely bullshit. They aren’t creating jobs anyway, so why cater our tax policy to them.
The answer is obvious, it’s because they have the lobbying money. But if I ever hear someone say that we need to lower corporate taxes to create jobs, I just laugh.
Corporate profits as a percentage of GDP have never been higher in history, all while large companies are firing people left and right. And you’re worried about protecting these guys why?
I’m all for cutting my personal income taxes, that would be great, it might also allow more entrepreneurs to take stabs at starting companies.
In my mind the government, if it really wants to create jobs, should do everything they can to provide a safety net to entrepreneurs, provide infrastructure to entrepreneurs, provide cheap healthcare to their companies, and provide the ability to raise capital (JOBS Act rules still stalled at SEC, fuck them).
That’s how you create jobs. You don’t lower corporate taxes, that’s just stupid.
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Leigh Drogen is the founder and chief investment officer of Surfview Capital, LLC, a New York based investment management firm employing an intermediate term long/short momentum strategy. More »
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