Do The Real Job Creators Even Care About The Tax Rate?

Posted by Bob Lord

We can’t tax the job creators! We can’t tax the job creators!

So goes the familiar refrain. The response is more or less to point out that the folks in the top 1% are not really job creators. Heck, many of them are coupon clippers. In addition, there’s the fact that they sure aren’t creating many jobs, those job creators. It’s hard to disagree with those points. After all, they’re true.

But even if Cantor, Boehner and company could get past those basic facts, isn’t all the job creator bullshit still bullshit? Here’s my take on it —

A job creator is just like any businessperson. He wants to make money. There’s nothing wrong with that. So, if a new employee, including benefits, is going to cost, say $50,000, the job creator is going to hire that person only if the net revenue from that job is positive. So, if the new employee will generate more than $50,000 in additional revenue, job creation makes sense.

Here’s where I get stuck. Assume the newly created job will generate $100,000 in revenue, for a net profit of $50,000. Today’s maximum rate corporate tax rate is 34%. So the tax would be $17,000, for an after tax profit of $33,000. Let’s say you increase the rate all the way to 40%. That increases the tax on the net additional profits to the job creator to $20,000. But the job creator still is left with a profit of $30,000 after tax. So unless the job creator is profit adverse, the job will be created, even that the sky high tax rate of 40%. And guess what? The job even would be created if the tax rate were 50%.

I suppose one could argue that the job creators need the after tax profits in order to invest in new job creating endeavors. But that’s a tough argument to make when there’s trillions of cash sloshing around corporate America and the top one percenters who own their own businesses are out there buying luxury items and chasing speculative investments.

So even if the top one percenters really were job creators, the elimination of the Bush tax cuts wouldn’t cost us any jobs. Of course, we already knew that.