Lowering Taxes does NOT create jobs?

[JohnfrmClevelan]

My argument is simple....

1. A business considers ALL costs, including taxes for future business growth and margins.

2. Part of growth and expansion is the need to hire people, just like buying equipment, marketing, and a variety of needs to expand that business.

3. Smart business practice is to never borrow money or sell equity IF one does NOT need to, if they are looking to expand - which includes hiring.

It is wise business practice to run at the most optimum productivity level without creating liabilities and reducing equity. To do this a company always monitors their costs, which includes taxes. If a company can cut costs to reach the optimum productivity level, they should.

I agree on all points here.

Taxes are a cost.

Agreed.

Employees are a cost.

Agreed.

Lower taxes give a business the OPPORTUNITY to hire people without significantly impacting margins, by lowering the need to borrow or sell equity.

This is where we differ. Lower taxes give you bigger profits, and you can do lots of things with bigger profits. But taxes are calculated after other costs. If you hire a new employee, your taxes on profits at the end of the year will be lower for it.

Your faulty assumption here is that it will always be worth it for the company to hire a new employee, and all you have to do is find the money to do so. That is backwards thinking. That is how companies hire the boss' kid for the summer, or the secretary with big tits that doesn't know how to type, or buy a better coffee machine - "do we have the money to do this?" But do they hire another guy that builds widgets when there is plenty of demand to justify that hire? Yes, whether they have money on hand to do so or whether they have to borrow to do so.

That doesn't mean a business HAS or WILL hire people, they may pocket the profits, spend it on a better office, marketing, or equipment. However, never-the-less, it gives the business the option to hire.

It gives the business an option to hire. They could also borrow money or sell equity. If the employee is going to be worth the cost, the employee will get hired.

Anyway, you just made the argument for us. Lower taxes do not lead to more jobs, they lead to higher profits. What companies do with those profits is up to the companies.

 

[JohnfrmClevelan]

Our business was profitable BEFORE hiring the compliance person and it didn't NEED a compliance person.
We hired a compliance person because we had new regulations that required it.

The hire NOW allows our business to operate but certainly did NOT contribute to it's profitability.

Well, you are more profitable than you would be if you were shut down for noncompliance, so my point stands.

If this regulation was in place before you started, you would see it as just another cost of doing business, like having a certain number of fire extinguishers around.

 

[prohobo]

I agree on all points here.



Agreed.



Agreed.



This is where we differ. Lower taxes give you bigger profits, and you can do lots of things with bigger profits. But taxes are calculated after other costs. If you hire a new employee, your taxes on profits at the end of the year will be lower for it.

Simple Example:

Company has $20 million in revenue
Company has $18 million in costs
Net is $2 million in taxable income.
State tax is 10% = $200k in taxes
Profit is $1.8 million
Margins are 9%

Company moves to no tax state and wants to expand WITHOUT impacting profit margins.

Company has $20 million in revenue
Company increases their costs to $18.1 million (hires two people)
Net is $1.9 million in taxable income
State tax is zero = zero taxes
Profit is $1.9 million
Margins have increased to 9.5% and the company hired two people.


(This is a very simple example to show basic tax savings vs. costs and impacts to margins).

Your faulty assumption here is that it will always be worth it for the company to hire a new employee, and all you have to do is find the money to do so. That is backwards thinking. That is how companies hire the boss' kid for the summer, or the secretary with big tits that doesn't know how to type, or buy a better coffee machine - "do we have the money to do this?" But do they hire another guy that builds widgets when there is plenty of demand to justify that hire? Yes, whether they have money on hand to do so or whether they have to borrow to do so.

I never said "it will always be worth it for the company to hire a new employee, and all you have to do is find the money to do so", nor did I imply that. So I am not exactly sure how you read into that.

My position is fairly clear.


1. Taxes are a cost.
2. Employees are a cost.
3. If a company needs to hire more people and is looking at doing so without impacting margins, costs ARE taken into a consideration.
4. Reducing costs (of which taxes are a cost) can give a company an opportunity to hire while limiting the impact to margins and reducing the need to borrow or sell equity.


A company that does save on costs however may not decide to hire, they may use the savings to for a new office, marketing, bonuses, healthcare, pay raises, or they may just wish to pocket the money. However, they DO have the opportunity to use that cost savings to hire more people.

The cost savings gives the company opportunity and choices while reducing the impact to margins.

It gives the business an option to hire. They could also borrow money or sell equity. If the employee is going to be worth the cost, the employee will get hired.

In our case we were FORCED to hire a compliance officer. They are not cheap and certainly do NOT contribute to the profitability.

So where is this money to come from for the NEEDED hire?

What expenses should we cut? Healthcare, give everyone a pay cut, no bonuses, cut marketing expense, what exactly?

Of course we could borrow money and assume debt or we could sell equity? Those are also bad decisions for use of run costs, because they are ONE time capital raises to pay for ON GOING run rates. It would be stupid to do it.

So we moved offices that saved both on rent and taxes, which allowed us to hire WITHOUT impacting margins and also without needed to raise money or sell equity (both stupid options for obvious reasons).

Anyway, you just made the argument for us.

Lower taxes lead to higher profits. What companies do with those profits is up to the companies, which may include hiring more people.

Finally you get it and you agree with me. ( I corrected your statement above to make it more clear).

 

[prohobo]

Well, you are more profitable than you would be if you were shut down for noncompliance, so my point stands.

If this regulation was in place before you started, you would see it as just another cost of doing business, like having a certain number of fire extinguishers around.

You are getting it. Yes, not ALL employees contribute to the profitability and some are costs.
Yes these are costs of doing business, like rent, taxes, and even fire extinguishers.

 

[Tettsuo]

VERY SIMPLE:

1. We had to HIRE new employees that had NOTHING to do with the profitability or demand. It was a tech and compliance person.
2. COSTS were considered to determine to HIRE these people. To SAVE on costs we looked at rent and taxation.
3. Saving on RENT and TAXES allowed the company to HIRE more people without impacting margins, the need to borrow money, or sell equity.

1 - Nothing to do with the discussion. That situation is simply a cost of doing business and not related to taxation. We are discussing taxation aren't we? Stick to the topic please. I will try to do the same.
2 - Maybe we're talking past each other.
I've already stated that if the cost of business is too great, those costs can stifle the growth business. Again, we are no where near that point now. Proof of this is the amount of capital businesses are currently sitting on. Profits are up, but employment is barely growing to match it. How exactly does lowering their taxes further spur them to hire employees (that will increase production) they don't need?

If a net profit increase is present because the demand is there, it's bad business to not hire and expand. Only a fool would leave potential money on the table solely to maintain a specific profit margin percentage. Are you seriously saying that you're willing to leave an ACTUAL increase in net profits in an effort to maintain a specific profit margin? Personally, I'm more than willing to sacrifice my profit margin percentage for REAL net profit gains. A new employee (an increase in cost) is worth it when demand supports the hire. If demand does not support the cost of that new expense, then it's not worth the cost. Do you agree?

My point? Taxes will absolutely affect your profit margin. So what? That's a cost of doing business. If demand is not present, even if there's a reduction in your taxes (cost of business) if the demand is not present, why on earth would you hire if all other costs are static?

3 - I understand your point but I still disagree and here's why... if your cost of business decreases but there's no reason to increase production (no rise in demand), why would you hire a new employee? Profit margins nice, but the bottom line is net profit. Who cares if you lose a percentage point in the margin if your overall net profit total increases? That's the entire point of hiring the vast majority of employees.

My point is simple.

Taxes are a cost, just like rent, insurance, and other costs.

If you can SAVE costs you can use that to hire people, expand an office, buy equipment, spend it on marketing.

Taxes are a cost.
Saving on a cost gives the company money to do other things with it, like hiring.

I agree... to a point. Employees are an investment. You have to take risks to success in business, don't you agree? Most people are hired because the employer sees the employee as a way to increase their profits. Even regarding your compliance hires, cost is made to save you money by keeping you in compliance as the cost of failing to be in compliance is too great. Just like insurance.

Let's make this as simple as we can. In case you didn't read this from my post to someone else -

My argument is simple....

1. A business considers ALL costs, including taxes for future business growth and margins.

2. Part of growth and expansion is the need to hire people, just like buying equipment, marketing, and a variety of needs to expand that business.

3. Smart business practice is to never borrow money or sell equity IF one does NOT need to, if they are looking to expand - which includes hiring.

It is wise business practice to run at the most optimum productivity level without creating liabilities and reducing equity. To do this a company always monitors their costs, which includes taxes. If a company can cut costs to reach the optimum productivity level, they should.

Taxes are a cost.
Employees are a cost.
Lower taxes give a business the OPPORTUNITY to hire people without significantly impacting margins, by lowering the need to borrow or sell equity.

That doesn't mean a business HAS or WILL hire people, they may pocket the profits, spend it on a better office, marketing, or equipment. However, never-the-less, it gives the business the option to hire.

In my two personal experiences, the cost savings (from taxes and rent) resulted in hiring more people and expanding offices and equipment.

See the bolded part? That's a poor business decision on your part. You don't expand because your cost has decreased, you expand because the market is open for you to make headway in. That's the only reason to expand. If you expand just because your profit margin increases, who are you selling your newly created stock to?

Back to the root... Demand is king.

 

[Tettsuo]

Our business was profitable BEFORE hiring the compliance person and it didn't NEED a compliance person.
We hired a compliance person because we had new regulations that required it.

... sounds like you needed a compliance person then.

The hire NOW allows our business to operate but certainly did NOT contribute to it's profitability.

Of course the hire contributes to the business' profitability. To be found out of compliance would cost you more then the cost of the employee. It's like buying insurance. The cost of the insurance is often peanuts compared to the cost of the loss or injury you're insuring against.

 

[prohobo]

1 - Nothing to do with the discussion. That situation is simply a cost of doing business and not related to taxation. We are discussing taxation aren't we? Stick to the topic please. I will try to do the same.

It has everything to do with it. We need to hire people, we looked at the cost savings (taxes) and the savings was used to hire someone. Is that not the point of the OP?

I've already stated that if the cost of business is too great, those costs can stifle the growth business. Again, we are no where near that point now. Proof of this is the amount of capital businesses are currently sitting on. Profits are up, but employment is barely growing to match it. How exactly does lowering their taxes further spur them to hire employees (that will increase production) they don't need?

See my previous posts on optimum productivity and what to do to spur growth and employment.

Post 219 and 220
http://www.debatepolitics.com/gover...s-does-not-create-jobs-22.html#post1063385336
http://www.debatepolitics.com/gover...s-does-not-create-jobs-22.html#post1063385341

If a net profit increase is present because the demand is there, it's bad business to not hire and expand. Only a fool would leave potential money on the table solely to maintain a specific profit margin percentage.

Part of that was answered in the previous posts mentioned above, but let me explain again.

Optimum Productivity: A company should run at it's optimum productivity level. This is determined by quality/quantity vs. demand. If a company can INCREASE supply with the current operation (cost margins) without impacting the quality and/or quantity, then it is NOT running at it's optimum productivity level. Meaning that it is possible to INCREASE the margins.

When productivity starts running too high your quantity/quality vs. current demand begins to suffer and you need to increase (expand) your operations so that you can maintain the quality and/or quantity to meet that demand. You tend to hire people.

When productivity starts running to low your quantity/quality vs. current demand may not be effected at all, but your operating expense is high and margins are compressed. Companies need to cut costs.

During the boom times we see companies productivity run far too low. These companies are considered running fat = they need to trim the fat.
During economic depressions we see companies run productivity to high. These companies need to expand and usually do so, but slowly as to not get to fat again.

The decision to hire has less to do with Demand and everything to do with finding the optimum productivity levels and managing margins.

Are you seriously saying that you're willing to leave an ACTUAL increase in net profits in an effort to maintain a specific profit margin?

I don't think your question makes sense. I think you are saying if I am willing to suffer top-line revenue to maintain a specific profit margin. If that is what you are saying, then absolutely no.

Top-line Revenue and Top-line sale (you can't confuse the two and MUST consider both) is what you strive to increase and all costs are considered from this to determine not only current margins, but future expenditures.

Personally, I'm more than willing to sacrifice my profit margin percentage for REAL net profit gains. A new employee (an increase in cost) is worth it when demand supports the hire. If demand does not support the cost of that new expense, then it's not worth the cost. Do you agree?

No, because I believe in the optimum productivity model - not just looking at demand. Don't get me wrong, I believe Supply & Demand drive the world, but I do not make hiring or cost decisions solely predicated on current demand.

My point? Taxes will absolutely affect your profit margin. So what? That's a cost of doing business. If demand is not present, even if there's a reduction in your taxes (cost of business) if the demand is not present, why on earth would you hire if all other costs are static?

You say "so what?" and doesn't address the issue. People that are in business never say "so what", the strive to figure out how manage the costs of the business. If there is an opportunity to increase you profit margins and expand your business (which MAY include hiring) you do it.

Sometimes we are FORCED to hire, like with the technology and compliance person I mentioned before. It does NOT contribute to the demand or the profitability, yet it is a need that can't be avoided.

3 - I understand your point but I still disagree and here's why... if your cost of business decreases but there's no reason to increase production (no rise in demand), why would you hire a new employee? Profit margins nice, but the bottom line is net profit. Who cares if you lose a percentage point in the margin if your overall net profit total increases? That's the entire point of hiring the vast majority of employees.

This makes no sense. I can only see (in very basic terms) that your top-line revenue is increasing and cost are increasing faster, compressing margins and you are looking only at the bottom line. Any accountant, investor, partner, or anyone with a ounce of business acume would say STOP! Something is wrong, it would seem that you are IGNORING productivity and missing the idea of running an effiecent business.

If you were on Shark Tank or the Profit they would quickly point out this mistake.

I agree... to a point. Employees are an investment. You have to take risks to success in business, don't you agree? Most people are hired because the employer sees the employee as a way to increase their profits. Even regarding your compliance hires, cost is made to save you money by keeping you in compliance as the cost of failing to be in compliance is too great. Just like insurance.

We hire when we need to and not all of them necessarily increase profits. I have no problem with that, I appreciate and respect the need, but I also don't fool myself to thinking that the complaince officer is making us profitable. They have nothing to do with the top-line revenue growth or sales.

See the bolded part? That's a poor business decision on your part. You don't expand because your cost has decreased, you expand because the market is open for you to make headway in. That's the only reason to expand. If you expand just because your profit margin increases, who are you selling your newly created stock to?

Back to the root... Demand is king.

You are assuming the business decision was poor because you assume that it was solely predicated on cost savings and not top-line revenue. It is not that myopic, however cost savings was (and should be) a consideration when expanding a business. Our business was expanding, but that doesn't mean we should say "so what" and just hire because demand has picked up, while ignoring costs and margins.

Demand is king, but if you don't manage your margins (costs) you fail. GM is a perfect example. They met the growing demand and expanded, but they failed at managing their costs and margins. Pretty much they said "so what" and eventually when they had to borrow money just to pay the interest on their debt, it was game over.

 

[pdog]

REPLY PART II



Without getting to complicated lets look at a simple example.

Company has $1 million in revenue
Costs run at $500k
Creating $500k in profits (these profits could be invested, distributed, etc, it matters not at this point).
State tax is 10% so you pay $50k in state tax on the net leaving $450.

Company moves to another state
Costs run at $500k
Creating $500k in profits.
No state tax means the net is $500

If the company hires an employee for $50k a year, the impact to the net profit is unchanged. Since the run costs have increased from $500 to $550k, taking profits back to the $450k it was before.

OK - this was a very simple example and does not include the type of structure, etc...however I think you can see the point.

First aren't you just showing that the tax applies to the profit? I don't see how we're getting around that.

Second, aren't you making the mistake of holding revenue constant?

In a well run business, that employee should be justified by at LEAST the same amount in revenue either now in the demand side case or in the immediate future even in the supply side case and I would consider break even to be very conservative (or at least make up for employment taxes).

Company A 1050k - 550k = 500k --> @ 90% + $450K

(I did company B with a 8% instead of zero - zero eliminates context)
Company B 1050k - 550k = 500k --> @ 92% + $460K

Adding the additional employee did not affect profits in either case! Now obviously the margin decreased and we could be talking about what an investor sees relative to two states, but that is not what we're talking about here. The profits were not reduced and even if they were it has no bearing on what pretax profit can be used for. Again, I think we still need to step back to that part of the debate starting with JfC repeated callouts of "profit" and not get side tracked by the semantics.

I appreciate your questions and differences of opinion without all the name calling and ad hominum. It would be nice to continue to debate on the merits of the issue rather than lobbying names and telling each other they are wrong because we say so. Hope I answered with both my thoughts and opinions without any offense, none was intended.

Admittedly, it's easier to keep your cool when you're reading from afar compared to other people that have invested themselves. But, every once in a while I see a glimmer that somebody isn't a fox news conservative - not posting one liners over and over like a particular red-icon'd member is doing as we speak. You truly have interest in aligning others beliefs with your own or you would not have taken such time to post such detailed threads. However, I do support the majority of those you are battling now. "We" (if I may to refer to some of us collectively) are liberals, socialists (democratic at least), libertarians (well sort of) and orphaned conservatives - all very different. But I think the one thing that binds us together is logic. We want data and equations. We want references to other sources. Want things identified for what they are - specifically society - as a complex system built over hundreds of years in which we all have a right to equal access and equal opportunity. The irony is that "we" enjoy the time when we are proven wrong or at least lead down another path - that's learning. But when somebody avoids our questions, yes we get frustrated and lash out, I'm just as guilty of this.

That's why I'm really urging you to go back to #185. Either you need to concede and move the debate to a more favorable position for you, or take the the question head on with specifics or clarification. The only thing we got from that post is that you consider "profit margins" an uninformed term - which is fine - i think we can concede that point just to move things forward. But I think the point that taxes, at least business taxes, don't apply until AFTER money is taken out of a business, and I'll add that those taxes should actually incentivize the investment/employment into that business. You could abandon the individual business example and talk about available capital for all business but that is a dramatically different argument.

 

[jaeger19]

I find it odd that you say I am wrong, yet help make my point and agree, in yet a very confusing manner I might add. I guess you didn't take note that I quoted "reinvest" for obvious reasons.

No you don't "Reinvest" profits.... ;-)

I do find it amusing that you get likes from the people that disagreed with me and talking about "reinvesting" profits to begin with, of course they liked it simply because you said I was wrong, which is odd.

As a business owner, of course you know you ALWAYS want to report a profit if you can (if you have shareholders or equity partners), so taking investment charges with credits, which you can add as a liability is always far better than "reinvesting" profits.

You forget to address overseas income, mark-to-market gains, interest carry, unrealized gains, and host of other issues that impact both profits and taxes, but I am not sure your business is subject to those as I am not familiar with what type of business you are in, far enough.


So I guess in your businesses you have never issued equity, issued a bond / warrant, have overseas profits, have mark-to-market gains, unrealized gains or any interest carry. For a small business that is locally dependent, perhaps that is the only option you see or may have. I suggest talking with your tax attorney and CPA, because it seems you have just a cursory understanding. But I don't know or understand your business....nor do I pretend to. However, I am very well aware that there are certainly advantages

You sir are too funny...

I suggest that perhaps you might need to educate yourself a bit.

First of all, depending on your business, you don't always want to report a profit. In fact.,. many companies go out of their way to NOT report profit and to hide profit... and why? Because we don't want to pay tax on it.
now.. if you a publicly traded company and have shareholders to keep happy? That may be different... then again... maybe not.

I have issued bonds, have overseas profits and have dealt with unrealized gains and carried interest. I have a much greater understanding. And that's how I know that you aren't really knowledgeable about everything you are saying here.

Some taxes are a cost.. excise taxes for example, tariffs, VATS.. they are costs.... Corporate income taxes? Not a cost....

The point of the OP was to make the statement that lower taxes creates jobs.. and that as a statement is not factually true. Taxes are a factor.. but different taxes have different effects.. and their are many other more important factors that influence the creation of jobs.

California has been a high tax, high regulation state for a LONG LONG time.. its certainly not a recent development... yet consistently they have had one of the largest and strongest economies in the nation and really in the world since they are better than a lot of countries.

So how do YOU explain that if taxes were the be all end all of business.

 

[JohnfrmClevelan]

(This is a very simple example to show basic tax savings vs. costs and impacts to margins).

I understand all of that.

I never said "it will always be worth it for the company to hire a new employee, and all you have to do is find the money to do so", nor did I imply that. So I am not exactly sure how you read into that.

From your example. You have extra money, so you hire another employee. No mention of demand, no mention of whether or not the employee will be worth it, and, most of all, you aren't adjusting the numbers to reflect the profit that most employees would result in. You keep putting things in terms of holding your margins steady, but that is misleading. Even in your example, higher taxes aren't forcing the company to move, with or without the new employee. Lower taxes merely allow ownership to pocket an extra $50,000 - the money saved in taxes.

You keep going back to examples of employees that don't directly result in more profits. But those employees are no less necessary to a working business - that's why they were hired in the first place. You hire an accountant because you need an accountant. You hire a regulatory guy because you need a regulatory guy. Those are simply the costs of doing business. My point has always been that you don't hire an accountant that you don't need simply because you have enough money to do so. So taxes on profits aren't going to impact your decision on whether or not to hire that accountant; need is going to make your decision for you. You need him, you hire him. He's worth it, because it allows you to keep your business going. Lower taxes just allow you to pay for that cost without taking out a loan or selling equity.

 

[prohobo]

First aren't you just showing that the tax applies to the profit? I don't see how we're getting around that.

Of course it applies, the very simple example was an exercise in which one state they apply vs. another they don't.

Second, aren't you making the mistake of holding revenue constant?

Only so far as to give a simple example.

In a well run business, that employee should be justified by at LEAST the same amount in revenue either now in the demand side case or in the immediate future even in the supply side case and I would consider break even to be very conservative (or at least make up for employment taxes).

Hopefully true in theory, but not practically. Never seen it work in the real world where justification always meets with demand. We could only hope.

Company A 1050k - 550k = 500k --> @ 90% + $450K

(I did company B with a 8% instead of zero - zero eliminates context)
Company B 1050k - 550k = 500k --> @ 92% + $460K

Adding the additional employee did not affect profits in either case! Now obviously the margin decreased and we could be talking about what an investor sees relative to two states, but that is not what we're talking about here. The profits were not reduced and even if they were it has no bearing on what pretax profit can be used for. Again, I think we still need to step back to that part of the debate starting with JfC repeated callouts of "profit" and not get side tracked by the semantics.

That is my point, additional employee did NOT affect profits since one is focused on managing cost.
The old saying rings true, "It's all in the margins".

I think we can easily get too focused on profits and lose site of the margins.

Admittedly, it's easier to keep your cool when you're reading from afar compared to other people that have invested themselves. But, every once in a while I see a glimmer that somebody isn't a fox news conservative - not posting one liners over and over like a particular red-icon'd member is doing as we speak. You truly have interest in aligning others beliefs with your own or you would not have taken such time to post such detailed threads. However, I do support the majority of those you are battling now. "We" (if I may to refer to some of us collectively) are liberals, socialists (democratic at least), libertarians (well sort of) and orphaned conservatives - all very different. But I think the one thing that binds us together is logic. We want data and equations. We want references to other sources. Want things identified for what they are - specifically society - as a complex system built over hundreds of years in which we all have a right to equal access and equal opportunity. The irony is that "we" enjoy the time when we are proven wrong or at least lead down another path - that's learning. But when somebody avoids our questions, yes we get frustrated and lash out, I'm just as guilty of this.

That's why I'm really urging you to go back to #185. Either you need to concede and move the debate to a more favorable position for you, or take the the question head on with specifics or clarification. The only thing we got from that post is that you consider "profit margins" an uninformed term - which is fine - i think we can concede that point just to move things forward. But I think the point that taxes, at least business taxes, don't apply until AFTER money is taken out of a business, and I'll add that those taxes should actually incentivize the investment/employment into that business. You could abandon the individual business example and talk about available capital for all business but that is a dramatically different argument.

Let me review 185 and get back to you.

Thanks for the consideration. I am neither a Republican, Democrat, or Tea Party. I am also not a Keynesian nor do I support Freeman. I guess I beat to my own drum and try to apply objective reasoning and logic. I have voted for both Republicans and Democrats, but not because of any party affiliation. I certainly hate being labeled when people take something I say (write) out of context.

Thanks again...

 

[Tettsuo]

It has everything to do with it. We need to hire people, we looked at the cost savings (taxes) and the savings was used to hire someone. Is that not the point of the OP?

No, you don't need to hire people. If a company can be run without any additional people, it would as that would maximize profits.

It looks like you're saying you'll hire if you can work up the profit to fully cover your employee (expense). That's bad business. The entire point of investing is to take risk your money on a potential gain in net profits. What you're saying is you'll never risk a loss even if demands rise and you cannot meet those demands with your current production. I don't see how you stay in business with such thinking.

See my previous posts on optimum productivity and what to do to spur growth and employment.

Post 219 and 220
http://www.debatepolitics.com/gover...s-does-not-create-jobs-22.html#post1063385336
http://www.debatepolitics.com/gover...s-does-not-create-jobs-22.html#post1063385341

Part of that was answered in the previous posts mentioned above, but let me explain again.

Optimum Productivity: A company should run at it's optimum productivity level. This is determined by quality/quantity vs. demand. If a company can INCREASE supply with the current operation (cost margins) without impacting the quality and/or quantity, then it is NOT running at it's optimum productivity level. Meaning that it is possible to INCREASE the margins.

When productivity starts running too high your quantity/quality vs. current demand begins to suffer and you need to increase (expand) your operations so that you can maintain the quality and/or quantity to meet that demand. You tend to hire people.

When productivity starts running to low your quantity/quality vs. current demand may not be effected at all, but your operating expense is high and margins are compressed. Companies need to cut costs.

During the boom times we see companies productivity run far too low. These companies are considered running fat = they need to trim the fat.
During economic depressions we see companies run productivity to high. These companies need to expand and usually do so, but slowly as to not get to fat again.

The decision to hire has less to do with Demand and everything to do with finding the optimum productivity levels and managing margins.

WTF... the bolded above is just utter nonsense. I've already stated that demand drives production. If you production can match the demand, you don't need to expand/hire. This is obvious. If demand exceeds your current production, you hire. To not do so is a guaranteed lost of revenue. Sure, you'll maintain your profit margins, but you'll never grow. Even if you margins are reduced, your goal is to increase your net profit. If your net profit increases... good business decision. If you net profit is reduced, but you increased your margins (very possible), bad business decision.

You put too much stock in your profit margins.

I don't think your question makes sense. I think you are saying if I am willing to suffer top-line revenue to maintain a specific profit margin. If that is what you are saying, then absolutely no.

No, I don't mean top-line revenue. I mean net profits. Net profits (all costs and sales accounted for) trumps all other items on your balance sheet. That's the bottom line. If you increase your bottom line but also increase cost... good business.

Top-line Revenue and Top-line sale (you can't confuse the two and MUST consider both) is what you strive to increase and all costs are considered from this to determine not only current margins, but future expenditures.

Do you know what net profit means? I question if you even know what top line revenue and top line sales even means. I certainly don't think you understand how all of that relates to net profits (both are calculated within the net profit total).

No, because I believe in the optimum productivity model - not just looking at demand. Don't get me wrong, I believe Supply & Demand drive the world, but I do not make hiring or cost decisions solely predicated on current demand.

Again, if demand exceeds your production capability, you expand (hire new workers). Where did I say otherwise? Why are you trying to add complexity to a very simply concept? You're not dazzling me with these terms. I know them already. I always assume a business is working at optimum productivity before hiring if we're discussing things in terms of the US economy. Me saying, "demand that exceeds production", encompasses that already.

You say "so what?" and doesn't address the issue. People that are in business never say "so what", the strive to figure out how manage the costs of the business. If there is an opportunity to increase you profit margins and expand your business (which MAY include hiring) you do it.

Again you focus on profit margins as if that's the end all be all. You can increase your profit margin and still lose money. Do you understand that?

Sometimes we are FORCED to hire, like with the technology and compliance person I mentioned before. It does NOT contribute to the demand or the profitability, yet it is a need that can't be avoided.

You can always risk being out of compliance. Dumb... but that doesn't eliminate your choice.

This makes no sense. I can only see (in very basic terms) that your top-line revenue is increasing and cost are increasing faster, compressing margins and you are looking only at the bottom line. Any accountant, investor, partner, or anyone with a ounce of business acume would say STOP! Something is wrong, it would seem that you are IGNORING productivity and missing the idea of running an effiecent business.

I honestly don't think you know what you're talking about. Your adherence to increase your profit margin is foolish.

If you were on Shark Tank or the Profit they would quickly point out this mistake.

TV does not equal real life. I'm not impressed.

We hire when we need to and not all of them necessarily increase profits. I have no problem with that, I appreciate and respect the need, but I also don't fool myself to thinking that the complaince officer is making us profitable. They have nothing to do with the top-line revenue growth or sales.

You are assuming the business decision was poor because you assume that it was solely predicated on cost savings and not top-line revenue. It is not that myopic, however cost savings was (and should be) a consideration when expanding a business. Our business was expanding, but that doesn't mean we should say "so what" and just hire because demand has picked up, while ignoring costs and margins.

Demand is king, but if you don't manage your margins (costs) you fail. GM is a perfect example. They met the growing demand and expanded, but they failed at managing their costs and margins. Pretty much they said "so what" and eventually when they had to borrow money just to pay the interest on their debt, it was game over.

I'm not sure why you keep harping on top line revenues. Top line revenue actually ignores costs. Margins fluctuate all the time. Any one-time expenditure can throw your margins off, but still would be a great business decision (large acquisitions).

 

[prohobo]

You sir are too funny...

Thank you - I prefer satire and wit.

I suggest that perhaps you might need to educate yourself a bit.

First of all, depending on your business, you don't always want to report a profit. In fact.,. many companies go out of their way to NOT report profit and to hide profit... and why? Because we don't want to pay tax on it.
now.. if you a publicly traded company and have shareholders to keep happy? That may be different... then again... maybe not.

I am not sure about the educational reference, unless it is a backhanded compliment. I 100% agree we do NOT want to report a profit (EVER) in the private sector, however it maybe unavoidable. We certainly do everything we can to minimize it.
For publiclly traded company profit reporting (earnings per share) is certainly important, yet those too can be murky depending on how one decides to report.

I have issued bonds, have overseas profits and have dealt with unrealized gains and carried interest. I have a much greater understanding. And that's how I know that you aren't really knowledgeable about everything you are saying here.

Some taxes are a cost.. excise taxes for example, tariffs, VATS.. they are costs.... Corporate income taxes? Not a cost....

I apologize, your previous comments had simplied your point to a level in which you did not initally include bonds, carried interest, and different gains or taxes. So I only made the assumption were not informed, for that I apologize. I assure you, while I am not an accountant or tax attorney, I have priced, modeled, made markets in bonds and deriviatives and have delt with the machinations of tax implications in these maters for a couple of decades.

As per corporate income tax, from a technical point, you are 100% correct it is never labeled as a cost on the balance sheet and I will certainly concede that. Yet if we can dispense with the labels and semantics focus on the math, it is a fundemental factor that does impact the decisions for the opertional cost of running a business, since it does impact the bottom line (after tax). A reduction of an expense (or whatever label one wishes to give), whether it is above or below the gross or net line on the balance sheet, impacts the bottom line.

I think one would concede to my point that it does matter if one just looks at the fact of all the domiciled businesses in the Bahama's, the tax inversion moves like Walgreens, the advertising by NY with no taxes for 10 years, and companies citing they are leaving California with one reasons BEING taxes.

Of course I will grant you HOW a company wishes to use that savings is immertial, they could pocket it, hire more people, pay health insurance, bonsuses, etc. The point being - it is the bottom line and taxes have to come out somewhere in the wash before you get to the bottom line.

The point of the OP was to make the statement that lower taxes creates jobs.. and that as a statement is not factually true. Taxes are a factor.. but different taxes have different effects.. and their are many other more important factors that influence the creation of jobs.

California has been a high tax, high regulation state for a LONG LONG time.. its certainly not a recent development... yet consistently they have had one of the largest and strongest economies in the nation and really in the world since they are better than a lot of countries.

So how do YOU explain that if taxes were the be all end all of business.

First, I never said that taxes were the "be all end all of business" I have stated repeatedly that taxes ARE a factor (call it "cost") or whatever you like that determine companies margins.

The point of the OP was simple... For anyone to believe that taxes do not AT ALL impact a businesses hiring decision is naive. Of course they do, like any other expense. If taxes were never a consideration then we wouldn't have companies domiciled in the Bahama's, moving out of California, and NY advertising NO TAXES.

Is it not apparent and obvious that companies flock to low tax areas because it DOES impact their bottom line.

Now it is certainly true that a company may just wish to pocket the profits, however it is equally also true the company MAY wish to use that savings to expand the business, which includes hiring or for any other reason.


....thanks for your consideration and response.....apologies if I offended, none intended.

 

[prohobo]

I understand all of that.



From your example. You have extra money, so you hire another employee. No mention of demand, no mention of whether or not the employee will be worth it, and, most of all, you aren't adjusting the numbers to reflect the profit that most employees would result in. You keep putting things in terms of holding your margins steady, but that is misleading. Even in your example, higher taxes aren't forcing the company to move, with or without the new employee. Lower taxes merely allow ownership to pocket an extra $50,000 - the money saved in taxes.

You keep going back to examples of employees that don't directly result in more profits. But those employees are no less necessary to a working business - that's why they were hired in the first place. You hire an accountant because you need an accountant. You hire a regulatory guy because you need a regulatory guy. Those are simply the costs of doing business. My point has always been that you don't hire an accountant that you don't need simply because you have enough money to do so. So taxes on profits aren't going to impact your decision on whether or not to hire that accountant; need is going to make your decision for you. You need him, you hire him. He's worth it, because it allows you to keep your business going. Lower taxes just allow you to pay for that cost without taking out a loan or selling equity.

You are making valid points about whether or not an employee is valid hire or not and you keep bringing up demand as part of the equation. Those certainly are factors.

However - the point I am making is clear.

Taxes are a factor that impacts the bottom line.
Employees are a cost (whether they are justified or not, needed or not, regardless of demand)

A company that can increase their bottom line (either through cost savings or an increase in top-line revenue) can hire an employee with out impacting the margins.

It is simple.

Thus - any type of cost savings (taxes or otherwise) means the company has room to make changes without the need of additional capital.


Fact remains and the math is simple.

X revenue - Y costs = NET


For those that want to argue that Taxes are not a cost, then the formula would read:

X revenue - Y costs - Z taxes = After Tax Net

Either way the math is pretty straight forward. I don't know why people harp on it.

Fact is if this tread was about moving and saving costs on rent to hire more people it would get NOT attention. Replace the word rent with taxes and all of a sudden it turns into a taboo subject.

 

[JohnfrmClevelan]

Fact is if this tread was about moving and saving costs on rent to hire more people it would get NOT attention. Replace the word rent with taxes and all of a sudden it turns into a taboo subject.

That's because rent is a cost, up front, and it doesn't change depending on how much your labor costs are or how much you are taxed on profits. Also, nobody is trying to claim that lower rent results in more jobs, because it would fail by similar logic.

 

[prohobo]

No, you don't need to hire people. If a company can be run without any additional people, it would as that would maximize profits.

It looks like you're saying you'll hire if you can work up the profit to fully cover your employee (expense). That's bad business. The entire point of investing is to take risk your money on a potential gain in net profits. What you're saying is you'll never risk a loss even if demands rise and you cannot meet those demands with your current production. I don't see how you stay in business with such thinking.

I must admit you are quit frusterating to exchange with as you either do not read, misintrepret, or don't understand what I am saying. I will admit that posting online is not always the best way to exchange ideas or debate. However, let me give it one more go.

1. A company needs to break-even at the very least, otherwise it will go out of business. I am sure we all agree on that.
2. Hiring someone, spending money on marketing, expanding a business, any type of business investment one must way the productive value which can be measured in revenues and/or profits - is an important fact. Again - I think we can all agree.
3. Margins are a very easy and traditional way to determine how much you are making if one divides the net profits by the revenue. Again simple math.

I think we can all agree that IF margins are shrinking then something is wrong, but what? There are many factors, but let's keep this simple.

1. Revenue/sales are decliningig (Demand falling)
2. Costs are rising.

However, there is something else that can occur.

Revenues/sales could be increasing, but costs could be out pacing revenues.

Using margins is a risk metrics for making a business decision on costs. We take risks all the time, but the risk needs to be measured and calculated. You don't spend and hire just because demand is up, it is really not that simple, yet I wish it was.

WTF... the bolded above is just utter nonsense. I've already stated that demand drives production. If you production can match the demand, you don't need to expand/hire. This is obvious. If demand exceeds your current production, you hire. To not do so is a guaranteed lost of revenue. Sure, you'll maintain your profit margins, but you'll never grow. Even if you margins are reduced, your goal is to increase your net profit. If your net profit increases... good business decision. If you net profit is reduced, but you increased your margins (very possible), bad business decision.

You put too much stock in your profit margins.

If someone tells me that I just made $1 million dollars in profit, the first question is what MARGINS are we running. Because if I made $1 million dollars on $200 million in revenue, I certainly would NOT be happy investor, business owner, or employee.

Frankly profits don't mean squat if you don't know what margin you are running.

You talk about measuring risk and investing and taking risk. Sure, but HOW do you measure that risk? You measure it based on costs vs. revenue (or projected revenue). It's called margins. Everything is margins... it is the simple math calculation that we use all the time to determine risk, returns, and differences. Buy a bond you measure risk by using MARGIN (called yield). Buy a rental property and you are measuring rent vs. taxes and up keep to determine your MARGIN. Buy stock on margin, and you are looking at a rate of return on borrowed money. Every business looks at margins to determine risk, profits, investments.


I don't know how to respond if you completely dismiss productivity and levels of productivity as a function of business. Either you believe that productivity levels are important or your don't. However in all my years of business and economics, I don't know anyone on any-side of the economic or business spectrum that would dismiss productivity levels as "utter nonsense". I just don't know what to say...perhaps you have a better theory and if you can describe something that works better, I am humble enough to concede. However, until then productivity levels are the essence of determining margin efficiency, or in simple terms HOW MUCH PROFIT ARE YOU GOING TO MAKE.

No, I don't mean top-line revenue. I mean net profits. Net profits (all costs and sales accounted for) trumps all other items on your balance sheet. That's the bottom line. If you increase your bottom line but also increase cost... good business.

Profits mean little if you can't determine the margins for generating that profit. It is NOT good business.

 

[prohobo]

PART II

Do you know what net profit means? I question if you even know what top line revenue and top line sales even means. I certainly don't think you understand how all of that relates to net profits (both are calculated within the net profit total).

I would think it was clear that I understand. I suppose you are going to tell me that difference between top-line revenue vs. top-line sales doesn't mater either.
Seriously are you just yanking my chain with these responses?

Again, if demand exceeds your production capability, you expand (hire new workers). Where did I say otherwise? Why are you trying to add complexity to a very simply concept? You're not dazzling me with these terms. I know them already. I always assume a business is working at optimum productivity before hiring if we're discussing things in terms of the US economy. Me saying, "demand that exceeds production", encompasses that already.

You are getting closer, rather than just talking about demand you have added "production capability". However, I put to you if demand picks up and my current operation is able to MEET that pick-up in demand without impacting quality/quanty, do I hire more people? Of course not. One looks at productivity levels (what you previously stated as "utter nonsense").

Again you focus on profit margins as if that's the end all be all. You can increase your profit margin and still lose money. Do you understand that?

Of course - because that lets anyone know the rate of return based on revenue.
How do you forecasts profits, risk, returns, cost of money, cost of investments.

I wish it was as simple as looking at your profit and ignoring costs and everything else.

You can always risk being out of compliance. Dumb... but that doesn't eliminate your choice.


I honestly don't think you know what you're talking about. Your adherence to increase your profit margin is foolish.

Adherence to increase profit margin is foolish? You said it, not me.

TV does not equal real life. I'm not impressed
I'm not sure why you keep harping on top line revenues. Top line revenue actually ignores costs. Margins fluctuate all the time. Any one-time expenditure can throw your margins off, but still would be a great business decision (large acquisitions).

You obviously didn't read the posts that I linked earlier to you because it talks about margins, run cost margins, and one-time charges.


Let me give you an example why I believe that paying attention to top-line revenue and top-line sales is so very much important when analysising a business (as well as margins). This is off subject, but I think it is very important.


If one only focuses on PROFITS and ignores margins, top-line revenue, and top-line sales they have NO IDEA how they made more profit.

A company that reports a profit, when top line revenue and sales decline has most likely cut costs to boost profits. If the trend is a decline in top-line revenue and sales, but one is only focused on profits - they are missing a big picture problem going forward.
A company that reports a loss, but top-line revenue and sales are increases may be just increases costs to meet demand. If the top-line trend continues the company will most likely be a long-term winner. We see this in high IPO multiples.
A company that reports a profit, but top-line sales are declining, but top-line revenue is higher, then something could be at play with either currency (if selling overseas) or that the price per unit has increased.
A company that reports a profit, but top-line revenue declines, but sales are increasing, could mean the company is cost cutting to increase market penetration.


The point being is that we MUST always ask HOW and WHY, rather than just accept the fact a company has a profit or a loss.

Knowing your margins is knowing our risk and return on capital. Knowing how your revenue is derived is also important.

I hope this shed some light and not intended to offend. We tend to look at things too black-n-white and we tend to forget to ask WHY and HOW. We need to stop accepting face value and do the math to make better objective decisions.

We also need to dispense with the name calling, it is fair to say one is ignorant, but let's avoid calling each other stupid.

 

[prohobo]

That's because rent is a cost, up front, and it doesn't change depending on how much your labor costs are or how much you are taxed on profits. Also, nobody is trying to claim that lower rent results in more jobs, because it would fail by similar logic.

If you have an office for 10 people and pay $10k a month in down town SF and then move to Incline and have an office for 15 people and pay $5k a month, you just saved $5k a month and that money can now be used towards another person's salary.

Pretty simple math.

 

[JohnfrmClevelan]

The point of the OP was simple... For anyone to believe that taxes do not AT ALL impact a businesses hiring decision is naive. Of course they do, like any other expense. If taxes were never a consideration then we wouldn't have companies domiciled in the Bahama's, moving out of California, and NY advertising NO TAXES.

Do you try to figure out your personal income taxes at the beginning of the year, then work the exact number of hours that will get you to the number you calculated?

This is very similar to the argument that higher tax brackets are a disincentive to earning more money. Earning more money might mean that the taxes on your last $1000 of income are taxed at a higher rate, but you are still making a net profit on that last $1000. And this is true no matter what state you live in, even though their tax rates might be different.

 

[JohnfrmClevelan]

If you have an office for 10 people and pay $10k a month in down town SF and then move to Incline and have an office for 15 people and pay $5k a month, you just saved $5k a month and that money can now be used towards another person's salary.

Pretty simple math.

If that new employee isn't going to result in a net gain for me (directly or indirectly), I'm not going to hire them in either location. And if they are going to result in a net gain for me, I am going to hire them in either location.

 

[pdog]

Hopefully true in theory, but not practically. Never seen it work in the real world where justification always meets with demand. We could only hope.

Really?? Happens constantly in my business. We win contract, we then gear up to do it. It's never the other way around.

That is my point, additional employee did NOT affect profits since one is focused on managing cost.
The old saying rings true, "It's all in the margins".

I think we can easily get too focused on profits and lose site of the margins.

Yes, but the underlying idea here is how business taxes affect hiring decisions. On a business by business basis, I want to say we even agree that business taxes are an incentive AGAINST a business declaring profit and instead encourage internal investment. It would seem (I'm having a realization here) that business taxes only have a negative affect in the generic sense of "business" - i.e. a global pool of capital over all businesses. Talking about capital and business in general is entirely different that talking about an entity on a case by case basis and I think the focus so far has been on the latter.

Thanks for the consideration. I am neither a Republican, Democrat, or Tea Party. I am also not a Keynesian nor do I support Freeman. I guess I beat to my own drum and try to apply objective reasoning and logic. I have voted for both Republicans and Democrats, but not because of any party affiliation. I certainly hate being labeled when people take something I say (write) out of context.

Thanks again...

Ditto on all cases. But admittedly, I am a reluctant democrat these days. I'd rather still call myself an independent, but the "middle" line is a little two far to the right at this time.

 

[prohobo]

If that new employee isn't going to result in a net gain for me (directly or indirectly), I'm not going to hire them in either location. And if they are going to result in a net gain for me, I am going to hire them in either location.

Of course NO ONE would hire someone if you didn't need to and it does NOT refute the point.

So stay on this example and feel free to refute it.

Company is making $1 million per year.
You have 10 employees on average making $75k a year and rent costs you $10k a month.
Your basic costs are $870,000 per year.
Your net is $130,000
State tax is 10% or $13,000
After tax is $117,000
Margin = 11.7%

Demand has increased and you need to expand to meet demand. That means hiring 5 more people. You project that next year top-line revenue/sales will increase 40% from $1 million to $1.4 million.

To stay in the city your rent to expand goes from $10k to $15k a month (about $1k per employee) = $60k in additional expenses for a total of $180k
The employees on average cost $75k and you are increasing by 5 employees = $375k in addtional. for a total of 1.125m
Your net run costs are now at $1.3 million up from $870k.
Based on revenue projections of $1.4 million you will net about $95k in profits state tax and $85.5k after tax.
Margin = 6.7%




However you can move operations.
New office will cost $60k a year for 15 people. That brings costs down from $120k to $60k, rather than up to $180k. The rent savings alone increases profits by $120k more than 60% increase.
The employee cost is the same at $75k for a total of 1.125m.
Your net run costs are up from $870k to $1.185m
Based on revenue projections of $1.4 million you will net $215,000
Also there is no state tax, which is an additional savings of $21,000.
Margin = 15.3%


One person would look at this as the company is making more PROFITS because he is saving on rent and taxes. That is certainly true, however what if the company is doing this analysis and says that IF it stays in the city it may only want to hire 3 or 4 people instead of 5, so they could expand just a little and push productivity levels very high (lean).

Well they could, but that means 1-2 jobs that were NOT created because the company decided to stay put.


The fact remains that costs/fees/taxes/expenses are all important factors while making a business decision. Businesses change phone carriers, change software, change shipping companies, and all sorts of changes to SAVE money to boost margins (and hopefully profits). Part of that is rent and part of that is taxes.


Whether we like it or not it is a factor. I have been witness two it twice and also the WHY and HOW it impacted the growth and expansion of the business. I can certainly tell you that taxes were one of the contributing factors to the move in both cases. I also know of another business leaving SF bay area based on taxes as well, the business owners decided to move. I am not sure if they WILL hire more people, but they will have extra capital to do so.

 

[prohobo]

Really?? Happens constantly in my business. We win contract, we then gear up to do it. It's never the other way around.

Stand corrected, our tech company does the same.

Yes, but the underlying idea here is how business taxes affect hiring decisions. On a business by business basis, I want to say we even agree that business taxes are an incentive AGAINST a business declaring profit and instead encourage internal investment. It would seem (I'm having a realization here) that business taxes only have a negative affect in the generic sense of "business" - i.e. a global pool of capital over all businesses. Talking about capital and business in general is entirely different that talking about an entity on a case by case basis and I think the focus so far has been on the latter.

I can't help but take into the considerations that we see the boom in Ireland, Bahama's, Hong Kong and other domiciles. Now we are seeing a rise in tax inversion plays by some very big players. Additionally we are seeing states become more agressive with their marketing of business like NY no taxes for 10 years.

There is a bigger concern from this recent rise, perhaps top-line revenue / sales is not strong enough in the west that in order to meet the burden of profit growth they are looking at the last bastion of cost cutting because they are already running at high productivity levels, taxes.

Ditto on all cases. But admittedly, I am a reluctant democrat these days. I'd rather still call myself an independent, but the "middle" line is a little two far to the right at this time.

I have flipped flopped from Clinton to Bush to Kerry to Paul - can't get on any band wagon, not even the tea party. I am just "other party" - I just grow tired of the ever oppressive government on both social, economic, energy, and corporate greed...it's just tiring.

 

[JohnfrmClevelan]

One person would look at this as the company is making more PROFITS because he is saving on rent and taxes. That is certainly true, however what if the company is doing this analysis and says that IF it stays in the city it may only want to hire 3 or 4 people instead of 5, so they could expand just a little and push productivity levels very high (lean).

Well they could, but that means 1-2 jobs that were NOT created because the company decided to stay put.

But if that business decides, for whatever reason, not to hire those extra 1-2 people, even though those new employees are profitable in either tax situation, they are choosing to make less of a profit than they are able to make. Not many companies would make that choice.

So my point stands.

 

[prohobo]

But if that business decides, for whatever reason, not to hire those extra 1-2 people, even though those new employees are profitable in either tax situation, they are choosing to make less of a profit than they are able to make. Not many companies would make that choice.

So my point stands.

First, your answer does NOT address the example at all, it ignores it all together and draws speculation. There was clearly an option in which they could hire more people AND increase profitability.

Second, you can't make a valid point based on conjecture and "what if" assumptions, while simply ignoring the math. You are correct in that a company MAY make any decision it wishes, but for you to say your "point stands" based on a particular decision based purely on assumptions and conjecture is not valid and certainly refutes your point. As someone just as easily could reverse your sentence logic and make the opposite point.


The facts and math are simple, regardless of "what if" assumptions about decisions.

Company needs to hire 5 more people to meet projected 40% demand growth.

Option one: stay where they are and will not be able to hire the 5 people, because margins would run negative.
Option two: move and save money that can allow the company to hire the 5 people to meet the demand.

One can make up all the "what if" conjectured based assumptions they want, but the reality on the ground is that the company has an OPTION because of cost savings. That option exists solely because of the math, which can't be ignored. Whether the company takes option two or not is immaterial, the option still remains, therefore the point remains.

A company able to cut costs (taxes) has an option that it may not otherwise have, which can be used to hire more people. That option exists, whether they use it or not is immaterial. We just can't ignore the option and pretend it doesn't exist.

Even one company that uses the option of cost cutting (taxes) to monetize hiring expenditures proves the fact valid. We might not like it and we can come up ad infinitum with "what if", but it doesn't change the math nor does it change the point.