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I think I get what you're saying. The savings from not paying the employee are increased when the profits are taxed less. This makes sense if the employee is a
by daveFNbuck 8y ago
I think I get what you're saying. The savings from not paying the employee are increased when the profits are taxed less.
This makes sense if the employee is a net negative on pre-tax profit. If having the employee increases pre-tax profit, wouldn't lower taxes on profits make them effectively cheaper?
- trhway 8y ago>If having the employee increases pre-tax profit, wouldn't lower taxes on profits make them effectively cheaper? in a situation of rigid linear connection between expenses and revenues - i.e. when adding additional work units immediately and proportionally increases your revenue. In real life there is usually elasticity between expenses and revenues - while increasing/decreasing expenses has immediate direct effect on the bottom line there is no such effect on the top line. The situation is even worse when you need to hire or do capital investment today (and thus take the hit today) while the related revenue increase would come only some years down the road.
- daveFNbuck 8y agoSo this is part of a more general effect where low taxes on profits deter investment? It makes a little more sense to me phrased that way. You don't need to worry about increasing your future profits as much when they're higher now.