Letter to the Editor, July 25
July 24, 2013 12:48PM
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Updated: August 26, 2013 4:11PM
Tax cut, deregulation won’t lead to economic growth
You can completely deregulate the entire economy and eliminate all corporate taxes but until business sees a significant increase in sales, there will be no improvement in the current rate of economic expansion or new employee hiring.
When sales increase to the point where lost sales from not having an additional employee are greater than the cost of hiring an additional employee, then business will hire that additional employee.
In other words, when revenue from lost sales exceeds the expense of an additional employee, then business will hire.
Only an increase in sales will cause an increase in revenue, which in turn will increase profits. Tax breaks and deregulations only increase profits by reducing expenses and do nothing for sales or revenue.
Tax breaks and deregulation are only a form of indirect corporate welfare payments that go straight to profits.
By bypassing sales and revenue, corporate welfare eliminates all incentive to hire.
When corporate welfare payments go straight to profits, then the expense of an additional employee will only decrease profits and there will be no sales increase to justify hiring any additions to the workforce.
This is the poisonous nature of tax breaks and deregulation, not to mention the fact that they also drain tax revenue and add to the national debt.
This is one reason why business is making record profits and sitting on record breaking amounts of useless idle cash.
This is why business investment is at a 30-year low. This is why unemployment is so high when profits are so high. Business has no incentive or reason to hire when hiring will only reduce profits.
Only an increase in sales will induce business to hire.
Every dollar of corporate welfare creates a dollar in profits by reducing expenses, but since every dollar in sales is reduced by expenses, which rise an fall with sales, then it takes many dollars in additional sales to equal the profit that one dollar in corporate welfare creates.
This creates a disincentive for business to invest or hire and can only be reversed by eliminating corporate welfare to force business to invest and hire as the only means left to increase profits.
The increase in tax revenue generated by eliminating corporate welfare would be more than enough to support an increase in the minimum wage.
The wealthy choose to spend but everyone else must spend. Almost every dollar increase in the minimum wage will increase sales by the same amount.
If the increase in the minimum wage is large enough to start the cycle of increased sales leading to increased hiring, leading to more sales and hiring, then we will have the momentum to escape our current financial dilemma.
Thirty-plus years of Republican sponsored welfare have totally failed. It’s time to believe and invest in the American people.
Michael J. McGregor