EyeHeartA2

Tue, May 3, 2011 : 3:01 p.m.

I'd be a lot more impressed with his half baked simplistic ideas and farmer math if he was a doctor of economics, not sore throats. It is impressive that for the last 30 years, he has been investing his money. Not many people can lay claim to something that impressive. I betcha he has had a bank account too. That probably makes the good Dr. an expert in banking as well.

Patriot

Tue, May 3, 2011 : 3:27 a.m.

Better that companies have the money than the government.

Will Warner

Tue, May 3, 2011 : 12:11 a.m.

Dr. Salberg, I've read your replies to the criticism here. I'm pleased to learn that you agree that the MBT is an abomination. The remainder of your rebuttal consists of different ways of saying your critics are off topic because they do not confine themselves to your narrow scenario. In our defense, we were confused by the title of our column – "Why corporate tax reduction will not increase jobs." Had it been more appropriately titled – "Why corporate tax reduction will not increase jobs if the savings go to unimaginative hypothetical businessmen who lack the analytic powers of actual businessmen" – we would not have misunderstood you.

John Q

Mon, May 2, 2011 : 11:10 p.m.

"Most business owners can probably give you a half dozen ways they could expand their companies if they had the capital to do it ... and most of those ways probably involve hiring more people." The primary flaw in the Snyder argument is that it assumes that there's a market of people who can afford to support these businesses. If your business markets to the wealthy in our society, perhaps that's true. But many small businesses that rely on selling to the middle and working class are going to find that there's no one who can afford to buy their products and services and that business tax cut isn't going to translate into new jobs because there's no market to grow. With the consolidation of wealth at the top of the income ladder, those who don't fall into the top 25% of the society have fewer and fewer dollars to spend on anything but the necessities of life. The business tax cut will only exacerbate that because it will take dollars out of the pockets of low-income workers and seniors, most who spend a much higher percentage of their income on goods and services and put those into the pockets of business owners. We're told that these business owners will use those dollars to hire more people. But why would they? There's no growing market to serve and many markets are going to shrink as the dollars that flowed from low-income and seniors get sucked out to pay for the business tax cut. I have yet to hear an explanation from the Republicans on how taking money away from people who actually spend it to give to business owners is going to result in increased economic activity.

grye

Mon, May 2, 2011 : 1:55 p.m.

A simple minded company that does not want to expand their operations will probably not do anything. However this is not how most companies operate. A real company will look at other opportunities for products and will diversify. They will look at expanding their market to additional customers outside of the normal business arena. They will look at other types of products that are within the same genre to produce. The writer has modeled this company after someone who is willing to work for minimum wage and never look to expand. Very unrealistic.

KJMClark

Mon, May 2, 2011 : 11:10 a.m.

Small businesses (and probably larger ones too) aren't doing much hiring because their sales stink. &quot;WASHINGTON, April 12, 2011 – Despite an increase in hiring and a decrease in the unemployment rate during the month of March, the NFIB Small-Business Optimism Index ended its upward trend, falling 2.6 points to 91.9—consistent with recession-level readings. The decline, which comes after several consecutive months of a slow but steady growth, was driven by weaker expectations for real sales gains and business conditions and a marked deterioration in profit trends. Hiring and future plans to hire built on February's gain and remain the bright spot in an otherwise discouraging report. &quot; - <a href="http://www.nfib.com/press-media/press-media-item?cmsid=56562" rel='nofollow'>http://www.nfib.com/press-media/press-media-item?cmsid=56562</a>

Angry Moderate

Mon, May 2, 2011 : 11:05 a.m.

Taxes are reduced -&gt; the company's costs of doing business are reduced -&gt; it lowers widget prices -&gt; the quantity of widgets demanded increases. To dispute this, one would have to deny that many Michigan businesses use a cost-plus pricing strategy, or simply reject the law of demand. A model that fails to account for this simple scenario (among others) is useless and not solid ground on which to base policy decisions. While I think that the new business tax replacing the MBT is too low and will harm the state by slashing revenues, poorly reasoned arguments do nothing to prove that.

Angry Moderate

Mon, May 2, 2011 : 10:53 a.m.

Funny how the same commenters who claim the film credits (read: TAX CUTS) for out-of-state megacorporations create thousands of permanent, full-time Michigan jobs are fawning over this article and its laughably unrealistic scenario (as an econ major, I can't bring myself to define the term &quot;economic model&quot; so loosely as to include this.) I guess tax cuts for corporations only create jobs when the corporations are cool Hollywood companies that bring in hip liberal actors for the townies to gawk at.

Macabre Sunset

Sun, May 1, 2011 : 11:59 p.m.

What a silly column. Businesses do many things to affect demand, and hires are not made one at a time. A significant decrease in the costs of creating more product will create jobs. Also, the tax cuts being suggested are targeted to small businesses. Those businesses have the most flexibility in expansion and contraction. The Granholm tax structure penalized small business very heavily in favor of her big corporate friends (yes, she had them, they were connected to big labor).

talker

Sun, May 1, 2011 : 10:09 p.m.

Arguments that reducing Michigan corporate taxes at the expense of the middle class is akin to the argument that reducing Federal taxes on income over $250,000 increases job creation by small businesses. Most small businesses that operate as S-corporations don't report over $250,000 in CEO earnings. Even if gross income is over $250,000. gross income isn't taxed. Taxes are paid on net earnings after business costs, not on gross earnings. How many owners of &quot;mom and pop&quot; earn that much? Businesses that earn taht much have likely become C-Corporations in which owners' earnings are taxed the same as employees with the same incomes from the GE's and BP's. That leaves the S-corp. lucrative hedge funds, Bectels, and such of the economy the beneficiaries of that tax that we are told will help small businesses hire more people. Such tax cuts for the richest add more burdens to middle class workers, especially those with stagnant wages. Well funded public education and public works including publicly funded highways, parks, medical research, and public health facilities that have helped most Americans will suffer on the state and the Federal level if we don't curb this trend of taxing the richest less and expecting the middle class to pay more. Class warfare has been waged by the richest for over a decade. The middle class just wants to stop more desecration of the American dream and maybe even reverse some of the damage. Current tax proposals &quot;screw&quot; the middle class even more. That's what I take from the guest editorial.

talker

Sun, May 1, 2011 : 9:53 p.m.

The crux of the matter is that for the past 10 years we've been told that cutting taxes on the richest will be good for workers and job seekers. Instead, we've seen stagnation (at best) or workers' earnings and no net job creation. Even President Reagan's former budget direction, David Stockman (from Michigan) has noted that the no net jobs have been created over the past 11 years, despite tax cuts that have helped to explode the deficit. Today, we are seeing more Robin Hood in reverse in many statehouses. Class warfare has occurred for the past dozen or so years and now it's time to reverse some some of it. Accusations of class warfare and insistence that those who make the most need to keep more in order to hire worker sounds like the continuation of class warfare by those who speak on behalf of the richest corporations and who benefit from the richest corporations. Unfortunately, campaign contributions by those who can afford to give the most influence the votes of too many politicians including in such matters as punishing those who work hard at educating, protecting, and healing but who don't create earnings immediately and directly. I agree that cutting taxes won't increase demand in the U.S. and will hurt middle class workers.

Speechless

Sun, May 1, 2011 : 9:35 p.m.

Tax cuts and subsidies directed specifically toward the lower middle class and the poor will automatically generate consumer activity – and thus new jobs. The growing lower-end economic groups in our society reliably spend on family necessities right away when cash becomes available. They need things they can't now afford to by on their very low or nonexistent wages. Heavy public stimulus spending of this kind will work. Giving even more breaks to corporations and larger businesses will do little except line the pockets of private owners, top stockholders and leading executives. Without consumer demand being generated first, the business elite will simply hoard the cash. Most of these people care little about the public interest, while their respective country clubs will no doubt reap much of the windfall from corporate tax savings. I would favor of breaks for small businesses, which tend to feel the financial weight of taxation, unlike their huge corporate brethren. The big boys however, should pay through the nose. They can well afford to. And, as has been noted previously in these state tax debates, relying on corporate INCOME taxes for state revenue is far, far less stable than the current business tax. This method is more sensitive to economic fluctuations and will do even more to deny Lansing funds during recessionary times, when they're most needed. Further, no doubt bigger businesses will embolden their accountants to devise clever ways to hide annual profits so as to show "break-even" status for the operation, or maybe a loss.

Dr. Salberg

Sun, May 1, 2011 : 9:21 p.m.

First, I am surprised that interest in my little essay generated 58 comments as of this moment, many of which are critical. I acknowledge those who claim that my argument was simplistic but I want readers' who have limited business knowledge to be able to understand my conclusion. Some detractors, like braggslaw, will not accept my premise that no more and no fewer widgets can be sold. Along with craig matteson, braggslaw wants me to recognize new markets, new products, expansion of business, productivity...&quot; which impacts DEMAND and is not directly effected by taxes on profits. Increase in demand may certainly require expansion of production which will more likely to be capitalized through use of leverage (loans) and the issuance of stock than by reallocating profits. Likewise, my discussion is not about the Michigan Business Tax (&quot;MBT&quot;) which taxes revenue as a fee for doing business in the state. The MBT is burdensome and will deter new enterprise. Being a physician does not preclude business acumen. A cousin who is a cardiologist in Chicago has an MBA in business from the University of Chicago and has already developed and sold one cabinetry business and a biotech company. A number of University of Michigan physicians have commercialized products which they have developed and remain involved in the businesses.

Richard Trombley

Sun, May 1, 2011 : 8:35 p.m.

This article is typical of how liberals think. Now DR. Salberg, imagine that the $35000 tax savings was used by the widget Co. to buy advertising to create increased demand for widgets. This also increases demand for the advertising Co. Now imagine that the advertising uses the money from the deal to buy more newspaper advertising which increases profits for the newspaper and on and on and on... and you soon realize that Dr. Salzburg hasn't got it right. The $35000 does increase demand not only for widgets, but for widget supportive services and the services that support the widget supportive services. Taxes diminish this process by removing assets which can be used by businesses to increase demand for products and therefore has a negative effect on employment in the privater sector.

Thaddeus

Sun, May 1, 2011 : 7:59 p.m.

I agree that many good points have been made by both the article author and numerous commenters. In the case of large corporations in particular, lower taxes are in most cases less likely to lead to more company development or growth. It too often just allows the top executives of that company more money they can personally pocket as they are intentionally driving the company into the ground. With a bankrupcy, the company executives can pocket even more money as they liquidate their employees, company holdings, and writing-off pretty much everything else. In some cases, these company executives even have the gull to lobby hard for cash rewards if they do not go through with a bankrupcy situation they created. When that company is dead and gone, too often these company executives are already sitting on the boards of or have ties in another large corporation where these company executives can then go and pocket gazillions $$$$$ more as they assist in bankrupting the next company.... Laissez faire capitalism at its worst/ finest (depending on how much one approves of this preditory practice). In smaller companies, the owners and other top people are much more likely to be relying on the company's long-term survival for their own basic bread-and-butter personal expenses. Therefore everything such as taxes, talent pool, proximity to their primary market, etc. are all going to be much more important to factor in. Overall, I believe making the tax code being realitively straight-forward, easy to follow, and fair is much more important than the % rate (within reason). Let's change the tax code on income so that such top executives as I describe (who often get paid millions per year plus stock and other benefits) so they must pay taxes (Social Security and other taxes) on more than just few percent of their income.

gild

Sun, May 1, 2011 : 6:26 p.m.

This is an extraordinarily simplistic argument that doesn't hold water, for all of the reasons previous commenters have mentioned. Most business owners can probably give you a half dozen ways they could expand their companies if they had the capital to do it ... and most of those ways probably involve hiring more people.

johnnya2

Sun, May 1, 2011 : 6:24 p.m.

Ok lets make this clear and real world. We all agree Bill Clinton raised taxes and George W Bush lowered them. Now, leets look at their JOBS record <a href="http://blogs.wsj.com/economics/2009/01/09/bush-on-jobs-the-worst-track-record-on-record/" rel='nofollow'>http://blogs.wsj.com/economics/2009/01/09/bush-on-jobs-the-worst-track-record-on-record/</a> This fact brought to you by that liberal rag called the WALL STREET JOURNAL.

debling

Sun, May 1, 2011 : 6:20 p.m.

No doubt any company (or individual for that manner) would like to see their taxes decrease. You might use the money to reinvest in equipment, hire more employees or quite possibly just distribute more profits and bonuses to shareholders and employees. Who knows. It's all good. The problem is that if your taxes decrease, someone else is picking up the tab for the difference. Taxation is not a issue of &quot;redistribution of weath&quot; as some may see it but rather a &quot;distribution of the tax burden&quot;. The question of fairness is what is at issue. Over the history of the US in the past century the percentage of taxes paid by corporations has steadily decreased, leaving the burden to working Americans. Now if businesses and individuals all had flat tax rates and calculated taxes the same way fairness would be achieved. The problem is businesses do not compute tax in the same way that individuals do. I'd love to write off my car, mortgage, food and other expenses that business do to calculate my &quot;profit&quot;. In the analogy presented, likely the business would find some creative accounting way of showing their taxes were 0 for the year and pay nothing. So the tax rate means nothing to them. Let's end subsidies, tax breaks, write offs, creative accounting tricks and implement a flat tax rate that is the same for individuals and businesses. Then we will achieve fairness in the tax burden.

Joe Z

Sun, May 1, 2011 : 5:47 p.m.

PART 3 You see, the major problem with the example that Dr. Salberg uses is its' simplistic view and flawed business plan of a fixed widget market. No one would open a business based upon such a business plan. Banks would not provide loans etc. To survive in business, the opportunities for expansion must exist and investments in how to capture or expand this market must be made. No one would ever expand production if the demand were not there. They would, however, hire more marketing, sales or developers to expand the market or the products they manufacture. But they are not going to do this in Michigan when other states are offering a far more appealing cost of doing business. Bringing business back to Michigan is a complex task and lowering business taxes is just one step that must be taken. We have over 50 years of unrealistic tax laws, dependence upon money from the Big Three and policies created when Detroit and Michigan showed population growth. These sources for taxes are no longer there so we can choose to ignore this fact and stay the course until the ship sinks or make some hard choices to re-invent our economy and appeal to 21st century business opportunities. These facts are something that Dr. Salberg should be well aware of and I encourage him to utilize his 30 years of financial investment experience to suggest something constructive to benefit the state instead of throwing rocks at one small part of a plan to bring this state back to its former greatness.

Joe Z

Sun, May 1, 2011 : 5:46 p.m.

PART 2 As time went on and competition from other companies and states increased, major corporations and smaller businesses in Michigan started to find themselves held captive by the powerful labor force they helped to create. Examples of labor extravagances common at this time include "personal paid holidays", and union reps getting employees who had been caught drinking or drunk on the job, or leaving work and returning to punch out later in the day re-instated. Competition (both foreign and domestic) took notice and pounced on the opportunity to employ their people and improve their economies – while arrogant Michigan labor forces and our sleeping Michigan lawmakers and leaders did nothing, gambling that no one would move such a major industry elsewhere. Other reasons for the decline in jobs include a "Wal-Mart" mentality among the Michigan consumer. How many people buy on price alone rather than looking at where the money is going in the end and who it helps to employ? In this global economy, it is possible to obtain goods from other countries with less regulation, causing more damage to the environment than a product that is produced in the good old U.S.A. The end effect is limiting job opportunities to fellow US employees and their families. What is the long term outcome if we continue to purchase goods made in other areas? (Just take a look at England and its economy for a possibility.) I wonder what kind of automobile Dr. Salberg drives? Is it a prestige "status" nameplate from Europe or Asia? How does this decision support the U.S. or Michigan economy?

Joe Z

Sun, May 1, 2011 : 5:45 p.m.

PART 1 Instead of using an over simplistic example of economics to voice a skeptical view of one of the current ideas that Governor Snyder has proposed to reverse the continuing decline of the Michigan economy, Dr. Donald Salberg should use his 30 year experience to focus on ideas he can come up with to improve the economy in Michigan. It is easy to throw stones at change, but what positive contribution does this make?? Give us some of your experienced insight Dr. Salberg. What do you propose we do at the state level to entice business back to Michigan and jump start our declining economy? Your elementary example does not take into account the thousands of jobs this state has lost to other states because our current flawed business tax structure and other unhealthy "business norms" established during a time when our economy was booming. Having lived in this state my entire life and having worked in a sales and engineering role since the 80's. I have personally witnessed the deterioration of the Michigan economy due to jobs being moved to other states and other countries. In addition to job loss due to the business tax laws, another reason was to find cheaper (non union) labor at a time when stubborn labor leaders demanded to hold fast to the excessive and unrealistic gains they were able to achieve in the 1960's and 1970's - when the auto industry was king. Michigan unions were granted pretty much anything they asked for by companies who were making money and happy to oblige. This may have been fine for the times – but was not viable long term. This mentality spilled to other Michigan industries – due partially to the fact that there was a lack of competent labor alternatives elsewhere at that time. Michigan was a strong economic state and laws and practices were established to take advantage of all the money the state had from businesses and employees. My, how times have changed in this great state.

SillyTree

Sun, May 1, 2011 : 5:27 p.m.

It is more likely that the net profit, whether 100,000 or 65,000 would be invested in capital improvements that modernize the plant to produc more widgets with less labor. Widgest would then drop in price and demand would increase with the possibility that those replaced by technology might be rehired at a future date. Meanwhile they are unemployed and unable to buy the end products that the widget purchasers produce and the demand for widgets would fall. Luckily there is at least one large market overseas that is in a growth phase and needs widgets. Shipping widgets overseas is expensive When the cost of transportation is added to the cost of labor here, the companly decides to send its manufacturing plant overseas. Now all of the workers have been displaced. They hear about jobs in health care and technology, but they are over 50 and in debt. They have car payments and mortgages, but no income. They don't have the money to go back to school to &quot;retool&quot; for the &quot;new&quot; economy. They spend their final days working menial jobs where ever they can, but people are reluctant to hire them because of their age. Sure, that's illegal, but you don't have to hire anyone you don't want to hire and any reason will do as a substitute for age. Now you have an aging population with no healthcare and no income. I guess that's a good mix because you don't want people like that to live too long.

RayA2

Sun, May 1, 2011 : 4:25 p.m.

While you can pick apart Mr. Salberg's argument, citiing special circumstances that contradict him for example, my experience close to the marketing side of business agrees with his assessment. What most of the posts from republicans seem to forget is that corporations realize a huge benefit from government and need, as the equivalent of a person according to the recent Supreme Court decision, to pay for that benefit. Critical needs of corporations like roads, an educated workforce, regulation, sewers, even defense, are paid for by all taxpayers so corporate tax dollars are hugely leveraged to their own benefit. Since corporations are far heavier users of these benefits than the average taxpayer then they should theoretically pay more for them than the average taxpayer, not less. While some seem to bellieve that the additional bottom line revenue from the tax cuts will increase their tendency to add jobs, I say it is only a very short term benefit at best. Eventually corporations have to move out because them have become freeloaders on the public. They also can't find enough educated workers.

David Cesarini

Sun, May 1, 2011 : 3:09 p.m.

Since the article is an OPINION- I understand everyone has an opinion, but it does not mean their opinion considers the big picture. Many businesses pay the Michigan Business Tax based on a percentage of their inventory- which means the small business pays a tax not only based on profits. For every dollar that is unfairly paid in taxes, takes a dollar away from the small business to reinvest in making their business more competitive; moreover, the dollar is also saved to wait for opportunities to expand, advertise, and grow. Growth means that many employees have the potential to not only make more money, but also reduce the brutal reality of losing their job in an uncertain economy. It is not just about hiring more employees, it is helping your current employees improve their quality of life and help reward businesses for contributing to the local economy. For the most part, the more money a business retains, the better chance it will remain viable and healthy. Taxes should be based on the profits a company generates- the current tax system in Michigan taxes small businesses when they make profits (which is part of doing business), but a tax is due even if the small business loses money......... That should NOT be part of doing business.

A2Realilty

Sun, May 1, 2011 : 2:25 p.m.

This is an interesting opinion piece with many good responses. I'm a small business owner in Michigan so I have a couple of points that others might find interesting for me to share: 1) The current MBT is absolutely terrible. This has nothing to do with my desire TO or NOT TO pay taxes. It's terrible because it is very confusing and, in some specific instances, just doesn't make sense. Here are two quick supporting examples from my experiences: Example A: Our first year of business, we had some unexpected bad debts. When doing my MBT for the year, I learned that Michigan taxed our business based on the revenue and didn't have an allowance for bad debts before this calculation was done. This is ridiculous. Put it this way, a company could have one customer to whom it sold $100k of goods in the year. Cost of goods was $50k. Unfortunately, the customer went out of business and didn't pay its bills. From a federal perspective, your company's tax basis would be $100k (sales) - $50k (COG) - $100k (bad debt) = -$50k. Your company lost money and would owe no federal taxes. This is good logic since all that you experienced was a $50k loss. According to the MBT, your tax basis would be $100k (sales) - $50k (COG) = $50k. The MBT actually wants you to pay tax on $50k even though your business derived no gain from the sales and lost money on the year. This makes absolutely no sense. -- Continued in reply --

snoopdog

Sun, May 1, 2011 : 2:23 p.m.

You may be a good doctor but you would make for a lousy businessman. You leave so much out of the equation one wonders where to start with a response. Good Day

braggslaw

Sun, May 1, 2011 : 2:15 p.m.

The election of Snyder in many ways was a referendum on Makers versus Takers. People elected someone who was willing to create wealth and not simply redistribute wealth from Makers to Takers. Snyder won.

DonBee

Sun, May 1, 2011 : 1:47 p.m.

Dr. Salberg - Thank you for your article. I could write one on medicine that would be equally right and at the same time wrong. Michigan's MBT does not work like your article indicates. First it taxes all Revenue before you get to take any expenses out as one way of figuring taxes, so if you LOSE money you can still pay taxes. Second, if you are making the right widgets or located in a favored location, or... you may not pay any taxes, as there are loopholes and abatements and credits and .... that are more than the taxes paid right now. Then there is inventory tax and equipment tax and ... MBT is a very complex beast, so as a small business, your $65,000 is probably going to one or more accounting firms, not going to retained income. The idea behind the tax change is to level the field for taxes, it will take 3 to 5 years for many of the abatements to expire. So in each of the next 3 years, even if no company grows or turns a higher profit, the money the state collects from business will grow significantly. Many small start ups look at Michigan, realize they are 3 to 5 years from turning a profit and leave - why - because it is cheaper to be almost anywhere else. A large number of small businesses (e.g. plumbers, truck drivers, etc) work for cash and never file income taxes. Why - too complex and too expensive to file. Whether we like it or not, this is a good first step to keeping startups, helping people who are off the books move on the books, and letting folks grow their small business. There is NO good reason that all income from all sources for all individuals and all profit from all sources for businesses should not be taxed. Good Luck Michigan

MiSola

Sun, May 1, 2011 : 1:36 p.m.

I like this comment best. &quot;does not take into account new markets, new products, expansion of business, productivity, return on investment etc. etc. Someone told me that General Motors is again a very profitable corporation. It has new markets, expanded it's business, more productivity and lots of new jobs. But then, some one on TV said, that's because most of the New jobs are in China, most of the cars are made in China and most of the cars are sold in China. Things like this really helps Michigan and the people here. Hope my dad moves to China to get his old job on the assembly line back. We might be able to keep our house.

Craig Lounsbury

Sun, May 1, 2011 : 1:18 p.m.

I don't know whether Snyder's plan will help the much needed turn around. I'm willing to give it a try. I voted for the guy. I also voted for Granholm twice. I don't blame Granholm for the &quot;Perfect storm&quot; (somebody slap me for using that cliché) that befell our state but she had 8 years to stem the tide at least a little and I didn't see enough. As to Dr. Salbergs widget example there are too many flaws in the argument to address. I can only hope his deductive reasoning is better in medicine than it is in Widgetry 101. Again I don't know to what degree Snyder's plan will or won't work. But tax rates DO MATTER to businesses. If one didn't see it at the time 60 minutes did a segment on Corporations moving around to avoid taxes. They mentioned a small Swiss town... &quot;The population of the town of Zug is 26,000; the number of companies in the area is 30,000 and growing at an average rate of 800 a year.&quot; Zug was described....&quot; Zug most probably has the lowest tax rates in Switzerland..... kind of a tax haven within a tax haven&quot;

MiSola

Sun, May 1, 2011 : 1:08 p.m.

Bottom line. What Group of people own the major businesses, that will get this additional 35% of money? What did they actually Do with any extra % of the money, historically? What do these people that own have major businesses actually done the with jobs in the last 10 years? I don't understand words like speculation and rationalization, yet. My mom is out jogging, so I can't ask her and I don't think they will teach this until I get to 6th grade next year.

Victor Lacca

Sun, May 1, 2011 : 1:05 p.m.

Let's say I'm looking to start a company. Where do I set up shop? where the cost of doing business is lowest. And buddy if the business tax isn't a factor in that mix I'll eat all your widgets.

Will Warner

Sun, May 1, 2011 : 1:01 p.m.

What's great about capitalism is that you can depend on people's "greed." A guy running a million-dollar business is not going to be happy with a million-dollar business or $100K in profits. He's going to want more, and he's going to pursue it using his profits to expand his business or create additional businesses or move to a place where prospects for after-tax profits are higher (such as, we hope, Michigan). When he has a $2M company, he'll start working for $3M. If he can accomplish all of this without increasing his payroll, he will. But, generally, he can't.

mgnfcntb

Sun, May 1, 2011 : 12:55 p.m.

Dr. Salberg's argument isn't perfect and is hardly completely wrong, simplistic, ignorant or stupid. It's an opinion. When we attack people who share their thoughts and points of view simply because we disagree with them it is rarely because we want to have a free exchange of information, it's because we want ourselves to be the only voice in the room and want to consider no other possibility. Be good gentlemen.

FredMax

Sun, May 1, 2011 : 12:51 p.m.

Wow! It is unfortunate that you weren't around 8 years ago to show the previous governor how elementary school arithmetic can model complex economics! Suppose the new employee is a research engineer that can improve the current product in such a way that it eats into a competitor's sales? Suppose the new employee is hired to bring out an entirely new product in a new market? Let me guess that in your work as a physician at a large hospital, that you had no contact with real-world product development.

David Briegel

Sun, May 1, 2011 : 12:37 p.m.

The TeaPublican sits at the table with the CEO and the Union guy and 20 cookies. The CEO takes 19 cookies and while leaving says to the TeaPublican, &quot;look out, that Union guy wants your cookie!&quot; We have the lowest tax rates in 60 years, the largest profits and the most cash on hand. All they want is more at the expense of the future of the middle class. Grandma's health care and pension are all fair game, but increasing the tax contribution to support the economy from which they have benefitted so greatly is somehow unfair. Well, that mythological dog just ain't huntin' any longer. 56% of even the TeaPublicans believe that the wealthy should be taxed at a higher rate. You should ALL be outraged that your &quot;representatives&quot; don't reflect YOUR values. Exxon Mobil, GE and many corporations don't pay tax. Why should you?

Will Warner

Sun, May 1, 2011 : 12:11 p.m.

...plus, Widget man could use his increased profits to launch a new product line or start a completely new business.

braggslaw

Sun, May 1, 2011 : 12:06 p.m.

I was trying to restrain myself but such as simplistic and almost ignorant post has lit my fire. Certain types of people think that the pie is always the same size and that when someone gets a bigger piece of the pie everyone else gets a small piece...which is completely untrue. it is this type of thinking that leads completely idiotic economic policies. The post does not take into account new markets, new products, expansion of business, productivity, return on investment etc. etc. Google was a search engine, they are now an operating system and a software giant. There will always be new markets to exploit and there will always be a need for investment capital. When companies get high returns on capital all benefit.

craig matteson

Sun, May 1, 2011 : 12:06 p.m.

The idea that a small company has 100% of the market and cannot expand sales is a foolish assumption. Using the logic that your present level of sales is the maximum level of sales your company can have is poor thinking indeed. Plus, the current tax on businesses in MIchigan requires us to pay on our gross revenue whether or not we make a profit. Which is just as stupid as the assumption in this very faulty argument from Dr. Salberg.

Ed Walsh

Sun, May 1, 2011 : 12:04 p.m.

Please consider these... 1. With a lower tax burden, you can now charge less for your widgets in order to meet your annual payroll and other expenses. That has the high liklihood of increasing demand on its own, leading to addiitonal investment in your company. 2. Lets look beyond your widget company to your primary competitor, who has been manufacturing widgets in Kansas for years but would really like to be closer to the suppliers and customers in the Midwest. That company has been looking primarily at Indiana as the most tax efficient state in the region but now is seriously considering Michigan because the the rich maunfacturing and engineering talent is now not completely offset by a much higher tax structure. Therefore, in addition to your company hiring one or two employees, Company B relocates and hires ten.

braggslaw

Sun, May 1, 2011 : 11:53 a.m.

We are all entitled to our opinion but you are completely wrong...

RTFM

Sun, May 1, 2011 : 11:51 a.m.

Then a 100% tax will not eliminate jobs?

Basic Bob

Sun, May 1, 2011 : 11:43 a.m.

1. European environmental regulations requires that the widget is redesigned to be more efficient. With the tax savings, the employer is able to hire an engineer to improve the design and modify the tooling and production methods. Without laying off a long time employee and cutting into current production. The upgraded widget takes more labor, but the customer is willing to pay more for the increased functionality. Additional jobs are created. 2. A college graduate with a marketing degree and five years experience applies for a job. She has been working at Walmart for the last year because her last company moved to New Jersey. The tax savings allows the employer to hire a new employee who works with a new customer to determine that a gizmo can be produced with the same materials and tooling in the plant. But sales of the gizmo require additional equipment. A local machine builder provides six new machines over a two year period and even more jobs are created. 3. The engineer, the marketing executive, the machine builder, and the current employees are not forced to move out of state to look for work. They avoid foreclosure and moving expenses. Everyone lives happily ever after.

Townie

Sun, May 1, 2011 : 11:40 a.m.

You're right but if you are trying to reason with Republicans you're largely wasting your time. Facts, statistics, etc. don't matter. Really, they don't care. This latest tax cut is about enriching and pleasing their core constituency: corporations and the wealthy; not jobs. There will be no attempt to measure the effectiveness of this latest tax cut. One of the sponsors of the cut said it was 'common sense'. When I asked my representative Rick Olson for sponsorship of some amendment to actually see if $1.8 billion in lost revenue (he said the lost revenue was 'not &quot;our taxpayer dollars&quot; but dollars extracted from other individuals without their consent.') he said there wasn't a way to count the new jobs. Our economy is slowly recovering (it didn't have much of anywhere else to go) no thanks to the Republicans but they will be the first to loudly proclaim that any new jobs were because of the tax cuts. Whenever I ask a Republican to show me a study or a state where tax cuts to individuals or businesses has demonstrably created jobs all I get is silence and the 'common sense says' argument.

1bit

Sun, May 1, 2011 : 11:36 a.m.

Dr. Salberg, I take it you are using the above as an analogy to the Michigan Business Tax reform that will happen. Your analogy is flawed because you don't seem to understand the problem with the MBT. You state: &quot;Now, if the 35 percent tax is eliminated, then instead of retaining $65,000 you will keep all of the $100,000 in profits&quot;. That will NOT occur with the MBT reform. What will occur is the same thing that happens now, the $100,000 in profit is passed to your personal income (via your LLC) and it will continue to be taxed at your personal rate. What is being eliminated is the gross receipts tax that taxed small business owners twice (and on the gross revenue, not just the profit!)

MB111

Sun, May 1, 2011 : 11:34 a.m.

So reinvesting in marketing - to generate additional demand - is not feasible? That investment, either intrnal or external to the widget company, is part of the money multiplier effect. This is what benefits an economy.