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Sunday, November 28, 2010

Jobs and taxes are they related?

A recent article in the Wall Street Journal written by Louis B. Mendelsohn covers how he believes that tax incentives and tax breaks allow the wealthy to expand their business and therefor create jobs. Mendelsohn would understand this as he is an entrepreneur who in the late 70s began his own software company. According to him lower marginal tax rates as well as tax incentives with research and development help the wealthy that own businesses take risks that if they pay off will create growth, and allow for more employment. Mendelsohn explains how he grew his business to a multi million dollar company with over 50 well compensated employees with lower rates. His final plea is for the government to extend all tax cuts at least through 2012.

In many ways it is easy to see the points made by Mendelsohn and I agree that the wealthy should not be taxed differently merely because they have a higher income. In fact taxes should be kept low for all to encourage any one person, or group to possibly start a company. Although I may not completely understand what Mendelsohn is saying in one of his quotes "Portrayal of the wealthy as selfish opportunists while characterizing small business owners/job creators as "the backbone of our economy" is a fallacious". I disagree on this point many of the wealthy group he is talking about came from what he classifies as small business owners. That is the main goal of those owning a business for it to expand and to become wealthy. I think it is also time to point out that by giving tax cuts or extending them you are going to get a plethora of results from each individual. One person may choose to take their new disposable income and save it, and another may chose to spend it on any number of things each with different results. Still others would take it and make an investment or in other words take a risk, and that risk may either pay off or it may fail depending on other factors such as demand for it. If that investment pays off then that persons wealth or their company will grow creating the potential for jobs. Overall tax cuts or lower taxes certainly play a role in job creation, but it is not an easy one to one formula. However when times are tough for so many people to find jobs it presents a tool for solving this problem.

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