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Comment by trhway | Hacker News Reader

>So for instance imagine a company that grosses $250 in sales with total before tax costs of $100 in labor and $50 in other costs. With a 30% tax rate, their after-tax net is $70. With a 20% tax rate, it's $80.

cutting those $100 of labor leaves you with $140 in 30% scenario vs. $160 in 20% case. The similar goes for capital investments with associated depreciation. This is why tax cuts is the time to take money out of business through dividends, buybacks, etc. and not the time to expand the business (i.e. not the time for additional employees and capital investment). It does put comparatively higher pressure to increase productivity using existing employees on/in existing machinery/buildings/etc.

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This has nothing to do with labor. Lower tax rates simply mean you take home more of every dollar you earn. For instance if you cut your overhead by $10 now you take home (just looking at that value in a vacuum) $8 instead of $7. That obviously does not imply your overhead costs were lower when tax rates were higher.

>For instance if you cut your overhead by $10 now you take home (just looking at that value in a vacuum) $8 instead of $7.

and if you add $10 overhead your take home will get $8 less instead of $7. Either way that $10 overhead is $1 more expensive in the case of lower tax rate.

No, it's not. That money is lost to the government, not to your actual costs (labor/goods/etc). To illustrate the point clearly imagine I'm a robber. Each time I see you get paid I come and rob you. I take 30% of everything in your wallet. If I suddenly stop robbing you, you're suggesting that now all of your costs would increase. This is obviously not rational.

>That money is lost to the government, not to your actual costs (labor/goods/etc).

as long as the money is lost ... I'm not arguing that sticker price of that employee went up. I'm saying that my net total changes differently while i'm paying the same sticker price. In the case of lower taxes my total decreases more when i pay the same sticker price. Thus it is more costly to me.

> If I suddenly stop robbing you, you're suggesting that now all of your costs would increase.

Obviously. For better illustration lets say you take 90%. Before, for every $1 paid in my costs, my end total was decreasing by $0.1 and you were losing $0.9. Once robbing stops my total would be decreasing $1 for each $1 paid in my costs.

So, in order to obtain the same thing, in one situation i'd loose $0.1 and in another - $1. I.e. in one situation the same thing is 10 times cheaper for me than in the other.

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