Let's pretend that you
are the sole proprietor of a small business – one that employs 15
or 20 people. Suppose you manufacture two products: shirts and
widgets. Both lines are selling very well - your bottom line nets out
to about $100K, on which you pay about $15K in income tax after
deductions.
Now the government, in
its relentless pursuit of job creation, lowers your taxes to $13K.
How many new employees will you hire with that extra $2,000? (A
no-brainer.)
Suddenly your sales of
shirts drop 50% because your competitors have outsourced their
production to India; do you keep all the employees in the shirt
production line, or do you lay some of them off? (Another
no-brainer.)
Your accountant tells
you that the government will give you a hefty allowance if you
install automated equipment (made in China) that will enable you to
compete. In fact, you will need even less employees than you have
now! Do you buy the new equipment? (This is almost too simple.)
Suddenly a new use is
found for your widgets, and the sales double in just a few months.
You absolutely must find extra equipment and employees to handle the
increased volume. So you hire a consultant who fixes you up with
automated equipment which can handle the entire increase, and better
yet, can be run by only one new employee. You are back in clover.
Now let's take a look
at what happened here. Job creation was dependent upon two variables:
it was directly proportional to sales and inversely proportional to
operational efficiency. Tax adjustment was useless, at least for the
small business.
In the old days the
mantra for business success was location, location, location. Not any
more – these days success is determined by customers, customers,
customers.
Mr. Romney, please take
note.
******
My
books,
“There Are Only Seven Jokes” and “The Spirit Runs Through It”
are available in paperback or Kindle at Amazon.
Comments
Post a Comment