Romney loves to say that lowering taxes on companies will create jobs. This is spoken like some gospel truth. I actually stopped to think this through tonight and came to a much different conclusion.
I believe that higher taxes can actually encourage increased hiring and investment. Why? Because, as a small biz employer (structured as an S Corp) company profit flows through to my personal taxes. As both candidates regularly note, 90%+ of all businesses are structured this way.
So if you reduce my tax rate then I'm more likely to take money out of the company since the penalty for doing so (taxes), is reduced. Whereas a higher tax rate means I'm incentivized to take a reasonable salary and continually reinvest the profit in the business- new hires, marketing, etc, instead of taking the profit and paying the taxes. This reinvestment will then grow my business. So I hire more people, the economy grows and the value of my business also grows. Everyone wins.
Also, consider what happens to the profit business owners take out of their companies with this lower tax rate. Will they reinvest it here or overseas? Chances are they will do some of both leading to an exodus of cash.
I am, of course, writing from the small business perspective. An enterprise (think Walmart) business may see this differently but from where I'm sitting: higher taxes=encourage reinvestment=more hiring. Am I missing something obvious here?