Public radio carried a story about the then-pending tax bill, quoting a chicken producer who lauded its expected benefits. He said that any reductions in taxes would increase his income and permit him to pay debt down faster. This fellow allowed that he would then take out a new loan to build facilities, buy equipment and increase jobs.

Mr. Nosy asks 

I am normally not this nosy, but since this is a public bet on private investment, I have a follow-on question. Like, how much of the chicken guy's tax reduction will go to jobs? And how much to, say, his savings account? 

Why am I so interested in his claim that tax politics will build jobs?

'Cause I just don't believe it.

I have worked with literally hundreds of companies on startups, growth plans, turnarounds and capital raises. These plans have created--or saved--thousands of jobs. Guess where taxes comes in as a consideration for investment, growth or credit?

Dead. Freakin'. Last.

Entrepreneurs fill a need, not a tax form

Think of the growth companies that are household names today.

I'll start with Starbucks, Facebook, and Google.  Where were taxes in their business plan?

Answer: I doubt if taxes got a mention. In the case of all of these companies, they not only grew to multi-billion dollar companies--they all started in high tax states. Their success had zero to do with taxes, and everything to do with a great plan and incredible execution.

See, entrepreneurs are sensitive to customers. They see a need, then fill it. Some entrepreneurs feel so close to the customer need, they can articulate it before the customer can. 

Think of Southwest Airlines, who set up a discount airline in 1971. They had the audacity to go against the mighty Braniff International Airways with a piddly single route, between San Antonio and Dallas

Big piddly carrier

Who, you might say? You never heard of them? Yes, Braniff was once a big international carrier, which was subsequently lost in the deregulated market. In the meantime, Southwest continued to build piddly route after piddly route. Now those routes have built a substantial international carrier, one that is widely respected for its powerful strategy, execution and culture.

I am sure that Southwest now has a sizable tax department. After all, they buy capital equipment and pay taxes like crazy. So a tax reduction would  certainly be welcome. But is it a job builder? If you know the culture of Southwest--one built on dedication and loyalty-- taxes doesn't even get a mention.

Jobs-The politician's view

You see, I think politicians believe that jobs come from tax deals. A company comes to the governor's office and says, "Hey Gov, if I build a plant here, what'll you give me?"  Think auto plants in Tennessee, or the notorious Foxconn deal in Wisconsin. That's the way business is done to attract factories, not that I agree with it.

The companies get a tax break--usually outsized compared to the actual number of jobs brought in-state--and the politician gets a big, long lasting talking point.  "As Governor, I created jobs in blah-be-ty blah!"

You created jobs? Never. And your tax strategy didn't create jobs, it just helped influence where already-planned jobs were going to go.

Here's the test

Why am I making this point?  Because we are now doomed to hear the repeated lie that politicians created jobs. That taxes are a big factor in creating jobs. That up is down.

Meanwhile, the real heroes of entrepreneurial culture--the startup mavens, the scrappy CEOs, the funders and the believers--are being put aside.

Here's all the proof you'll need that tax strategies don't create jobs. If you are ever in a one of those expos where startup CEOs describe their plans, just raise your hand, clear you throat and say: "How will your tax strategy create jobs?"

Be prepared to be laughed out of the room.

Published on: Jan 5, 2018
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