Conventional wisdom claims cutting job creators’ personal income tax rates creates jobs. Not true. Businesses small and large are motivated to derive income and create profits. Employees are a cost item. In 35 years of corporate management experience and as a former owner of a small business, never were my decisions based on how to create jobs. Head count was a measure of cost control. Only after all means to satisfy customers with existing resources were exhausted was increasing employees a consideration. Introducing a new product or increasing manufacturing capacity created new jobs, but only as a consequence of expanding the business to grow income and increase profits. Jobs were created as a necessity to succeed, without any management altruism.
The notion that simply reducing personal income tax rates will induce business owners to hire people is nonsense. These mythical job creators, who would hire people if only they were allowed to keep slightly more of their taxable income, do not exist. Businesses do not take hiring decisions lightly. Adding salaries and benefits has a direct affect on the bottom line and undergoes a detailed cost-benefit analysis in any responsible company.
In 2012 and 2013, Kansas eliminated income tax on 191,000 businesses and dropped the top individual tax rate from 6.45 percent to 4.9 percent. Job growth is below the national average and Kansas faces a $279 million revenue gap. Remember this when income tax cuts are presented as the way to create jobs.