How Do Businesses React To Tax Increases?

Apparently, Obama believes that we can jump-start economic activity and create new jobs with massive spending programs, tax increases, and a few tax credits so he can claim he's cutting taxes. Indeed, with several tax cuts enacted during the Bush Presidency set to expire, we even have tax increases on the way.

So how do businesses react to this kind of thing? For the answer to that, let's go to the great state of Colorado. They are facing exactly this situation, with the government trying to repeal 13 tax exemptions that are currently law. So, how will businesses react if those tax exemptions are repealed? According to this survey, by delaying expansion, cutting pay, and freezing hiring.
http://denver.bizjournals.com/denver/stories/2010/01/25/daily10.html?ed=2010-01-25&ana=e_du_pap

Nearly three-quarters of Colorado businesses say they would delay planned expansions and more than half would cut worker pay and freeze hiring if proposed suspensions of 13 tax exemptions are signed into law, according to a survey released Monday by the Colorado Association of Commerce and Industry.

The CACI survey, conducted among the statewide business group’s 112 members, was released just two days before the House Appropriations Committee is scheduled to conduct the first hearings on the budget-balancing proposal.

And it came three days after three other business organizations, including the Denver Metro Chamber of Commerce, sent Gov. Bill Ritter a letter saying that they were concerned that approval of exemption cuts would lead to “job loss and stymied economic growth.”

To those who understand the basics about how a free market operates, this will not be startling news. In fact, one might even call it obvious. And it isn't done out of spite, but out of necessity.

“All tax credits that are eliminated or suspended directly affect our profitability and will affect our ability to employ and provide benefits to our employees and eventually could eliminate our ability to stay in business,” wrote Kim Moravec, co-owner of ABC Die Cutting and Embossing of Denver, in response to the CACI survey.

Marty Terek of Ball Corp. in Broomfield noted in the survey that his company could lose $750,000 a year through the energy exemption suspension and see a decrease in production of soft-drink containers, whose exemption also is on the chopping block. The two hits taken together could severely impact the company, he said.

This is basic stuff... possibly too basic for the super-advanced ultra-brains that now occupy the White House?

Tax increases, whether new increases or existing cuts/credits that are cancelled, hurt people and businesses. Period. The more that government takes from us, the less we get to keep and make do with, the worse off we are.

But does the President understand this? No. Do the Democrats understand this? No.

I guess sometimes the simplest lessons are the hardest to learn.