The launching of the American Jobs Act presents the majority of unemployed Americans with hope of employment opportunities. Currently, a good number of Americans are unemployed. The Act is directed to the small businesses and provides categorical outlines for firms to engage in hiring, investments and business expansion. As opposed to the current tax code which is perceived as being legalese-ridden, complex, mystifying, ambiguous and demoralizing, American Jobs Act comes with added advantage as per reasonable tax regulations are concerned.
With the tax cut, small businesses will be able to invest more and thus earn more returns which can be used to hire more labour. This boosts employment rate. Retrenchment of employees will be a thing of the past. Tax cut is however likely to promote work sharing between workers. This improves economic growth. In addition, flexibility regulations and additional funds promised will result in reinstatement of more workers and therefore increasing employment rate.
Reduction in tax liabilities
With the introduction of the Act, small businesses will pay taxes half the current amount. A tax cut in payroll tax liabilities on the first $5 million of payroll translates into a reduction in general tax liability paid by small businesses. Besides, employer-paid payroll taxes will be avoided completely when new workers are employed. Hiring a veterans guarantee a tax credit of $5,600 to $9000.
Training and development opportunities for the low-income youth and adults are likely to be realized. Youths will get employed in growth industries.
Reaction of Industry
The comprehensive benefit of the Act shows that tax cut results in employment which boost industry performance. Predominantly, companies will undertake more spending and investments. With improved investment and a reduction in economic harm as a result of tax cut, industry profitability is guaranteed. Therefore, companies will support the Act as they are likely to realize better returns.
I support the companies’ support for the Act. Higher rates on corporation tax as well as other business taxes do not stimulate but decreases fixed capital investment. A decrease in planned investment due to higher taxes implies that economies capital stock cannot rise and hence a decrease in capital stock employed per worker. This leads to worker retrenchment and low earnings for small businesses. A tax cut is thus appropriate to boost investment and employment opportunities.
Relationship of concepts
The profitability of small businesses primarily depends on the amount of taxes paid. Higher tax rate reduces profitability and consequently increases unemployment. This leads to poor performance of the economy.
Lee, B. (2011). What the American Jobs Act Will Mean for Small Businesses’ Taxes. Retrieved at http://smallbusiness.foxbusiness.com/legal-hr/2011/10/21/what-american-jobs-act-will-mean-for-small-businesses-taxes/#ixzz1bp7U9Pdu