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Budget & business taxes

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Letter to the Editor
Tuesday, March 11, 2014, 9:00 p.m.

Regarding the letter “Corbett's budget claim” by the executive director of Democrat staff for the state House Appropriations Committee: I do not question whether there was a budget deficit, but I do object to the statement about “cutting business taxes ... when the state couldn't afford to do so.” If the state cannot afford the cut in business taxes, neither can its citizens afford an increase.

Business taxes are paid in part by purchasers of the product made and by the employees and stockholders of the company. Taxes are a cost on business, and if competition does not work to hold prices down, the price of the product is increased. Where competition restricts price increases, there is an effect on the number of employees or a restriction on wage increases and that is paid for by the employees and stockholders.

One estimate is that every $1 increase in corporate tax will reduce wages by 60 cents. So, the question becomes: Should government work to reduce its costs and employees, or should companies restrict wages and lay off people? Which would be better for the economy?

If the economy gets weak, there are lower profits to tax, hurting both citizens and the state. If the economy gets stronger, tax revenues will increase without an increase in business taxes, since profits will increase. It seems the answer is to cut the business or corporate tax, and both the consumer and the state benefit. It still would help if the state would begin to reduce instead of growing in size and begin to control wasteful spending and limit spending to worthwhile projects.

Ronald Nicely


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