Thursday, September 13, 2012

Mayor Bloomberg: 'taxes aren't the most important priority for business'

In a speech, Mayor Michael Bloomberg effectively ended both the call for lower tax rates to stimulate the economy and the Fed's zero interest rate and quantitative easing policies.

If Washington really wants to help businesses, New York Mayor Michael Bloomberg says that politicians need to stop obsessing so much over tax rates. 
When it comes to improving the business climate, “Usually the pundits think of this as lowering taxes,” Bloomberg said in a Wednesday speech in downtown D.C. 
“But taxes are just one element of the environment — and usually not the most important. The first question most entrepreneurs ask is not can I afford the taxes — it’s not that. It is: Who are my customers, and where do I need to be to serve them, and how do I get up and running  quickly?”...
Please re-read the highlighted text as Mayor Bloomberg has nicely summarized how a businessman really looks at the world.

Businessmen know that it takes revenue to generate earnings and it is only after you have earnings that taxes are a consideration.  Businessmen are not concerned that they will have so much revenue that they generate so much in earnings they end up in the top tax bracket.  It is the businessman's goal to have this happen.

Mayor Bloomberg's comment also reinforced the results of the Duke University survey of CFOs.  Note how the businessmen also don't ask what is the prevailing interest rate.  Like taxes, it is one element of the environment, but not the most important element.

If businessmen see demand, they set out to serve the customer.

This is why the Fed needs to stop engaging in zero interest rate policies and quantitative easing.  The Fed's policies are artificially suppressing demand.
“If the next president and the next Congress spend half as much time discussing how to help entrepreneurs as they’ve spent debating whether upper-income tax rates should be 35 or 39.6 percent, wed’ be in a heck of a lot better shape,” Bloomberg told the audience, which broke out into appreciative laughter.
“You show me a business person who cares about his federal tax rate more than his customers, and I’ll show you Darwin at work,” he added. The audience laughed even louder.

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