

Why I'm not hiring - cwan
http://online.wsj.com/article_email/SB10001424052748704017904575409733776372738-lMyQjAxMTAwMDAwODEwNDgyWj.html

======
jsz0
I believe state & federal taxes existed 3-4 years ago when unemployment was at
5% so I'm not sure how it's relevant to the current unemployment situation.
Also as a rule anyone who uses the term "ObamaCare" has an agenda so I just
assume he's either lying or misrepresenting the situation with a 28% increase
in health care costs. I wouldn't expect anything less from WSJ -- taxes bad,
Obama bad. Maybe we'll start hiring again when you elect some Republicans.

~~~
lionhearted
> Also as a rule anyone who uses the term "ObamaCare" has an agenda

Everyone stop and think for a second - do you hold yourself to the same
standard of debate as you hold the other side to? Would you, jsz0, call out a
user of the word "teabagger" as coming from someone with an agenda? It's the
same level of discourse.

A lot of people get upset when their ideal gets hit with a tacky dismissive
label while simultaneously trying to slap one on the other side.

~~~
jsz0
I try to. I don't use the term "teabagger"

------
100k
"Companies have also been pressed into serving as providers of health
insurance. In a saner world, health insurance would be something that
individuals buy for themselves and their families, just as they do with auto
insurance. Now, adding to the insanity, there is ObamaCare."

Actually, in the saner world, companies don't have to worry about health
insurance because it's provided by the government.

~~~
orangecat
_Actually, in the saner world, companies don't have to worry about health
insurance because it's provided by the government._

Should the government also be providing even more necessary items like food,
housing, and transportation?

~~~
jamii
> food, housing and transportation

Dole money, food vouchers, council houses, roads and subsidized public
transport. They pretty much already do and I have no problem with my taxes
paying for that.

Think of it from an entrepreneur's perspective. The bigger the safety net the
higher you can jump.

~~~
wyclif
_Think of it from an entrepreneur's perspective. The bigger the safety net the
higher you can jump._

And yet, the UK is hardly known as a startup greenhouse. In fact quite the
opposite. Now why do you think that is?

------
CodeMage
Wait, I don't get it. What is he proposing as an alternative? Would he be
happier to pay Sally $74,000 so that she herself can do the whole process of
paying $30,000 for taxes and health care and stuff like that? Or is he
proposing to pay sally $44,000 and let Sally pay $30,000 out of _that_? Or is
he just whining?

~~~
noodle
just whining. he could, instead, hire freelance or contract workers. he won't
have to pay much to the government, he'll just have to pay the contractor
double what he pays Sally.

~~~
mattm
I don't know how it works in the US. In Canada, if a business hires someone on
contract but they are not in an "arms-length" transaction (ie. the
'contractor' is working in their office, using their equipment for more than a
'temporary' period of time), then the Canadian Revenue Agency can force the
business to re-classify them as an "employee" causing both the person and
company to pay back-taxes and any penalties.

~~~
noodle
i honestly don't know the details of the current US laws, but i do know that
i've worked in a team with reasonably permanent, in-house contractors before.

~~~
e40
And that company was likely breaking the law in the state in which they
operated. If CA, MA, WA, or most others.

CA and many other states are now going after companies that hire contractors
to do the work that is usually done by employees (and they use their own
definition of "employee", too). They will hit you with fines and back
employment taxes should you be audited. How would you be audited? A contractor
files for unemployment, to which they are not entitled (because unemployment
taxes are not paid for them). It happens all the time.

------
gahahaha
What total utter crap. Taxes is the price you pay for a civilized society, and
the US has far less taxes that most western countries, and as a result is
arguably less civilized. Millionaires whining to other millionaires in the
WSJ. Spare me.

~~~
jswinghammer
He has to make the calculation about hiring people. If he doesn't feel
comfortable hiring he shouldn't. Why do you feel as though you're in a
position to tell him what his reasons are or should be?

Taxes take money out of the private sector and thus reduce the pool of capital
for private sector job creation. Our taxes go to fund bankers and wars. That's
why we're in such bad shape. If they went to build roads and bridges no one
would care so much.

~~~
jbooth
Yeah, except he's not actually calculating. He's just delivering a pre-
scripted rant with a little argument to authority, "I make hiring decisions".
Great, I feel better.

He's paying almost as much for his end of the health insurance as the total
tax take. What's he whine about? Taxes. Who's providing more bang for the
buck, the health insurance company or the relevant federal, state and local
governments? Does he have kids in school?

Does this guy even look at his own numbers?

~~~
gahahaha
I would be very surprised if his kids go to a state school with the plebs.

~~~
roboneal
Whether his kids go to "state school" or not, he is still taxed as if they
did.

~~~
jbooth
And here we find the real complaint. His tax burden compared to his health
insurance is probably much higher.

------
kgrin
It's interesting how his private insurer raising rates is obviously
"ObamaCare"'s fault. Like all businesses, insurers raise prices because they
_can_ , thanks to market position, scarcity and all the other usual factors
(distorted, as the health insurance market is, by oligopoly-entrenching state
regulations that have little to do with the Affordable Care Act).

~~~
kgrin
To elaborate a bit - it just really struck me as bizarre that he's basically
giving his insurer a pass for raising his prices, because it's "business", and
business can do no wrong - as a fellow businessman, he understands the plight
of the insurance company. But all the money that's collected in taxes, in his
mind, goes into the black hole of Washington & Trenton - including not just
the somewhat-opaque things like income tax (which indirectly funds his and
Sally's roads, schools, police force and wars abroad) but things like
disability & unemployment insurance, which it seems like Sally might need if
he has a bad day.

~~~
jbooth
Welcome to the mind of the Republican.

This guy probably spent 8 years defending the Bush deficits and discovered he
was a fiscal hawk on January 29, 2009. Until 2016, that is, or earlier if he's
lucky.

~~~
jambo
To those upvoting this speculation about the author's frame of mind, why does
this add to the conversation? To my mind, it distracts from the argument by
focusing on the arguer. Is this TPM?

~~~
chc
Understanding the motivation behind irrational thinking usually requires some
degree of focus on the one doing the thinking.

And just for the record, I've been a registered Republican since I turned 18,
and I've also noticed this sudden surge of fiscal hawkishness in the party.
This isn't liberal bas talking.

This also isn't to say the guy is necessarily being disingenuous. Just that
somebody in his chain of trust is playing politics and that's causing him to
form opinions that aren't entirely rational.

------
btilly
The author has an agenda. However he also has a point.

During the Bush recovery there was much complaining about how salaries didn't
go up. Well it turns out that the amount spent by employers on employees did
go up at normal rates for a recovery. However increasing health care costs
absorbed that surplus, and employees did not directly see more. In fact
employees got moved to crappier plans and so saw less income.

It is too early to tell whether Obama's plan is going to cost us all more or
less than the distorted market has been costing. But it is certain that the
USA cannot long afford to let current cost trends continue unchecked.

------
paolomaffei
$74,000 to put $44,000 in Sally's pocket and to give her $12,000 in benefits.

Employees get to keep more the 75% of what the company spends for them? (56k /
74k) Employees in Italy and Scandinavia countries barely get 50% of what
companies pays them...

~~~
sciolistse
Yep, move to Sweden and he'd be shelling out some 90k to put $44000 in his
employees pockets (46% payroll tax, 5-15% social security, then 30% income tax
on that).. And then there's the 25% sales tax.

------
doki_pen
It's worse then outlined in the article. Sally also pays other taxes with her
"net" income. If she rents, her rent is certainly higher because of the
landlords property taxes. If not, she pays it herself. Then there is sales
taxes and excise taxes to may. Truth be told, of the money that the employer
pays to keep her employed, only a little more then half of it ends up in her
pocket.

Here is a huge _opinion_ that could be incorrect. Most people work for what
they need to live. If it becomes more expensive to live, Sally will want a
raise. If it's cheaper to live, she won't be so pissed when she doesn't get a
raise. The bottom line is all that matters to most people. Therefore, no
matter what taxes are created, purported to be income tax and what not, are
paid by businesses.

What does this mean in practice? It means that by having incoming taxes at
all, we are encouraging business to hire people outside of the US. The only
way to level the playing fields, as far as I can see, would be to shift the
taxes from income to sales. I don't know if that is plausible or not, but it's
the only way I can see the US government really encouraging job growth here in
the US. It would mean that no matter where your company does it's business, if
it uses the US market, it has to pay the piper, and would give a real shot to
US workers at competing with other world-wide workers.

~~~
rwl
Shifting taxes to sales, especially in a significant way, will just dampen
aggregate demand, and push us into a deeper and longer recession. (See a
comment I made here, on an article that didn't get any front-page time about
states looking to raise revenue by taxing online sales:
<http://news.ycombinator.com/item?id=1513784>)

An alternative solution is to tax the unused value of illiquid capital like
land. Unlike income and sales taxes, which act as _dis_ incentives on economic
exchange, this kind of tax acts as an incentive for exchange, production, and
employment: if you own capital which is not being put to use, this tax is
either an incentive to put it to use or to sell it to someone who will.

This isn't a new idea. It was put forward by Henry George in _Progress and
Poverty_ in 1879: <http://en.wikipedia.org/wiki/Progress_and_Poverty>
(Disclaimer: I haven't read the book, but I did buy it recently and it's on my
to-read list.)

~~~
Retric
This is actually the economic argument for low levels of inflation.

~~~
rwl
Can you elaborate, please?

~~~
Retric
It forces people to be more aggressive with their investments if they want to
maintain wealth. If your making 15% ROI each year 2% inflation is nothing, if
you make 2.5% ROI each year inflation is going to crush you. Now which one of
those people has demonstrated a better utilization of capital?

Consider property taxes: if your ranch makes 100k / year many people will
haply keep doing that for sentimental reasons, if however the land is worth 50
million and you need to pay 100k in taxes each year you will sell it to
someone who will use the resource more productively.

It also eats away at debt. So if say the housing market is under water
inflation is going to help people get out from their debt load.

PS: Or consider what happens with 20% deflation, what would you invest in?

~~~
rwl
Ah, I see: the argument is that we ought to try to maintain a little
inflation, but not too much, because it acts as an incentive for better
capital utilization.

Perhaps I'm being thick, but I'm still unsure: when you say, "Actually, this
is the argument for low inflation," do you mean that we should focus on
maintaining a low level of inflation _instead_ of taxing underutilized
capital? or _in addition_ to it? or that, in policy terms, they're two sides
of the same coin?

------
bryanlarsen
Sounds like he should move his company to Canada. He could replace $10,000 in
private health insurance with $5,000 in extra taxes.

~~~
btilly
Better yet, Canada has a balanced budget. The US situation gets even worse
when you add in unfunded future liabilities each year.

------
kgrin
Fair enough; perhaps we should make the system a bit more progressive. Perhaps
if FICA weren't capped at ~$100K, we could reduce Sally's share of the burden?
Or if we eliminated any number of corporate-tax loopholes, or agribusiness
subsidies, or defense spending, we could reduce personal income tax rates?

~~~
anamax
> Perhaps if FICA weren't capped at ~$100K, we could reduce Sally's share of
> the burden?

Are you planning to uncap benefits? If you do, Ross Perot gets $400k/year. If
you don't, rich people start caring about SS. Those are the reasons why Social
Security advocates used to like the cap. Were they wrong?

FWIW, SS payouts are very progressive. Folks on the low end get a reasonable
return on their contributions. Folks near/at the cap get a crappy deal. The
rich ones don't care because of the cap.

~~~
Retric
It's not a binary choice, you can have uncapped benefits hand Bill G 5 million
a year, and give them exactly as crappy a ROI as I get.

Edit: This would also really help out aging athletes / rock stars / actors who
make a lot of money when they are young and then run out.

~~~
anamax
> It's not a binary choice, you can have uncapped benefits hand Bill G 5
> million a year, and give them exactly as crappy a ROI as I get.

Crappy payout was assumed in the "Ross Perot gets $400k/year".

It has two huge political problems - folks will scream about large payouts to
rich folk and rich folk will fight the crappy ROI.

------
marcusbooster
You can read all about Michael Fleischer and his "re-building" of Iraq by
removing government subsidies to state owned businesses:
[http://www.guardian.co.uk/theguardian/2004/jan/17/weekend7.w...](http://www.guardian.co.uk/theguardian/2004/jan/17/weekend7.weekend6)

He's a neo-con of the highest order, so take his "Joe Biz" spiel with a grain
of salt, he certainly has an agenda.

------
DannoHung
How much money does Sally bring in to the company? The unexamined part of the
equation.

~~~
Roboprog
Exactly, if Sally only brings in $30K / yr, BYE BYE Sally! Otherwise, if she
allows the guy to bring in another $150K, the guy should quite whining and
hire a few more.

Never miss an opportunity for a good libertarian rant, though, at the Journal
I guess.

Oh, and it should have read: costs 74K to give her 56K in pay and benefits --
18K in taxes.

~~~
wccrawford
Sally may not bring in enough to cover her own pay. Instead, she might enable
someone else to bring that much in. You know, like programmers do.

~~~
DannoHung
So is she a force multiplier? Part of a tandem or group role? You can't just
say that she brings indirect revenue as an excuse for not discussing what she
adds.

------
sprout
The logical conclusion I get from this article is that if the government wants
to improve hiring, they should remove all income taxes on people making <$100k
a year, and tax business profits to compensate. Also increase taxes on those
making >$100k to discourage upper-middle class and uber-rich hiring.

I don't think that's the solution he's looking for, but I didn't hear him
offer one.

~~~
Lendal
The solution is for government to cut its spending. But that brings up an
interesting question. Has any government in history ever significantly cut its
spending and reduced its taxes for the long-term benefit of its people,
without a violent revolution?

~~~
sprout
It's clear that that would benefit the OP, but your assertion that it would be
to the long-term benefit of the people is completely opinion. You take any
piece of government spending and cut it, there's a rational argument as to why
cutting it would cause serious harm in the long term, and many of those
arguments are stronger than the reverse.

------
c1sc0
Taking home 66% after taxes / healthcare is considered normal in large parts
of the world, so why are Americans so much more likely to make a fuss about
it? [Edit: jswinghammer enlightened me below: "Our taxes go to fund bankers
and wars." That indeed may make a big difference. Over here in Europe I feel
most of my taxes do good, not evil. So I'm kinda ok with them.]

~~~
abalashov
That's exactly right. We don't get even a tiny fraction of what you get for
your ~50%+, or would get for ~35%.

------
DrJokepu
The OECD publishes an extensive comparison of tax burdens on wage income in
various OECD countries: <http://www.oecd.org/dataoecd/44/2/1942506.xls>

Some key numbers, at average wage: US 34.4%, UK 38.8%, Germany 63.3%, France
52.0%, Japan 34.2%, Hungary 71.5%

~~~
Ardit20
You get free health care in the UK though. Also, you pay much less for
university, well for now anyway. It used to be free only 4 years ago!

~~~
DrJokepu
Health care, etc. are indeed covered by taxes here in the UK, but the bottom
line adds up the same anyway.

Obviously, the services different countries "provide" for your income tax vary
by country; some countries provide "free" healthcare, some offer high (perhaps
sometimes too high) unemployment benefits, while others decide to wage wars
instead to protect their interests overseas.

------
jmcentire
This is a ridiculous article. By ignoring the reality and focusing on only a
small aspect of the economy, the author attempts to covey the idea that the
current tax structure is not only bad for business, but bad for employees.

The author suggests that his company pays $74,000 to get $44,000 into his
employee's, Sally's, pocket. The tone used implies that the other $30,000 is
purely a waste. The key point conveniently ignored, however, is where that
$30,000 goes. He mentions the abstract ideas of state and federal taxes,
unemployment insurance, disability insurance, Medicare, and Social Security.

If we assume the author would be happy eliminating all taxes and insurance
payments, we're left with a range of possibilities; he wants Sally to have
between $44,000 and $74,000. Considering the article's purpose is to suggest
he's not hiring because he doesn't believe Sally is worth $74,000 and we can
eliminate the high-end (let's take of the top 10% and put Sally's max at about
$66,000).

Starting from the $44,000 figure. $7,322 of that would have to go toward a
supplemental system for Social Security. It's not government backed and Sally
has to spend time managing her investments. As we've all recently learned,
even without making any mistakes herself, she stands to lose a lot of money if
the stock market fails. $1,712 would be spent on supplementing Medicare. The
$12,000 in benefits would have to come from somewhere, in this worst-case for
Sally, we'll take it out of her pocket. Without paying taxes, Sally must pay
however much the privatized school charges her. She must pay the privatized
police force to protect her. She must pay the privatized fire station in case
there is a fire. She'll pay tolls for every road she uses to get to and from
work. I'm sure the author enjoys the ability the company has to lay off
workers, so Sally will have to put back some money in case she becomes
suddenly unemployed or temporarily disabled. That's $275 for the author today
-- but Sally wouldn't have the benefit of a collective pool of funds, so she'd
have to build up a buffer very quickly. So far, we're well above $21,309 not
counting the costs to which we've failed to attributed any value (police,
fire, roads, schools, et cetera). Let's assume those and associated services
currently provided by the government are a very reasonable $8,691 per year
(many private schools would be beyond Sally's reach). Whereas the author would
save $30,000 to put the same $44,000 in Sally's pocket, just to maintain her
standard of living today, she would need to easily spend that $30,000 out of
her own pocket. Whereas the employer might then be willing to hire someone,
Sally wouldn't be willing to work. Well, actually, she wouldn't have any
choice but to work or die.

What about the magnanimous author who'll now pay Sally $66,000? Well, she'd
bring home $66,000 and immediately spend $30,000 to pay for all the gaps that
taxation left. Which means she'll effectively receive $36,000. That sucks for
Sally and distills the author's argument down to: he wants to place the burden
squarely on the shoulders of the workers so he can save money.

Obviously any employer will only spend as much on an employee as they make
from having hired that employee. So, either Sally creates $74,000 in wealth or
more OR she doesn't. That's the bottom line. Stop trying to blame taxation
when the reality of the proposed system merely punishes the employee to the
additional benefit (beyond the value already created by the employee for the
company) of the employer.

Also, please note the multitude of public services I failed to mention which
are supported with taxation. Research, universities, military, postal
services, social services, public health, water, sewage, oversight and
regulation... Without these, Sally's standard of living would likely be much
worse than it is today.

~~~
jmcentire
By the way, you ~could~ argue that Sally could get by with less money for
Social Security, Medicare, and benefits. It wouldn't work, though, as it would
be predicated on the idea that individual endeavors would be more sustainable
than large-scale investments among an aggregate population. Even if we opened
these services up for private enterprise, it's unlikely that they would
operate as efficiently or more than the government bodies. Some people take
that as a maxim, but they don't evaluate the services currently offered with
the appropriate considerations. The most notable of which is "Caveat Emptor."
Private enterprise can cut corners and save money, sure -- but someone's
paying the cost. In no research that I've seen do private industries
significantly out perform government institutions without a lot of cajoling
and numerical torture.

The postal service is a frequent scapegoat here. Yet, the price of a stamp has
been nearly constant when evaluated based on purchasing power and inflation.
Further, try doing a cost comparison between FedEx, UPS, and the USPS for the
same package. I've worked in shipping and receiving and both FedEx and UPS
have more than their fair share of delivery issues and damages. Yet, I get
bills and letters in the mail _very_ regularly and reliably. Go figure.

------
mkramlich
He lost credibility with me somewhat when he threw out the term Obamacare. I
think it's a tactic by the Right meant to be derogatory by implying that
somehow only Obama wanted it or designed it. In reality, many people
contributed to it and shaped it, and the majority of Americans polled wanted
major health care reform and the majority of Congress passed it.

That said, the OA author made points I agree with that it seems unfair and
inefficient to require businesses to perform tasks and provide services which
are unrelated to their core business, and arguably should be the
responsibility of individuals or the government. I hate the fact that
businesses are involved in providing health care for employees, it seems
horribly inefficient and out-of-place. Businesses should only pay cash to
employees, ideally, since that is most efficient and the most transparent and
ungameable. Employees should then get health care from the market and/or from
the government.

------
Tichy
Not from the US, but I don't understand his issues with taxes. What does
change for his company if Sally has to pay higher taxes? Wouldn't it just mean
that Sally ends up with less cash, not with his company having to pay more.

Is it mandatory now to offer health insurance to employees? How has this
system of companies arranging for the health insurance emerged? I can only
guess: providing health insurance is a way of giving employees a tax free
bonus (like a company car, or free food)?

~~~
rlpb
Presumably he is contracted to pay Sally $59,000 gross + some level of
benefits. But his costs to pay this are higher ($74,000). Presumably as taxes
rise, he will still have to pay Sally $59,000 gross + the same level of
benefits, and his own costs will have increased. He is unable to pass on the
full cost of a tax rise to Sally.

From what I understand, the health insurance situation has arisen due to
buying power. It is impossible for Sally to buy her own insurance at the same
rate that her company can do it (even ignoring any tax breaks).

~~~
Tichy
That could explain it, but it seems weird. In my country salary is usually
negotiated pre-tax, and I think in this case it makes sense.

But is there a law to set up salaries that way? He cites it as a reason for
not hiring, so presumably he could just negotiate salaries post-tax and do
away with the problem.

------
thentic
Poll - How many of you who have written comments have 1 or more employees?

------
abalashov
Perhaps due to my incessant optimism about people's reasonableness, the way I
understood the argument seems to me to be primarily about the regressive
character of the tax system. $59k/$44k just isn't that much anymore,
especially in a relatively high-cost area, and especially considering the
sources of cost inflation he identified.

But okay, $59k/44k is one thing. You want to talk about regressive taxes, tell
me why I have to pay nearly $2k to employ a part-time person who nets just a
little shy of ~$1400 (roughly ~$22k annual gross), and that's without any
benefits. Talk about a disincentive for job creation! I'd much rather pay my
part-time employee more of that ~$2k, and if I could, I would.

If I give him a $300 bonus one month, he's going to see about $180 of it if
it's run through the normal payroll withholding mechanisms. At that level of
income, that really is ridiculous.

------
seasoup
This seems like a lot of whining to me. 33% does not seem high for total taxes
for employment. That's the total that both the employee and employer pay
together. Sure, they could do more without having to pay that, but they also
wouldn't have, I don't know... roads, police, fire department, public
education, an army to protect them, etc. What percent do they think they
should be paying? Sounds like they think they should be entitled to get it for
free.

------
locopati
Point and counterpoint...

[http://motherjones.com/kevin-drum/2010/08/wall-street-
journa...](http://motherjones.com/kevin-drum/2010/08/wall-street-journal-
editorial-page-outdoes-itself)

------
mattmaroon
This is little but a thinly-veiled attack on Obama.

------
toxicflavor
Another explanation for why Bogen Communications is not hiring might have to
do with their declining financials:

<http://www.bogen.com/aboutus/financials/#historical>

~~~
ratsbane
Good observation. The decision to hire comes down to a very simple "will
hiring this person cause us to make more money than the person costs us." He's
blaming the cost side of the equation for all of the decision to not to hire.
He could just as easily blame himself for having failed to streamline his
company's old-school high-markup sales network.

