How Do Business Taxes Impact the Job Market?

There are some states that are trying to make it easier for businesses to survive. These states either offer little or no corporate taxes. This can save businesses thousands of dollars each year. In turn, those businesses can hire more people, which can, in theory, improve the job market. But does it? The truth is there are many factors that affect the job market, but business taxes can be a huge factor.

Higher Business Taxes Can Drive Businesses Away

Why would a business choose to stay in a state that charges 8% corporate taxes on businesses when they could move to the next state over and pay 0-percent? From a financial standpoint it seems to only make sense to pack up and move the business. Many businesses will only consider the ability to save thousands off their taxes and not how it may truly affect their business. Regardless, states with lower or zero corporate taxes may be home to more businesses.

Lower or No Additional Business Taxes Can Increase Jobs

Because states that offer lower or not additional business taxes have more businesses, they may also have more jobs. States that offer these tax incentives are better suited for economic growth and thus more jobs. When a business has more money, they can hire more people. It’s that simple, but it isn’t that straightforward.

There Are More Factors Than Just Business Taxes at Play

There’s more to business success and economic growth than just taxes. For example, a business would obviously do better in a bustling city than one that has less than 1000 residents. A business that setup in New York City would make more money and need more employees than a business in Lincoln, Nebraska, if they had the right target market. In other words, just because a company has the ability to see more money at the end of the month doesn’t mean they make enough money to justify hiring more employees. There has to be enough money coming in despite everything else.

Statistics have stated that states that have lower or no additional business taxes do have more jobs available. Reported information has shown that states with higher income taxes on businesses suffer when it comes to employment. States that have recently seen tax hikes are experiencing higher rates of unemployment. So, in a way, taxes do have a lot to do with the amount of jobs available. Still, there’s much more to it than that. A state may have zero additional tax on businesses, but may have such a poor economy that the businesses can’t be successful and thus can’t hire more employees. As with most things in business, the answer isn’t always black or white.