Well Obama is proposing to "give" $5000 in tax credits to small businesses that hire employees this year. Although the specifics have not been fleshed out it hasn't stopped me from analyzing how it will affect my business. To be honest I think the tax credits should go to companies that are already in the black. Why? Well if my business wasn't making money I doubt a $5000 tax credit would help much. Now if a business that's profitable gets the credit they can use the tax credit to increase their revenue exponentially.
For example, say a company is spending $10,000 per year on advertising and from those funds they can generate $100,000 in revenue. Now if they increased their marketing budget by 50%, theoretically they should be able to increase their revenue by 50% based on the additional advertising budget. So that $5000 credit created $50,000 in additional revenue and more jobs. They could also reduce the $30 billion budget for the program down to $15 billion and use the balance to pay down gov't debt. Which should be a win win for Republicans and Democrats. Now to be sure this is a simplistic example but I think the premise is sound.
Now take a business that is losing money. That $5000 will probably go toward keeping the lights on and paying back debt. This use of the credit will produce limited growth which is what the credit is suppose to produce.
For our pool company we'll probably use the tax credit to buy another truck and more targeted advertising. For our new business (if it qualifies)we'll use it to do trade shows, lead generating services, and direct marketing.
I welcome the opinions of those that differ in my views.
