Poor Decision Rules

I know that my previous post is going to have some detractors, so I've got this one in the can and ready to post immediately following. 

Consider the following situation:  You have $100.  I tell you that you can put this in a bank account, and by this time next year, you can have $100.05.  Or, you can put it in a higher yield bond and earn $105.  Or, you can go into a business venture and earn $120.  What are you going to do?  Unless you have decided to live off-grid in a self-sustaining agrarian commune that has no use for money, you'll pick the $120.  Now, I tell you that last year, your options were $100.05 for the bank account, $105 for the bond, or $130 for the business venture.  What is your decision?  Still the business venture, right?  Of course!  Because if you want to maximize your profits, the business venture is still the best decision!  You don't suddenly go, well, it was $130 last year, so I refuse to earn $120 this year.

So how do taxes really kill jobs?  I haven't figured this one out.

If you are one of the companies that claim that Obama's policies kill jobs, and vow to cut jobs because of the threat of higher taxes, you probably have a business that's on the ropes to begin with.  Looking at some of the companies whose CEOs have threatened this, it's pretty hard to see any of these companies actually having to really lay-off people because of an increase in taxes.  While Murray Energy and Westgate Resorts are private companies, Papa John's is a publicly traded company with profit margins of 10.58% in their 2011 Annual Report.  How much of an increase in taxes (payroll, income, etc.) would it really take for this rate to be so low that being in business is no longer the most profitable option for John? 

Take this one step further, if taxes rise for John, they are rising for every business and pizza chain.  So if Papa John's slips in profitability to 8%, it's a safe bet that all other businesses will have similar shifts downward.  The attractiveness of Papa John's as an investment stays at the same level relative to the other options that exist at that time.  If John is correct though, and the margin slips to nothing, then you wave to look at the other options for investing that are available.  Interest rates for bank accounts are practically nothing.  If companies are shedding jobs left and right, then they are not expanding, the demand for loans decreases, meaning that the interest rates on loans decrease.  Even a 3-4% margin will be attractive to an investor.

However, you are assuming that profitability is a result of attracting investors.  From a labor standpoint, if a company can be more profitable by hiring more workers, it hires more workers.  If a company can be more profitable by hiring fewer workers, it hires fewer workers.  What it doesn't do, or rather should do, is think that a 5% increase in taxes for the majority owner means a retaliatory layoff of 5% of the workforce.  The stockholders sure as heck should keep the CEO in check if he really thinks that's a good decision rule.