Dear PBO #1 – Changing Behavior

Below is my letter to the President regarding the economy; it is in summary form.  To see full details click the Dear PBO page and go to the June 16 letter.

Dear Mr. President

By now I am certain you have been inundated with suggestions, advice, recommendations, etc. on how to improve our economy.  And you may think “oh here’s another” – but I would not be taking up my civic duty without expressing these thoughts. 

 Do know my objectives are not politically motivated and while I may agree or disagree with your policies, my advice is strictly business oriented.  So my fist bit of advice – stop throwing money at the economy.  Government spending is always needed at the time of an economic crisis to “keep people fed”.  It is always viewed by business people though, as short term, a band aid.  And while this was needed, it’s time to do what will really change the economy – change behavior.  Government spending does not change behavior or curb anxiety in the business world, it simply moves money around.  TAX CREDITS.

 Yes, tax credits are golden to business people and investors.  Example – repatriation of foreign profits.  It did not work in 2005 because it lacked an added motivator for businesses to hire.  Bad policy!  The assumption in 2005 was that companies would use their foreign profits, free from most taxes, to hire Americans – wrong!  Instead it should have been – bring your profits home, spend 50% of those profits on new hires for five years – pay NO tax.  Spend 70% of those profits on new hires (keeping them five years), pay no tax and get a 5% credit for the cost of new hires spread over five years.  Spend 100% of those profits on new hires, pay no tax and get a tax credit of 10% of the cost of the new hires spread out over five years.

 Don’t calculate the “losses” to the Treasury since, based on current tax laws, these profits are never coming home anyway.  So there is no loss to calculate and only gain – in employment, overall economic benefit and ultimately the tax revenues the Treasury thought it would lose and then some.

 These are bold and dramatic and require action on the part of business.  I had to search for the tax credit for investment in new business that was part of the 2010 Small Business Jobs Act, and will use it as part of an overall strategy for new businesses.  Sometimes you bury the “gold” too deep.

Thanks for the listen – until next time.

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