I thought LLCs were supposed to create thousands of new jobs in exchange for their tax break. What’s up with that?
First of all, there were 44,000 private sector jobs created in the first three years of tax reform (Bureau of Labor Statistics, average annual employment 2012 vs. 2015), and that number is net of job losses in oil & gas, aerospace and Sprint layoffs, all of which were unrelated to tax policy. But the notion than LLCs were supposed to create all the new jobs is a myth at best. Employers add staff to meet higher demand for their products and services, and that increased demand would primarily come from the tax breaks given to individuals.
The Department of Revenue shows that 29% of tax reductions are attributable exemptions on LLC pass-through income; the other 71% went to individuals, with marginal tax rates being 30% to 40% lower than in 2012. Some of that tax savings is spent in the local economy, which increases demand and eventually leads to more job creation. People spend their money wherever they choose; they don’t say ‘let’s go spend our money at an LLC!