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Old 09-09-2010, 10:21 AM   #41
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Originally Posted by Texas Proud View Post
We have gotten onto taxes more than what I think the OP wanted... but I will throw in an issue that seems to be left out...

My boss is one who makes over the $250K... and guess what... he says all the time he gets screwed... he had people do research for the research credit... but did not get to use them because after a SMALL amount of credit he hit the AMT tax... IIRC, he has over $60K of credits that he can not use...

So, any tax break they come up with, he will not do anything because HE will not get the benefit of it... you will need to change the AMT before someone like him will do anything...
I agree if you work for a mega corp making 250k or even 400k that most tax credits will NOT apply to you.

I do not think the tax credits should apply- your boss has the security of megacorp and makes a great income.

Take a small business owner which has about 250k or 400k of profit (income) each year. If that small business owner wants to make more money, they need to either
a) do more work themselves
b) have more passive income
c) hire someone to do some work (whether full time, part time, consulting or similar)

What gets the economy going is c), meaning that if that small business owner had $80k tax on that 250k profit, (33% tax), if that tax is reduced 15k or so, to where the business owner could choose to "expand" business by hiring another person for that 15k for some part time work, that does wonders to get economy going.

If that business owner just banked the 15k, then probably not, but most business owners will do little things to expand business if their "risk" is low.

Risk meaning if $1000 of profit is made, will owner keep $500 of that or less than that? Based on Fed tax+State tax+ insurance fees+medicare tax and similar will most of profit come back to business owner, or will various entities taking their cut make the investment in HIRING help not worth the risk.

My wife consults for small businesses and her fiscal year starts Oct 1. The upcoming fiscal year is probably going to be worst on record for her (even worse than 2008). Many small businesses which kept cash on hand to sustain business thru a down turn have now run out of cash.
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Old 09-09-2010, 04:42 PM   #42
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Originally Posted by Texas Proud View Post
My boss is one who makes over the $250K... and guess what... he says all the time he gets screwed...
I wonder if he would prefer to live in a 'gated community', clutching a pistol and afraid to go out at night. As Oliver Wendell Holmes Jr. put it, “I like to pay taxes. With them I buy civilization."
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Old 09-09-2010, 05:21 PM   #43
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Originally Posted by Milton View Post
I wonder if he would prefer to live in a 'gated community', clutching a pistol and afraid to go out at night. As Oliver Wendell Holmes Jr. put it, “I like to pay taxes. With them I buy civilization."

It's all a matter of degrees. But I don't think that ...
Quote:
In 2001 ... the highest quintile, which in total earned 52.4% of all income and paid 82.5% of federal income taxes. The fourth quintile earned 20.7% and paid 14.3%. The third quintile earned 14.2% and paid 5.2%. The second quintile earned 9.2% and paid 0.3%. The lowest quintile earned 4.2% and received a net 2.3% from the federal government in income "credits".
Try that condensed:

Code:
Top Quint - 52.4% of all income;  paid 82.5% of FIT.
4th Quint - 20.7% and paid 14.3%. 
3rd Quint - 14.2% and paid 5.2%.
2nd Quint -  9.2% and paid 0.3%.
Low Quint -  4.2% and received a net 2.3%
exactly paints a picture of a condition of feudal Lords and peasants with pitchforks.

-ERD50
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Old 09-09-2010, 05:54 PM   #44
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Originally Posted by jIMOh View Post
In my state (Ohio) consider the following from a "self employed" person making 500k before taxes

off the top is
35% fed tax
5.5% Ohio tax
6.2% SS tax (employee)
6.2% SS tax (employer)
1.45% medicare tax (employee)
1.45% medicare tax (employer)

The fed tax bill alone is $175,000 if I did that math right
just drop that tax to 32%.

If that person can hire a contractor for $15,000 to make him more money, then the government wins...

They can tax the 15.3% socialist taxes again AND a small amount of federal taxes, plus take one person off the unemployment payroll.

If there are 60 million people on unemployment payroll, can we drop taxes on the the 60 million richest people, in hopes they hire someone to make them more money?

I am being faced with this decision now- at one point do I hire someone to help me make more money? If I make 120k now, would I hire someone to earn me 15k more money? Maybe. 20k? almost. 30k? for sure.

If the tax I was paying at 120k was lower, the probability I would hire someone to help is higher (because I get to keep more of it and break even points are lower- so it lowers my risk).
We must think differently. If I understand the situation correctly, I'm a business owner who is netting $500k before tax, with a marginal tax rate of 44%. I can hire someone who'll add (making numbers up) $60k of revenue and $45k of (all in) expenses, so I net $15k. Would I hire that person knowing that $6,600 of my $15,000 will go to the gov't? Of course, why not? My after tax $8,400 > 0, it's extra money.

I don't see why your "breakeven point" moves because of the tax. If marginal revenue > marginal cost, I make an after tax profit regardless of the tax rate (unless taxes > 100%).

I don't see why higher taxes increase my risk. If I guessed wrong and this employee only generates $30k of marginal revenue, I lose $15k before tax. But, that reduces my taxable income by $15k, so the gov't picks up $6,600 of my loss. Higher taxes buffer my gains/losses on both the up and down side, I don't call that "higher risk".

Maybe most important in terms of public policy: If there are really customers out there willing to spend $60k on my products, and I decide not to hire the employee, they'll just go to one of my competitors. In that case the employee is hired by someone else and the economy gets the job anyway.
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Old 09-09-2010, 05:57 PM   #45
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Originally Posted by ERD50 View Post
It's all a matter of degrees. But I don't think that ...


Try that condensed:

Code:
Top Quint - 52.4% of all income;  paid 82.5% of FIT.
4th Quint - 20.7% and paid 14.3%. 
3rd Quint - 14.2% and paid 5.2%.
2nd Quint -  9.2% and paid 0.3%.
Low Quint -  4.2% and received a net 2.3%
exactly paints a picture of a condition of feudal Lords and peasants with pitchforks.

-ERD50
1) income taxes are only part of the tax equation.
.

I
"It is true that the U.S. tax and benefit system is does far less than other OECD welfare states to change the Gini coefficient after taxes-and-transfers. Before taxes-and-transfers, as Tom Schaller usefully explains, the U.S. Gini coefficient is 0.46, just above the OECD average of 0.45. Italy, Germany, and France are more unequal than the U.S. before taxes and transfers.
But after taxes-and-transfers, the U.S. is tied for most unequal with Portugal at 0.38"

From that well known commie rag the national review

Does Paul Krugman Understand Net Tax Rates? - The Agenda - National Review Online

Now when the lords merciful of the national review look at the poor here is what they claim

"If you receive more in benefits than you pay in taxes, I’d say you’re getting a pretty good deal. If you’re paying more in taxes than you’re receiving in benefits, well, that’s less true."

So if you are starving and have nothing and you get a dollar and pay no taxes you have a "pretty good deal"

What lord could have said it better?
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Old 09-09-2010, 06:19 PM   #46
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We rob banks tax "the rich" because that's where the money is...

The topic is "stabilize the debt", which, in my view, will require everyone to hold their noses, and accept less goverment/more taxes. There is no other feasible way to get the deficit/debt under control.

It's too big...
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Old 09-09-2010, 06:28 PM   #47
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The topic is "stabilize the debt", which, in my view, will require everyone to hold their noses, and accept less goverment/more taxes. There is no other feasible way to get the deficit/debt under control.
Correct - there is no magic.
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Old 09-09-2010, 06:51 PM   #48
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Correct - there is no magic.
Yaaay!
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Old 09-10-2010, 10:26 AM   #49
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Originally Posted by Independent View Post
We must think differently. If I understand the situation correctly, I'm a business owner who is netting $500k before tax, with a marginal tax rate of 44%. I can hire someone who'll add (making numbers up) $60k of revenue and $45k of (all in) expenses, so I net $15k. Would I hire that person knowing that $6,600 of my $15,000 will go to the gov't? Of course, why not? My after tax $8,400 > 0, it's extra money.

I don't see why your "breakeven point" moves because of the tax. If marginal revenue > marginal cost, I make an after tax profit regardless of the tax rate (unless taxes > 100%).

I don't see why higher taxes increase my risk. If I guessed wrong and this employee only generates $30k of marginal revenue, I lose $15k before tax. But, that reduces my taxable income by $15k, so the gov't picks up $6,600 of my loss. Higher taxes buffer my gains/losses on both the up and down side, I don't call that "higher risk".

Maybe most important in terms of public policy: If there are really customers out there willing to spend $60k on my products, and I decide not to hire the employee, they'll just go to one of my competitors. In that case the employee is hired by someone else and the economy gets the job anyway.
The break even point is about risk and reward. If the cost of hiring help is 15k (my example) or 45k (your example) there is risk.

Risk that the person takes business away
risk that person might have to collect unemployment if things go bad
risk that person might go on disability and require certain benefits to be paid

In return for taking on those risks, I expect a return. Taxes influence the ROI. Is it worth those risks to add $8400 (your example) to the 500k I already earned?
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Old 09-10-2010, 10:47 AM   #50
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The break even point is about risk and reward. If the cost of hiring help is 15k (my example) or 45k (your example) there is risk.

Risk that the person takes business away
risk that person might have to collect unemployment if things go bad
risk that person might go on disability and require certain benefits to be paid

In return for taking on those risks, I expect a return. Taxes influence the ROI. Is it worth those risks to add $8400 (your example) to the 500k I already earned?
the hypothetical said "expenses are all in" which elimiantes the 2nd 2

What is
"Risk that the person takes business away"?
not objecting, simply not understanding
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Old 09-10-2010, 10:49 AM   #51
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Originally Posted by jIMOh View Post
I agree if you work for a mega corp making 250k or even 400k that most tax credits will NOT apply to you.

I do not think the tax credits should apply- your boss has the security of megacorp and makes a great income.

Take a small business owner which has about 250k or 400k of profit (income) each year. If that small business owner wants to make more money, they need to either
a) do more work themselves
b) have more passive income
c) hire someone to do some work (whether full time, part time, consulting or similar)

What gets the economy going is c), meaning that if that small business owner had $80k tax on that 250k profit, (33% tax), if that tax is reduced 15k or so, to where the business owner could choose to "expand" business by hiring another person for that 15k for some part time work, that does wonders to get economy going.

If that business owner just banked the 15k, then probably not, but most business owners will do little things to expand business if their "risk" is low.

Risk meaning if $1000 of profit is made, will owner keep $500 of that or less than that? Based on Fed tax+State tax+ insurance fees+medicare tax and similar will most of profit come back to business owner, or will various entities taking their cut make the investment in HIRING help not worth the risk.

My wife consults for small businesses and her fiscal year starts Oct 1. The upcoming fiscal year is probably going to be worst on record for her (even worse than 2008). Many small businesses which kept cash on hand to sustain business thru a down turn have now run out of cash.

You got me confused with someone else.... My boss is a small business owner... 22 people in our company...
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Old 09-10-2010, 10:52 AM   #52
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I wonder if he would prefer to live in a 'gated community', clutching a pistol and afraid to go out at night. As Oliver Wendell Holmes Jr. put it, “I like to pay taxes. With them I buy civilization."

He actually has a farm as his second business... and yes he has guns...

And you missed my point... They talk about 'cutting taxes' and giving credits to small business owners... but IF that person can not take the credit... then why give them He did what he was supposed to, hire people for research, etc. etc... but when it came time to get the benefits that the gvmt said he would... NADA... sorry, you have to pay AMT and you do NOT get the benefit that we told you you would get... sorry....
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Old 09-10-2010, 11:04 AM   #53
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He actually has a farm as his second business... and yes he has guns...

And you missed my point... They talk about 'cutting taxes' and giving credits to small business owners... but IF that person can not take the credit... then why give them He did what he was supposed to, hire people for research, etc. etc... but when it came time to get the benefits that the gvmt said he would... NADA... sorry, you have to pay AMT and you do NOT get the benefit that we told you you would get... sorry....
No. I think you missed the point. We are supposed to pay taxes without complaint as the price of civil order. What--did your boss think that was his money?

AMT is just one "gotcha". With phase-outs, tiny niche requirements ("must hire only someone who has been unemployed for XX weeks to get the credit. . . and be sure to document that!), targeted industries, etc, it's a lot to ask a small business owner who's actually busy trying to make money to study all the hoops and play the game. That's why these pinpoint rifle-shot programs (targeted to this or that favored constituency) accomplish so little compared to a more broad-based pullback of the grasping hand of government.
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Old 09-10-2010, 11:17 AM   #54
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No.I think you missed the point. We are supposed to pay taxes without complaint as the price of civil order. What--did your boss think that was his money?

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Old 09-10-2010, 11:47 AM   #55
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Anyone who thinks they can "Make it on their own" without that nasty awful government can just invest in Afghanistan. It's a paradise for those who want to be free of government regulations.
Again, it's a matter of degrees. It's a false argument to say that someone who wants a less intrusive and better government would be in favor of NO government.

And I always have to wonder why someone would resort to a false argument... then again, I don't really wonder at all, I think it's obvious why they do it.

edit/add: Or using the "two can play that game" approach - I assume that since you favor higher taxes, you would be in favor of 100% tax rates - confiscate everything anyone makes and let the government decide how to spend that money for them. Yeah, that's the ticket!

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Old 09-10-2010, 12:33 PM   #56
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Anyone who thinks they can "Make it on their own" without that nasty awful government can just invest in Afghanistan. It's a paradise for those who want to be free of government regulations.
So, you believe in the European way of socialized government? Most rational folks recognize the need for SOME govt, they just have a problem with the "we're from the govt and we're here to help"........
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Old 09-10-2010, 01:07 PM   #57
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So, you believe in the European way of socialized government? Most rational folks recognize the need for SOME govt, they just have a problem with the "we're from the govt and we're here to help"........
Of course, the problem with that theory is that the small-government crowd has controlled the Presidency for much of the past 30 years, and had a majority in Congress for much of that time, too, and really didn't shrink the government, or reduce the deficit/debt. In fact, many think that the balance was tilted toward the well-off, to the detriment of the less well-off.

That everyone has all of a sudden gotten religion since Obama took office is both amusing and annoying...
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Old 09-10-2010, 01:22 PM   #58
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Of course, the problem with that theory is that the small-government crowd has controlled the Presidency for much of the past 30 years, and had a majority in Congress for much of that time, too, and really didn't shrink the government, or reduce the deficit/debt. In fact, many think that the balance was tilted toward the well-off, to the detriment of the less well-off.

That everyone has all of a sudden gotten religion since Obama took office is both amusing and annoying...

Hey... I wanted them to cut gvmt... they were stupid and did not... got voted out also... good....


NOW, maybe the next group will actually CUT spending and not go back to 'we spend more on what we want and less on what they want' type of politics.... but alas, I will probably be watching this group just like the last...
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Old 09-10-2010, 02:20 PM   #59
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NOW, maybe the next group will actually CUT spending and not go back to 'we spend more on what we want and less on what they want' type of politics...
Having been through this particular fire drill before, I'm not planning on holding my breath. I'll vote, but my expectations are, well:
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Old 09-10-2010, 02:52 PM   #60
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So, you believe in the European way of socialized government? Most rational folks recognize the need for SOME govt, they just have a problem with the "we're from the govt and we're here to help"........
So do you believe in personalizing discussions after making an abusive characterization of the other party?
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