Join Early Retirement Today
Reply
 
Thread Tools Search this Thread Display Modes
Old 08-05-2011, 04:00 AM   #21
Thinks s/he gets paid by the post
 
Join Date: Jan 2006
Posts: 1,012
Quote:
Originally Posted by ERD50 View Post
I just can't see trying to derive anything from such a small sample with such a complex system.

And who can say that the last round of tax cuts didn't help to stimulate the economy? The economy isn't a laboratory where we can run two separate experiments and see the effects.

I think I made this analogy earlier, but I have great certainty that adding insulation will reduce my energy usage for the year. But there are a lot of variables, the weather can change, I can have more/less people in the house with different schedules, and the price of energy can change. So if I add insulation, and my bill does not go down, does that 'prove' that adding insulation is 'bad' for my energy usage? No, my bill would have been even worse w/o the insulation. So I can have a relative improvement over what might have been, even if it is negative in absolute terms in real life. Tax rates could be the same way, and we could have been even worse in the 2000's with higher taxes, or not. But it doesn't hold that because the economy was bad that it 'proves' lower taxes are 'bad' for the economy.

-ERD50
to which a response i have already made applies

Quote:
Originally Posted by jdw_fire View Post
... it is funny that when i have pointed out times where there was economic growth in the US after tax increases (eg. during the clinton administration) or the converse that tax cuts didnt produce growth (eg. g. w. bush administration) there is always the response that there are so many things in the economy that can influence the growth i am not allowed to make a cause/effect argument of higher taxes to higher growth. therefore why should you be allowed to make a cause/effect argument of lower taxes to higher growth?
...
so therefore it doesnt hold that tax cuts or low income taxes are good for a nation's economy either.
__________________

__________________
jdw_fire is offline   Reply With Quote
Join the #1 Early Retirement and Financial Independence Forum Today - It's Totally Free!

Are you planning to be financially independent as early as possible so you can live life on your own terms? Discuss successful investing strategies, asset allocation models, tax strategies and other related topics in our online forum community. Our members range from young folks just starting their journey to financial independence, military retirees and even multimillionaires. No matter where you fit in you'll find that Early-Retirement.org is a great community to join. Best of all it's totally FREE!

You are currently viewing our boards as a guest so you have limited access to our community. Please take the time to register and you will gain a lot of great new features including; the ability to participate in discussions, network with our members, see fewer ads, upload photographs, create a retirement blog, send private messages and so much, much more!

Old 08-05-2011, 07:46 AM   #22
Give me a museum and I'll fill it. (Picasso)
Give me a forum ...
 
Join Date: Feb 2007
Posts: 5,072
Quote:
Originally Posted by ziggy29 View Post
Let's just say this -- in terms of tax cuts and economic recovery, I think in the Reagan years it worked (or at the very least, appeared to work).... .

That is what you are told by some who want people to believe it.

Govt spending remained high... They just spent the FICA income! Taxes did not get cut... the people that paid the taxes (to support the govt spending back then changed).

Govt ramped up spending. Remember Star Wars and Spending the Soviet Union into the ground!

The big change was Paul Volcker (and finally the politicians) being willing to move interest rates up (first) to break inflation... which had a painful effect of creating a recession. Of course there was a recovery.

Some believe Volcker actions were Keynesian.... not what was labeled as Reaganomics (supply side).

Spending just shifted. The fuel crisis was over and SDI was on. I can remember some of Carter's Energy Related Programs being shutdown and new ones like SDI replacing it.
__________________

__________________
chinaco is offline   Reply With Quote
Old 08-05-2011, 08:29 AM   #23
Give me a museum and I'll fill it. (Picasso)
Give me a forum ...
 
Join Date: Sep 2005
Location: Northern IL
Posts: 18,264
I'll address the other responses later, but for now...

Quote:
Originally Posted by ERD50
I just can't see trying to derive anything from such a small sample with such a complex system.
Quote:
Originally Posted by jdw_fire View Post
to which a response i have already made applies


so therefore it doesnt hold that tax cuts or low income taxes are good for a nation's economy either.
Please note that I didn't try to make the case that it 'proves' the opposite either. I said, "I just can't see trying to derive anything from such a small sample with such a complex system."


That's why I'm trying to stick to numbers to illustrate this, which I'll get back to later.

-ERD50
__________________
ERD50 is offline   Reply With Quote
Old 08-05-2011, 08:58 AM   #24
Give me a museum and I'll fill it. (Picasso)
Give me a forum ...
 
Join Date: May 2005
Posts: 13,263
I will go to a very micro level...

I know that my boss will not invest in his company with higher taxes... he is already planning for the tax increase when the Bush/Obama tax cuts expire in 2013... and he is trying to maximize profits NOW....


Another flaw that I see is that it assumes that the person will sell the business to get that (what you claim) increased value from investing... most people don't sell their business....

I am curious.... do you REALLY believe what you are saying If so, then you are like my friend who thinks the gold standard would actually matter and no amount of words would change your mind....
__________________
Texas Proud is offline   Reply With Quote
Old 08-05-2011, 09:43 AM   #25
Thinks s/he gets paid by the post
 
Join Date: Aug 2006
Posts: 1,356
Of course, right after Ronald Reagan said that, he went out and implemented policies that would have been almost exactly what Keynes would have recommended.

Deficit spending will tend to juice economic activity in the short term. Is there anyone who actually disagrees with that?

Note that good Keynesian economics would have the government paying back the debt accumulated during a recession in the next boom.

To my knowledge, we've never actually tried that.


Quote:
Originally Posted by veremchuka View Post
Keynesian economics, an abject failure.

"Free market capitalism is the best path to prosperity" as Larry Kudlow says every evening and I agree. On Jan. 20, 1981 Ronald Reagan said "In this present crisis, government is not the solution to our problem; government is the problem." and I agree with that also.

It's almost 2 am and I'm too tired to read beyond the op's comments but I will next time I come here.



__________________
Hamlet is offline   Reply With Quote
Old 08-05-2011, 09:55 AM   #26
Give me a museum and I'll fill it. (Picasso)
Give me a forum ...
Midpack's Avatar
 
Join Date: Jan 2008
Location: Chicagoland
Posts: 11,968
jdw_fire: Don't agree with you, so considering the thread from just a few days ago "The Rich Should Pay Their Fair Share", exactly how much would you propose increasing personal tax rates on high income earners? Please be specific, how much more punitively "progressive" should tax rates be in your view?

And if you're talking those above $250K/yr, it doesn't even come close to resolving the issue alone.

Quote:
I saw the chart below, which is supposed to be from IRS numbers in 2008. I also keep hearing on the news that the "rich" should have to pay their fair share as a way to get us out of the debt/deficit crisis. From the data alone, it would seem to me that this is already happening and how much more progressive can we get with the tax code and still have some semblence of an "ownership" culture in this country?

The top 5% of all taxpayers (income split on this group was at $159,619 in 2008) paid 58.72% of all federal individual income taxes in 2008.

Let's continue to break this down:

Top 10% (Income Split Point $113,799) Paid 69.94% of Federal Individual Income Taxes
Top 25% (Income Split Point $67,280) Paid 86.34% of Federal Individual Income Taxes
Top 50% (Income Split Point $33,048) Paid 97.30% of Federal Individual Income Taxes
Bottom 50% (Anyone Making Less Than $33,048) Paid 2.7% of Federal Individual Income Taxes
__________________
No one agrees with other people's opinions; they merely agree with their own opinions -- expressed by somebody else. Sydney Tremayne
Retired Jun 2011 at age 57

Target AA: 60% equity funds / 35% bond funds / 5% cash
Target WR: Approx 2.5% Approx 20% SI (secure income, SS only)
Midpack is offline   Reply With Quote
Old 08-05-2011, 09:58 AM   #27
Give me a museum and I'll fill it. (Picasso)
Give me a forum ...
FinanceDude's Avatar
 
Join Date: Aug 2006
Posts: 12,484
Some of us are self-employed, and think we are taxed enough right now. All that will happen is the govt raises taxes is I will spend less. Multiply that by millions of others, and the problem gets worse.

Still trying to wrap my head around raising taxes now that we ar either in or teetering on the brink of a double dip recession. A lot of problems could be fixed if we got about 5 million people back to work!!!
__________________
Consult with your own advisor or representative. My thoughts should not be construed as investment advice. Past performance is no guarantee of future results (love that one).......:)


This Thread is USELESS without pics.........:)
FinanceDude is offline   Reply With Quote
Old 08-05-2011, 10:27 AM   #28
Give me a museum and I'll fill it. (Picasso)
Give me a forum ...
 
Join Date: Sep 2005
Location: Northern IL
Posts: 18,264
Quote:
Originally Posted by ERD50 View Post
So how can higher income tax rates motivate one to invest (compared to lower income tax rates, not compared to lower cap gains rates), when the result is less money in the pocket? That's not usually a motivator. Can you present numbers where it would do so?
Quote:
Originally Posted by jdw_fire
i did address your numbers but since you dont think i did let me give you another example, 1 from the residential real estate business. ... when adding a bedroom to a house the owner can expect the value of the house to go up by about 80% of the cost of the remodel. ... for the real estate business person who plans to flip this house, ... but now s/he is in the 50% tax bracket, it makes sense to invest in this remodel because the owner only has to pay 50% of the cost of the remodel (the government pays the rest in refunded tax money)
When I gave my numbers, I said ' I don't think the average business in the US can turn investment into cap gains year after year. ', however, real estate did come to mind. But how much of the US economy is built on people who will be flipping real estate in the near term? Not enough to make a material impact on the current economy, I would think. Regardless, I believe your example is ignoring an important part of the equation when you say the owner only has to pay 50% of the cost of the remodel . The RE owner needs cash flow to live on. In Case H he has 1/3rd less money for living expenses. So lets look at it from a cash flow to cover living expenses view:

------, ------, ----PreTax , ----ReInvest, ----Taxable, ----Tax, ----TakeHome
Case H --50.00% --$1,000,000 --$500,000 --$500,000 --$250,000 --$250,000
Case L --25.00% --$1,000,000 -- $666,667 --$333,333 ---$83,333 --$250,000


So to maintain $250,000 in after tax income, in Case H, the business owner can only afford to re-invest $500K, while in Case L he can re-invest $667K. If $250K in take home is too 'rich' for you, we could scale these down, but the effect is the same.


I also don't know enough about Commercial Real Estate tax laws to know that capital improvements are deducted as an 'expense'. googling.... Tax Deductions For Rental Property Owners

Quote:
A repair keeps your rental property in good condition and is a deductible expense in the year that you pay for it. Repairs include painting, fixing a broken toilet and replacing a faulty light switch. Improvements on the other hand, add value to your property and are not deductible when you pay for them. You must recover the cost of improvements by depreciating the expense over your property's life expectancy. Improvements can include a new roof, patio or garage.
So I don't think your example, as narrow as it is, holds even in the narrow case.

sorry if this cross posted with other replies, it took me a while to get this written and formatted (I need a 'tables' lesson)

-ERD50
__________________
ERD50 is offline   Reply With Quote
Old 08-05-2011, 11:28 AM   #29
Give me a museum and I'll fill it. (Picasso)
Give me a forum ...
 
Join Date: May 2005
Posts: 13,263
Sometimes when a situation is presented I like to use an extreme example...


You are a business owner.... what will you do IF:

They raise the tax rate to 100%

Lower the tax rate to 0%




I think the first one you stop investing... (heck, you move to another country)

The second one you now can invest where it makes the most sense...


Another problem is that the examples given are only US... there are other countries that have lowered taxes and had economic growth.... but even then you can not have a pure cause and effect...
__________________
Texas Proud is offline   Reply With Quote
Old 08-05-2011, 12:14 PM   #30
Thinks s/he gets paid by the post
 
Join Date: Jan 2006
Posts: 1,012
Quote:
Originally Posted by Texas Proud View Post
I will go to a very micro level...

I know that my boss will not invest in his company with higher taxes... he is already planning for the tax increase when the Bush/Obama tax cuts expire in 2013... and he is trying to maximize profits NOW....
thank you very much, you have just supplied an example that supports what i have been saying. your boss is maximizing profits (and therefore, by definition, not plowing that profit back into his company i.e. he is not investing in his company) during a time of low tax rates and, by your statement, he is doing it because of tax rates (both current and anticipated tax rates). this, obviously, specifically supports my arguement that business owners will adjust the profit they make based on current and expected tax rates. there are 2 ways for them to adjust profit, 1) invest back into their business, thus changing the profit into an expense or 2) cut back on the amount of business they do (i.e. cut revenues). it makes more sense to me that they will do 1).

Quote:
Originally Posted by Texas Proud View Post
Another flaw that I see is that it assumes that the person will sell the business to get that (what you claim) increased value from investing... most people don't sell their business....
actually i didnt make the assumption that most people would sell their businesses, what i did was show that the additional investment in their businesses (that was a response to higher top tax rates) would make them richer because the value of their business rose. to show that they were better off financially in that case i made a hypothetical sale of the business. i dont think the majority of small business owners will sell their profitable businesses.

Quote:
Originally Posted by Texas Proud View Post

I am curious.... do you REALLY believe what you are saying If so, then you are like my friend who thinks the gold standard would actually matter and no amount of words would change your mind....
lets not start with personal attacks. if you dont want to continue in this discussion just stop posting but please dont say something that will get the moderators to lock this thread.
__________________
jdw_fire is offline   Reply With Quote
Old 08-05-2011, 12:21 PM   #31
Give me a museum and I'll fill it. (Picasso)
Give me a forum ...
 
Join Date: Feb 2007
Posts: 5,072
Quote:
Originally Posted by FinanceDude View Post
Some of us are self-employed, and think we are taxed enough right now. All that will happen is the govt raises taxes is I will spend less. Multiply that by millions of others, and the problem gets worse.

Still trying to wrap my head around raising taxes now that we ar either in or teetering on the brink of a double dip recession. A lot of problems could be fixed if we got about 5 million people back to work!!!
No one wants to pay more taxes.

Yes 5M back to work would help.... but that will not be enough either.

The prescription is going to be: You will pay more taxes (so will I). You will get a haircut on your SS and Medicare (So will I). It is the Middle Class Pays Solution.


One thing that could be done to cut spending and probably save alot of money without reducing the real outcome is... real reform to our healthcare system. If you will notice 2 (now 3) of the big hitters are Medicaid, Medicare, [Health Care Reform Act] Plus every govt employee and retirees health care expenditure from their retirement systems. That is a lot of money.

We spend quite a bit more than any other country in the world and have higher mortality rates... If we could cut 25% (just an example) of that (every year)... that would be a huge savings. But that would mean big changes. The cost could be dramatically reduced, provide care to people who need it and are frozen out of it and still give people with the means... the ability to have a little more flexibility. But there is a powerful lobby against it.

The problem is that some people do not want to change (out of fear... by the fear mongers... and in many cases not willing to compromise and accept adjustments). Ultimately, it would take a national healthcare system.

BTW -- it would be good for business also.... they would not have that burden show up directly on their financial statements.

But... most people seem to want someone else to bear the brunt of more taxes or cuts to things that do not affect them (be it special tax incentive or a reduction of spending by govt).
__________________
chinaco is offline   Reply With Quote
Old 08-05-2011, 12:30 PM   #32
Give me a museum and I'll fill it. (Picasso)
Give me a forum ...
 
Join Date: Sep 2005
Location: Northern IL
Posts: 18,264
Quote:
Originally Posted by chinaco View Post
No one wants to pay more taxes.

Yes 5M back to work would help.... but that will not be enough either.

The prescription is going to be: You will pay more taxes (so will I). You will get a haircut on your SS and Medicare (So will I). It is the Middle Class Pays Solution.
There are a number of threads on the deficit and SS, etc.

I think jdw_fire is trying to focus this one on his specific proposal - that increasing taxes would motivate additional economic growth through increased capital investment.

-ERD50
__________________
ERD50 is offline   Reply With Quote
Old 08-05-2011, 01:01 PM   #33
Thinks s/he gets paid by the post
 
Join Date: Jan 2006
Posts: 1,012
Quote:
Originally Posted by Midpack View Post
jdw_fire: Don't agree with you, so considering the thread from just a few days ago "The Rich Should Pay Their Fair Share", exactly how much would you propose increasing personal tax rates on high income earners? Please be specific, how much more punitively "progressive" should tax rates be in your view?

And if you're talking those above $250K/yr, it doesn't even come close to resolving the issue alone.
i made the following suggestion in another thread (Let's Tax The Rich!!!) so for consistancy sake i will just copy it here but that isnt to say i have put alot of thought (not to mention zero analysis) into that answer.

Quote:
ok, how bout this:
1) repeal the Bush tax cuts for incomes over $200k for singles and $250k for married
2) a new bracket at $600k income with a rate of 47%
3) a new bracket at $1M income with a rate of 55%

and while we are at it lets remove the cap on FICA and put another knee in the the computation of benefits formula: only 5% of the average monthly wages above the $9k/mo level get added in the benefits formula
__________________
jdw_fire is offline   Reply With Quote
Old 08-05-2011, 01:05 PM   #34
Give me a museum and I'll fill it. (Picasso)
Give me a forum ...
 
Join Date: Feb 2007
Posts: 5,072
Quote:
Originally Posted by ERD50 View Post
There are a number of threads on the deficit and SS, etc.

I think jdw_fire is trying to focus this one on his specific proposal - that increasing taxes would motivate additional economic growth through increased capital investment.

-ERD50

Oops your right.


BTW - He is correct... it can work in the short-term. But (IMO) not for the long term. It can get things started.

If... money that would otherwise be saved (hoarded.. out of fear), is put into circulation actually spent on capital projects... it can work. But... it would would only prime the pump for (hopefully) additional business growth.


Example: Roads and Bridges. Puts people to work. A lot of capital investment and jobs created... creates a spending cycle in the private sector (contractors).

Right now businesses are hoarding money! They are waiting till they see business opportunities that they are highly confident will yield a positive outcome. IOW - Fear Rules.

Hopefully the gov capital expenditure would allay some of those fears by creating business opportunities for certain private business... they would spend and hire.. the businesses they consume goods and services from would spend and hire and the upswing would sustain for a business cycle.

Not perfect... but it does work.

But... the govt seems to borrow the money instead of raising taxes... or should I say raise the taxes immediately.
__________________
chinaco is offline   Reply With Quote
Old 08-05-2011, 01:22 PM   #35
Thinks s/he gets paid by the post
 
Join Date: Jan 2006
Posts: 1,012
Quote:
Originally Posted by FinanceDude View Post
Still trying to wrap my head around raising taxes now that we ar either in or teetering on the brink of a double dip recession. A lot of problems could be fixed if we got about 5 million people back to work!!!
i agree that getting 5 million people back to work would fix alot of problems. just as an aside, when i 1st suggested the thought that raising taxes would produce job/economic growth, our economy appeared stronger and there was little talk of heading into a double dip recession.

i think now ("we ar either in or teetering on the brink of a double dip recession") is also a bad time to be considering government spending cuts. i have stated earlier that the government could stimulate alot of jobs if it would fix our aging infrastructure and then, at least, our country would have something substantial to show for that government spending/stimulus plus there would be real jobs created.

another problem with trying to balance the budget in this economy on spending cuts alone is that when the government cuts spending it is taking money out of the pockets of the poor and middle class. these people would probably spend all the money they get from the government. however when you give (or continue) tax cuts for the higher income people they dont spend anywhere near all of it, instead some of that money will go into the stock/bond markets (i have talked earlier why i dont think putting money in the stock/bond markets will produce economic/job growth). soo, between the 2, government spending produces more of an immediate economic stimulus than lower tax rates.
__________________
jdw_fire is offline   Reply With Quote
Old 08-05-2011, 01:26 PM   #36
Give me a museum and I'll fill it. (Picasso)
Give me a forum ...
Midpack's Avatar
 
Join Date: Jan 2008
Location: Chicagoland
Posts: 11,968
Quote:
Originally Posted by jdw_fire View Post
i made the following suggestion in another thread (Let's Tax The Rich!!!) so for consistancy sake i will just copy it here but that isnt to say i have put alot of thought (not to mention zero analysis) into that answer.

ok, how bout this:
1) repeal the Bush tax cuts for incomes over $200k for singles and $250k for married
2) a new bracket at $600k income with a rate of 47%
3) a new bracket at $1M income with a rate of 55%

and while we are at it lets remove the cap on FICA and put another knee in the the computation of benefits formula: only 5% of the average monthly wages above the $9k/mo level get added in the benefits formula
By be specific, I meant what would the revenue increase be (compared to the deficits we face)? If you're going to make a proposal, shouldn't you also do the math to see what impact it would have? Or do you think the rich should just be taxed more because "it seems fair."

I did the math in an earlier thread too Let's Tax The Rich!!! and taxing the rich alone won't get us anywhere near closing the deficit. I wholeheartedly agree Soc Sec, Medicare, Defense and Revenue/Tax Increases have to be on the table, I think we should all have to make sacrifices (rich included).

If the (as you can easily verify) "Top 10% (Income Split Point $113,799) Paid 69.94% of Federal Individual Income Taxes" - just how much more do you think they should pay on behalf of the other 90% without asking any more of the other 90%. Do you want the top 10% to pay 100% of the taxes (I am sure you don't)?
__________________
No one agrees with other people's opinions; they merely agree with their own opinions -- expressed by somebody else. Sydney Tremayne
Retired Jun 2011 at age 57

Target AA: 60% equity funds / 35% bond funds / 5% cash
Target WR: Approx 2.5% Approx 20% SI (secure income, SS only)
Midpack is offline   Reply With Quote
Old 08-05-2011, 01:48 PM   #37
Thinks s/he gets paid by the post
 
Join Date: Mar 2010
Posts: 1,648
Quote:
Originally Posted by FinanceDude View Post
Some of us are self-employed, and think we are taxed enough right now. All that will happen is the govt raises taxes is I will spend less. Multiply that by millions of others, and the problem gets worse.

Still trying to wrap my head around raising taxes now that we ar either in or teetering on the brink of a double dip recession. A lot of problems could be fixed if we got about 5 million people back to work!!!
+1
As a small business owner there is more I could say but this overall issue is far too complicated to reasonably get across other than to say what FinanceDude said.

But I will say that All sub S owners are responsible for the tax on profits. The tax bill is due regardless of what happens to the rest of the profit. So in the case of sub s owners...45% of the profit HAS to be distributed to the owners so the owner can turn around and give it to the government. Understand? They have made no money here.
Why 45% of the profit? Because in a lot of cases with multiple owners with income from their own independent careers any K1 income screws around with their tax bracket forcing them to pay overall at a higher level.

It also is not true that small business owners are not buying equipment. The 179 expense allows us to depreciate,up to a certain level, those expenses in 1 year rather than the say 29 years. So perhaps it is more that the depreciation of equipment, etc above the 179 expense takes, literally, forever....that is the disincentive ...especially for the smaller businesses and start ups. But it is also why the government has upped the level of the 179 expense in the last several years. It is an incentive...to buy equipment ...NOW..and reduce the taxable profit line.


Our current payroll and employee benefit package....is 1.9 times our profit line. (and rising...I might add). All due to CPI adjustments, minimum wage increases, merit pay, 401K matches, profit sharing for our employees, SSN, FICA and healthcare costs. And it won't be long before the rubber may meet the road. The ONLY way for a small business owner to delay this ..is for sales to increase. Tough, tough thing to do in this economy. Our own sales have decreased 20% since the financial crisis and we consider ourselves lucky. Some have shut their doors.

For those that want to take away deductions and incentives from small businesses...those that help us actually "reduce" the profit line by putting money back into our companies and employees.....well....all I can say at first blush.....is just stand back and watch...the businesses close and more employees on the street and higher unemployment.

Guess I said more than I thought I was going to...
__________________
sheehs1 is offline   Reply With Quote
Old 08-05-2011, 02:01 PM   #38
Thinks s/he gets paid by the post
 
Join Date: Jan 2006
Posts: 1,012
Quote:
Originally Posted by ERD50 View Post
When I gave my numbers, I said ' I don't think the average business in the US can turn investment into cap gains year after year. ', however, real estate did come to mind. But how much of the US economy is built on people who will be flipping real estate in the near term? Not enough to make a material impact on the current economy, I would think. Regardless, I believe your example is ignoring an important part of the equation when you say the owner only has to pay 50% of the cost of the remodel . The RE owner needs cash flow to live on. In Case H he has 1/3rd less money for living expenses. So lets look at it from a cash flow to cover living expenses view:

------, ------, ----PreTax , ----ReInvest, ----Taxable, ----Tax, ----TakeHome
Case H --50.00% --$1,000,000 --$500,000 --$500,000 --$250,000 --$250,000
Case L --25.00% --$1,000,000 -- $666,667 --$333,333 ---$83,333 --$250,000


So to maintain $250,000 in after tax income, in Case H, the business owner can only afford to re-invest $500K, while in Case L he can re-invest $667K. If $250K in take home is too 'rich' for you, we could scale these down, but the effect is the same.
if you look closely at my suggestions to raise the tax rates it is to raise the tax rates of the higher tax brackets. when you factor this in the business owner will be paying the same amount of tax on the 1st $200k/$250k of income so therefore the higher tax rates would apply only to profits/incomes above this level. only then will these higher tax rates start to provide the incentive i suggested.

Quote:
Originally Posted by ERD50 View Post


I also don't know enough about Commercial Real Estate tax laws to know that capital improvements are deducted as an 'expense'. googling.... Tax Deductions For Rental Property Owners



So I don't think your example, as narrow as it is, holds even in the narrow case.

sorry if this cross posted with other replies, it took me a while to get this written and formatted (I need a 'tables' lesson)

-ERD50
what isnt expensed would be capital and therefore could be depreciated (creating an expense) and taxed as CG. granted it depends on the way the business is run.

however, i gave that example to try and point out to you (and others) that some investments in businesses can be either good or not good (and therefore done or not done) depending largely (maybe solely) on the tax rates. and this statement doesnt just apply to a real estate business.
__________________
jdw_fire is offline   Reply With Quote
Old 08-05-2011, 02:03 PM   #39
Give me a museum and I'll fill it. (Picasso)
Give me a forum ...
 
Join Date: May 2005
Posts: 13,263
Quote:
Originally Posted by jdw_fire View Post
thank you very much, you have just supplied an example that supports what i have been saying. your boss is maximizing profits (and therefore, by definition, not plowing that profit back into his company i.e. he is not investing in his company) during a time of low tax rates and, by your statement, he is doing it because of tax rates (both current and anticipated tax rates). this, obviously, specifically supports my arguement that business owners will adjust the profit they make based on current and expected tax rates. there are 2 ways for them to adjust profit, 1) invest back into their business, thus changing the profit into an expense or 2) cut back on the amount of business they do (i.e. cut revenues). it makes more sense to me that they will do 1).



actually i didnt make the assumption that most people would sell their businesses, what i did was show that the additional investment in their businesses (that was a response to higher top tax rates) would make them richer because the value of their business rose. to show that they were better off financially in that case i made a hypothetical sale of the business. i dont think the majority of small business owners will sell their profitable businesses.



lets not start with personal attacks. if you dont want to continue in this discussion just stop posting but please dont say something that will get the moderators to lock this thread.

You misunderstand my point about my boss.... he is investing NOW to get profits NOW since he will be able to keep them... he will be cutting back when taxes become higher... this is not supporting your argument... (actually, we will probably be cutting back before that because business is just not there, see below)....

I did not say people do not make decisions because of tax policy... almost everbody does... I am just saying your logic is backwards from what I have learned and seen in my life... I have never met a person who has said 'wow, taxes are going up so I need to invest more in my business'....

Making a business more valuable is not the only thing that a business owner wants... especially a small business person.... they want take home pay... higher taxes hit their take home pay... so they have to figure out a way to make more money... you seem to think that there are customers that are not being served and all a business person needs to do is spend more money and WHAM, they get more profit... in our company, it is starting to look like 2012 will be like 2008... customers are drying up... they are not spending... we will have to give huge discounts to get a few... I just don't see where higher taxes will get someone to invest when there are no customers (or less demand than it has been... look at retail sales etc. etc.... it just does not compute)....


My last question is not a personal attack... I am just trying to see if this is an interesting discussion for you or you take this as a truth... IOW, no matter what anybody says you will believe that raising taxes will stimulate investment.... as I said, I had a friend who really really believed in the gold standard and a professor told me that no matter what proof was given, he would not change his mind and trying to do so was a waste of time....
__________________
Texas Proud is offline   Reply With Quote
Old 08-05-2011, 02:19 PM   #40
Give me a museum and I'll fill it. (Picasso)
Give me a forum ...
 
Join Date: May 2005
Posts: 13,263
Quote:
Originally Posted by jdw_fire View Post
i agree that getting 5 million people back to work would fix alot of problems. just as an aside, when i 1st suggested the thought that raising taxes would produce job/economic growth, our economy appeared stronger and there was little talk of heading into a double dip recession.

i think now ("we ar either in or teetering on the brink of a double dip recession") is also a bad time to be considering government spending cuts. i have stated earlier that the government could stimulate alot of jobs if it would fix our aging infrastructure and then, at least, our country would have something substantial to show for that government spending/stimulus plus there would be real jobs created.

another problem with trying to balance the budget in this economy on spending cuts alone is that when the government cuts spending it is taking money out of the pockets of the poor and middle class. these people would probably spend all the money they get from the government. however when you give (or continue) tax cuts for the higher income people they dont spend anywhere near all of it, instead some of that money will go into the stock/bond markets (i have talked earlier why i dont think putting money in the stock/bond markets will produce economic/job growth). soo, between the 2, government spending produces more of an immediate economic stimulus than lower tax rates.

Just respoding to your last point about cuts... the cuts that were just passed are back ended... there are very very few cuts next year... so, unless you think this recession will be going on for a good number of years the cuts are not during the recession...
__________________

__________________
Texas Proud is offline   Reply With Quote
Reply


Currently Active Users Viewing This Thread: 1 (0 members and 1 guests)
 
Thread Tools Search this Thread
Search this Thread:

Advanced Search
Display Modes

Posting Rules
You may not post new threads
You may not post replies
You may not post attachments
You may not edit your posts

BB code is On
Smilies are On
[IMG] code is On
HTML code is Off
Trackbacks are Off
Pingbacks are Off
Refbacks are Off


Similar Threads
Thread Thread Starter Forum Replies Last Post
Size Of Government - What Do We Really Want? cb7010 FIRE Related Public Policy 183 07-20-2011 08:55 AM
jobs news July 8--losing government jobs palomalou FIRE Related Public Policy 72 07-12-2011 07:31 PM
State Income Tax Strategy - CA and WA Da Nag FIRE and Money 8 07-05-2011 05:29 PM
How Much Can I Withdraw from Trad IRA and Pay No Income Tax? kelso FIRE and Money 10 07-05-2011 08:44 AM

 

 
All times are GMT -6. The time now is 01:33 AM.
 
Powered by vBulletin® Version 3.8.8 Beta 1
Copyright ©2000 - 2017, vBulletin Solutions, Inc.