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Old 08-05-2011, 02:23 PM   #41
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Originally Posted by Texas Proud View Post
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...
nice example but it doesnt say anything about what happens inbetween those 2 end points. if you are suggesting that business owner behavior will be a "linear" function between those 2 end points i would suggest that is not correct. i think the [top tax rates] vs [investment in your personal business] curve will look more like the [tax rates] vs [tax revenue] curve (however investment wont go to zero at the zero tax rate), then it would look linear.
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Old 08-05-2011, 02:35 PM   #42
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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)?
midpack, i have made my position on how to balance the budget clear on other threads (briefly: spending cuts and tax increases mainly focused on the high income earners)

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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
i thank erd50 for trying to keep this thread on course
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Old 08-05-2011, 03:01 PM   #43
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even though your post starts out like you are disputing my position ...

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+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.
you then come around to provide supporting arguments to my position, see below.

however before i move on to that let me say that if the small business invests more of its profits into equipment or hires more employees it will reduce the total profit and therefore reduce the size of that distribution. what i am saying is that if the top tax rates were higher then it is likely that these small business owners would look for more ways to invest that profit back in the company just to reduce the actual tax bite.

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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...
basicly you just said that investment in small business by the owners and employing people by small business is (at least partly) dependant on the tax code. it isnt big leap to see that the tax rates also play a role and a higher top tax rate will get small business owners to look for more ways to shelter that income, an easy way to do that is to just buy equipment or hire employees. of course doing such will probably need to make economic sense for the small business. however digging deeper, looking at an investment that makes sense when the top tax bracket rates are higher may not make sense at lower tax rates. i am suggesting that there are plenty of these kind of investments and therefore higher top tax rates will induce these investments.
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Old 08-05-2011, 03:41 PM   #44
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I don't see the relationship between taxes and growth. As long as taxes stay within a certain range which includes those in place during the 90s , I am not sure there is a direct relation between taxes and economic growth.
Growth is related to aggregate demand. Increasing demand, either internal or external, is the only way to grow. Taxes have no impact on external demand and little direct influence on internal demand. Taxes shift demand between different constituencies but neither increase nor decrease aggregate domestic demand. Business invest not because of tax rates but because there is unsatisfied demand that they can satisfy and make a profit.

So, can anyone point to some hard, non-partisan evidence that taxes cause growth to increase or decline?
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Old 08-05-2011, 03:41 PM   #45
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midpack, i have made my position on how to balance the budget clear on other threads
I did a search on your username and skimmed thru several threads, but I don't find it. In which thread do you answer how much more progressive tax rates should be, the top 10% are already paying almost 70% of all US Income taxes - how much more should the "rich" pay in your view?
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Old 08-05-2011, 03:54 PM   #46
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Originally Posted by jdw_fire View Post
even though your post starts out like you are disputing my position ...



you then come around to provide supporting arguments to my position, see below.

however before i move on to that let me say that if the small business invests more of its profits into equipment or hires more employees it will reduce the total profit and therefore reduce the size of that distribution. what i am saying is that if the top tax rates were higher then it is likely that these small business owners would look for more ways to invest that profit back in the company just to reduce the actual tax bite.



basicly you just said that investment in small business by the owners and employing people by small business is (at least partly) dependant on the tax code. it isnt big leap to see that the tax rates also play a role and a higher top tax rate will get small business owners to look for more ways to shelter that income, an easy way to do that is to just buy equipment or hire employees. of course doing such will probably need to make economic sense for the small business. however digging deeper, looking at an investment that makes sense when the top tax bracket rates are higher may not make sense at lower tax rates. i am suggesting that there are plenty of these kind of investments and therefore higher top tax rates will induce these investments.
I will say that you have a unique way of looking at that world. As Sheehs pointed out and something that you got wrong in your initial points, business don't have the ability to magically eliminate or even defer taxes on profits by reinvesting. Best case they can reduce the current tax bill by investing capital equipment and R&D which they can depreciate over several years.

However, what you are missing in your suggestion in that higher tax rate will encourage small business to reinvest is that business don't invest based on how much taxes they save, but on the likely after tax return. A higher tax rate by definition decrease the expected return.

Secondly it isn't just capital that small business owners invest, but time and stress. Say you have a $5 million dollar/year business. You have opportunity to invest $1 million in some new employees and equipment in a new related product line. You estimate over 4 year period there is 1/3 chance of utter failure, 1/3 chance of getting your money back and 1/3 chance of making $3 million. This provides an expected ROI of 14% and is probably worth doing. If the tax rate is 25% the ROI drops to 10%, still interesting, at 50% tax rate the ROI is 7% and many entrepreneurs will decide that it just is not worth the risk and the stress. It is better just to spend more time with the wife and kids, so the investment never gets made.
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Old 08-05-2011, 04:07 PM   #47
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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...

the above seems inconsistant with below. what really appears to be happening in your boss' business is he will be cutting back due to fewer customers and not due to rising taxes. given this and the fact that appearantly you currently still have customers, your boss is investing now to get profits now because he see this drying up of customers and not due to potential tax changes.

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)....
however i will suggest to you that the lower the after tax cost of an investment/employee the more likely a small business owner will make that investment or hire an employee or not fire an employee (all other things being equal)


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Originally Posted by Texas Proud View Post
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'....
i find it hard to believe you have not seen people looking for ways to reduce their income taxes back when the top rates were higher. see also raise income tax bracket rates to create economic/job growth

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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...
it doesnt look like you have considered
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Originally Posted by jdw_fire View Post
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.
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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....
i am not locked into my idea and would change my mind if a sufficient argument was made. i havent read 1 yet though. and yes, i do think it makes for an interesting discussion.

an aside: wow, answering all these posts is alot of work! and it doesnt help when i am just about done with an answer (like the 1 above) and i get bounced off the internet and i lose all that work.
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Old 08-05-2011, 04:27 PM   #48
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I did a search on your username and skimmed thru several threads, but I don't find it. In which thread do you answer how much more progressive tax rates should be, the top 10% are already paying almost 70% of all US Income taxes - how much more should the "rich" pay in your view?
if you think i have a detailed plan for taxation and government spending for the US, i am sorry to disappoint you but i dont. if it was my job to figure out something (i.e. i was president or even a member of congress) then i have ideas (some of which i have shared here) i would investigate and flesh out, but until then, they are ideas.

BTW, just how much of the total national income does the top 10% of earners make? and now if you postulate that all income earned by a given person/household over the median income in the US is discressionary, how much of the discressionary income in the US is earned by the top 10%? this last computation should show you how much more able the top 10% are to pay higher taxes (and frankly, how much less of a burden paying taxes is on them).
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Old 08-05-2011, 04:39 PM   #49
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even though your post starts out like you are disputing my position ...



you then come around to provide supporting arguments to my position, see below.

however before i move on to that let me say that if the small business invests more of its profits into equipment or hires more employees it will reduce the total profit and therefore reduce the size of that distribution. what i am saying is that if the top tax rates were higher then it is likely that these small business owners would look for more ways to invest that profit back in the company just to reduce the actual tax bite.



basicly you just said that investment in small business by the owners and employing people by small business is (at least partly) dependant on the tax code. it isnt big leap to see that the tax rates also play a role and a higher top tax rate will get small business owners to look for more ways to shelter that income, an easy way to do that is to just buy equipment or hire employees. of course doing such will probably need to make economic sense for the small business. however digging deeper, looking at an investment that makes sense when the top tax bracket rates are higher may not make sense at lower tax rates. i am suggesting that there are plenty of these kind of investments and therefore higher top tax rates will induce these investments.
I can't agree with you JDW. I was not saying what you have interpreted me to say. Higher tax rates will not induce business owners to invest more into their companies whether it is equipment or employees...because they do not know what the future holds for their business. There is a fine line. Let me ask you....why would a small business owner invest more into their business in this economic climate if their sales are not growing(or even with flat sales) and IF there is a risk the company may not make sustainable profit or may go bankrupt or they have to shut their doors? They would have made a poor investment. Think about that one for a bit.

Would you throw money at something you are not fairly certain about? It's about confidence. So no...it's not all about tax policy. Most small business operate on a year by year basis. They either make it or they don't.
If our own business had a terrible year or a disaster (which has never happened in our 55 year history but easily could) we would probably close our doors. What you are not factoring in...is the huge financial risks small businesses take year after year after year. But perhaps I'm off thread topic at this point since your thread was about taxes.

In order for a small business owner to feel confident doing what you suggest, they have to have confidence in the tax policy, the government and the economic environment. None of that exist today in this business climate.
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Old 08-05-2011, 05:01 PM   #50
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however i will suggest to you that the lower the after tax cost of an investment/employee the more likely a small business owner will make that investment or hire an employee or not fire an employee (all other things being equal)




i find it hard to believe you have not seen people looking for ways to reduce their income taxes back when the top rates were higher. see also raise income tax bracket rates to create economic/job growth



it doesnt look like you have considered




i am not locked into my idea and would change my mind if a sufficient argument was made. i havent read 1 yet though. and yes, i do think it makes for an interesting discussion.

an aside: wow, answering all these posts is alot of work! and it doesnt help when i am just about done with an answer (like the 1 above) and i get bounced off the internet and i lose all that work.

I just don't get your first point.... charging higher taxes does not make an employee cheaper to hire or not fire... you have to have income to offset that expense.... if there is not income it does not matter what tax rate you have....

Since I was a tax accountant back when taxes were high (and I bet you were not)... I can tell you that they did a LOT of stupid things to try and reduce their taxes.... cattle feeding comes to mind quickly... investing in real estate at highly inflated prices was another... oil wells were popular in Texas...

But I also saw the opposite.... there were many times I did estimated taxes on business decision and the taxes were too high for the business to do what it wanted... many investments were not made because of high taxes... one very rich guy had many opportunities to sell some banks that he owned... and it would have helped out the communities they were in if they were sold.... the cap gain tax back then was high and he decided it was not worth selling since his after tax return was so poor... so I am not talking from ignorance here... I did the work 30 plus years ago for many taxpayers.... and I still have not heard any businessman say he would invest if there were higher tax brackets...

Now, the 179 writeoff is a different animal... you are going to invest in some equipment either this year or next (or even next).... but if you invest this year you get a 100% deduction on your investment (note, not 100% of the cost, but 100% deduction)... you make it because you need that equipment... but do you invest in equipment that you do not need to reduce your taxes I have not heard of anybody doing that...


And you have not addressed the theme that a lot of people have pointed out that without demand there is nothing to invest in... demand needs to go up and higher taxes will not increase demand... heck, there is plenty of evidence that lower taxes will... have you seen what happens when they have a sales tax holiday Lots of people go to the stores to save a whopping 7 to 10%.... even when the store was giving a 30% reduction a few weeks earlier and not getting those same people...


Another example of someone that will not change their belief is the people who think that the earth is only 6,000 years old... (if you do, great... not trying to get a flame here... just saying)... the evidence is strong they are wrong, but they think the bible says it is so it is.....



And I have been there when you lose a long post... sorry to hear...
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Old 08-05-2011, 05:01 PM   #51
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I will say that you have a unique way of looking at that world. As Sheehs pointed out and something that you got wrong in your initial points, business don't have the ability to magically eliminate or even defer taxes on profits by reinvesting. Best case they can reduce the current tax bill by investing capital equipment and R&D which they can depreciate over several years.
there are ways to spend money and expense said money in the same year. advertising and labor costs are but 2. an increase in either will probably create job(s).

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However, what you are missing in your suggestion in that higher tax rate will encourage small business to reinvest is that business don't invest based on how much taxes they save, but on the likely after tax return. A higher tax rate by definition decrease the expected return.

Secondly it isn't just capital that small business owners invest, but time and stress. Say you have a $5 million dollar/year business. You have opportunity to invest $1 million in some new employees and equipment in a new related product line. You estimate over 4 year period there is 1/3 chance of utter failure, 1/3 chance of getting your money back and 1/3 chance of making $3 million. This provides an expected ROI of 14% and is probably worth doing. If the tax rate is 25% the ROI drops to 10%, still interesting, at 50% tax rate the ROI is 7% and many entrepreneurs will decide that it just is not worth the risk and the stress. It is better just to spend more time with the wife and kids, so the investment never gets made.
1st) i know that some small businesses do consider tax rates when considering what to do with their profits. in fact, it seems kind of imprudent to not consider the tax consequences when deciding what to do with a companies profit.

2nd) it seems to me that you are considering the impact of taxes on the return side but not on the investment side, which frankly isnt fair. at a 50% tax rate, if the investment is taken from moneys that would be profits if said investment isnt made then the after tax cost of the investment is half what it would be in a 0% tax environment (relating to your 1st ROI number of 14%) and since the investment cost is halved as is the after tax return the true after tax ROI is still 14% even at the 50% tax rate, provided the tax rates dont change in that 4 year period. however i am suggesting that at lower tax rates there is a very real incentive to the small business owners to just bank the profits (thus paying the taxes but not making the investment).
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Old 08-05-2011, 05:20 PM   #52
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an aside: wow, answering all these posts is alot of work! and it doesnt help when i am just about done with an answer (like the 1 above) and i get bounced off the internet and i lose all that work.
Whenever I'm working on a longer post (too often!), I hit select-All-copy once in a while. At least the latest work is in your copy buffer (and I use a clip board manager that gives be a history of clippings).


In response to my actual $$$ examples:

Quote:
Originally Posted by jdw_fire View Post
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.
I have a hard time seeing how this would change anything. Higher marginal rates would just translate to X% effective rates, it all seems like a wash to me that would just complicate the math for no benefit. What's wrong with my 50% versus 25% and 15% cap gains rates for illustration?

I'm going to have to ask you to make your case with numbers as I did. I'm not following you.


Quote:
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.
But I don't see where it made the case, even for real estate. See my above comments.

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I will say that you have a unique way of looking at that world. ....

However, what you are missing in your suggestion in that higher tax rate will encourage small business to reinvest is that business don't invest based on how much taxes they save, but on the likely after tax return. A higher tax rate by definition decrease the expected return.
I think clifp said it well.


The following is why I'd like to see numbers laid out:

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Originally Posted by jdw_fire View Post
back when the top tax rates were higher there were seminars and courses teaching a major tax reduction play, which i dont see much of now that the top tax rate isnt so high.
This is pretty 'squishy'. How would we get real data on 'how many' tax reduction seminars there are then versus now, and who is to say anyone's observation of the number is correct. And it really isn't relevant to the OP. Trying to optimize taxes when rates are high does not mean those methods involve economic growth opportunities. As a simple example, for higher t ax brackets, municipal versus corp bonds may make sense. Has nothing to do with 'growth'.


Quote:
this tax reduction play was to start a small business and invest in it to create a tax write off by either expensing or capitalizing/depreciating that investment. if creating a non profitable business actually made sense from a tax perspective for tax payers in the top tax brackets why,
I'm not even sure this was a valid strategy at any time.


Quote:
if the top tax brackets were higher, wouldnt owners of successful/profitable small businesses who were in the top tax brackets be motivated to take would be profits and find some meaningful way to invest said profits in their business so as to not have to pay tax on a profit?
Maybe. Depends a lot on the specific situation, and whether it really moves the income to a lower tax bracket. As some of us have posted, it isn't so easy for an on-going business to turn income into cap gains. I don't think we can assume it can be done in the general case, unless you can show us how.


I'm not pointing out that last group to be critical - all I'm saying is that I'd like to see you put these thoughts into numbers that we can all evaluate. I think that is the best way for you to get your point across.

-ERD50
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Old 08-05-2011, 05:22 PM   #53
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if you think i have a detailed plan for taxation and government spending for the US, i am sorry to disappoint you but i dont. if it was my job to figure out something (i.e. i was president or even a member of congress) then i have ideas (some of which i have shared here) i would investigate and flesh out, but until then, they are ideas.

BTW, just how much of the total national income does the top 10% of earners make? and now if you postulate that all income earned by a given person/household over the median income in the US is discressionary, how much of the discressionary income in the US is earned by the top 10%? this last computation should show you how much more able the top 10% are to pay higher taxes (and frankly, how much less of a burden paying taxes is on them).
So this is just another soak the rich thread with no data based support on your part. Any further and a Moderator will (rightfully) zap me...
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Old 08-05-2011, 05:50 PM   #54
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Quote:
Originally Posted by jdw_fire
however i will suggest to you that the lower the after tax cost of an investment/employee the more likely a small business owner will make that investment or hire an employee or not fire an employee (all other things being equal)
I just don't get your first point.... charging higher taxes does not make an employee cheaper to hire or not fire...
I'm with Texas Proud in just not getting this, and it seems to be key to your position. Rather than repeat it, I think you're going to have to put it in numeric form.

I'll use an extreme 90% rate to illustrate - You seem to be saying that at 90% tax rates, each $ I take home is somehow 'worth less' to me, since it only represents 10% of the gross profit? But it's the only money I get to take home, it's very valuable to me! I do think you are missing the after-tax value of that money.

I think you have a number of steps to make your case:

A) That it is possible for most businesses to consistently (year after year) shift their income from a higher tax rate classification to a lower tax rate classification.

B) That this shift would generally result in economic/job growth.

C) That increasing the tax rates would create more of this activity than would occur at lower tax rates.

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Old 08-05-2011, 05:53 PM   #55
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So this is just another soak the rich thread with no data based support on your part. Any further and a Moderator will (rightfully) zap me...

sshhhhh!!!!

That other thread was closed and I don't know why. But I had a fair amount of work into that one and now this one, and I'd really like to see jdw_fire give his best shot at convincing me. Maybe I'm missing something - it wouldn't be the first time.

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Old 08-05-2011, 06:27 PM   #56
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No Research Needed!

I don't need to do any research! You don't need to do any research! Nobody needs to do no stinkin' research! Nobody needs to take any polls!

If I keep more of my own money I will use it in a manner that suits me. More than likely that means I save some (cash), I have some investments and I spend some. Ultimately I plan to spend it all at some point. My goal is not to stuff my mattress with money.

However, I don't want or need the government taking it away from me and redistributing it to somebody else. This is not intended to flame anyone and it's not intended to be political (although I guess it will be construed that way). If you let individuals have more of their money it will find its way to other people and thereby create jobs and our economy will be fine.

There are many day-to-day situations that we've all experienced in one way or another that indicate simply redistributing money by taxing one group in an effort to help another group does not work. Stop the madness - let me distribute my money as I see fit!
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Old 08-05-2011, 06:28 PM   #57
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Originally Posted by jdw_fire View Post
i am not locked into my idea and would change my mind if a sufficient argument was made. i havent read 1 yet though. and yes, i do think it makes for an interesting discussion.
So ..let's say husband owns a small business and the profit line is $250,000. Lets agree that 45% is paid out to husband as the tax portion he will send directly to the federal government...because wife works and their combined income is bumped to a higher tax bracket due to this sub s income. So he needs to allocate $112,000 of profit to tax. He now has available $137,500. If he retains that profit....the entry is to the Accumulated Adjustments Account. And there it sits.

If he hires an employee, the expense of that employee comes out of next years cash flow. It does not reduce the accumulated adjustment account.
So ...$137,500 remains in that account.

If he buys equipment..he can either pay cash or take out a loan. Regardless, the undistributed profit remains in the Accumlated Adjustment account.

If he buys land...same thing. The POINT is ....that the ONLY way to get it out of the Accumulated Adjustment account is to distribute it to himself. That's it. Nada. No other way. The Accumlated Adjustment accounts specific purpose is to "hold" undistributed profits.

So...let's say business owner ..does buy the land, hires the employee, buys equipment...etc.. Years down the road....he decides to distribute to himself the money that is in the Accumulated Adjustment Account but by this time it's one million dollars. He does it. BUT...because he had to buy that land, that equipment and hire that employee....he now needs to borrow...from the bank the money to pay himself the profits that he originally left in the company....and he bankrupts the company doing so. (or not - it depends)

I think you may not quite understand what happens...to profit money left inside a company. It doesn't go ...where you think it goes. Most everything else comes out of "cash flow". Period. Profit is Profit. Cash Flow is cash flow and they are 2 different animals.

Second point.
Same scenario as above. Husband business owner....decides that instead of leaving profit money in the company he distributes it to himself. Why not, he had to pay the tax on it already.? He does so for many years. Down the road, the company gets in trouble....and guess what...because said owner...distributed the profits to himself..he is now in a personal position to loan the company money so it can be saved. (without going to a bank who may or may not lend him money)
Had he not distributed the profits to himself..he would not have this option.

End of points.

Except to say that instead of the 1 million he had... due to gross taxation by the government he now only has $600,00 to save the company( or some other lower figure). Oh i know...i know....but he has $600,000 which is far more than others have. So instead of saving his company he keeps his $600,000 since it is not enough to save the company anyway, closes the doors and lays off all his employees, reduces income for all his suppliers and vendors ...etc. Stewardship falls off the cliff.
So who gets hurt in this scenario. Business owner? With any luck - no. Employees, Suppliers, Vendors and the community...that's who.

Third point...is the fine line between the "profits" a company makes and what they can spend out of cash flow. They have to be very careful....to succeed.
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Old 08-05-2011, 08:28 PM   #58
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+1 to what Sheesh says.

Since he owns a small business and I don't listen to what he says.

However, as investor in start ups. This is really important.

"
Third point...is the fine line between the "profits" a company makes and what they can spend out of cash flow. They have to be very careful....to succeed."

Plenty of "profitable" companies are out of business cause they did not have sufficient cash flow. The one thing that is undeniable is that higher tax rates decrease cash flow. Since Uncle Sam is most companies most demanding accounts payable, I don't see the logic in increasing the size of the account.
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Old 08-08-2011, 12:06 PM   #59
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There is a fine line. Let me ask you....why would a small business owner invest more into their business in this economic climate if their sales are not growing(or even with flat sales) and IF there is a risk the company may not make sustainable profit or may go bankrupt or they have to shut their doors? They would have made a poor investment. Think about that one for a bit.
at the moment companies are having good revenue reports and, as i said in my 1st post on this thread, the highest profits/GDP in 60 years. why have they been realizing these profits instead of investing in their companies? maybe it is because the tax rates are so low that it makes more sense to book the profit.
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Old 08-08-2011, 12:15 PM   #60
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Originally Posted by jdw_fire View Post
at the moment companies are having good revenue reports and, as i said in my 1st post on this thread, the highest profits/GDP in 60 years. why have they been realizing these profits instead of investing in their companies? maybe it is because the tax rates are so low that it makes more sense to book the profit.


Or maybe there is some other (or a host of other) reasons? I could speculate on those reasons, but it would just distract the thread from your original premise, and would not prove anything anyhow.

Again, rather than speculating, can you show us numerically how higher tax rates would spur investments over and above what lower tax rates would, all else being equal.

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