raise income tax bracket rates to create economic/job growth

[Alan]

Is that like Ebola or something ?

Worse, it means you are turning into socialists

 

[MasterBlaster]

Worse, it means you are turning into socialists

Socialists are quite nice really, Until they run out of other people's money.

So thank you.

 

[HFWR]

Too much to read carefully, so I read carelessly...

Pulling all this from my...

Large corps with buttloads of cash they have no productive use for should be encouraged to return that money to shareholders, who would either use it more "productively", or spend it on "stuff", increasing aggregate demand, possibly resulting in higher employment and increased tax revenues for the gubmit.

While granting that "uncertainty" over future tax rates, healthcare liabilities, and all that are a concern, the largest concern is lack of customers. If money is there to be made, someone will step in to make it. Again, lack of demand...

And, finally (hold the applause), we could shrink government spending by, what, 40%, and not return a single dime to taxpayers, since we're borrowing that portion. What we would do, however, is remove about half a trillion from circulation, which would likely not do wonders for the economy, at least in the short-to-mid term...

So, the solution, it seems to me, is to not tax that money sitting around doing nothing, but to figure out a way to get it into the economy.

 

[rescueme]

So, the solution, it seems to me, is to not tax that money sitting around doing nothing, but to figure out a way to get it into the economy.

Something DW does quite well ..

Heck, I'm waiting for the companies holding a bunch of cash to start re-purchasing their outstanding shares, and increasing current shareholder's value in the company...

That way they could not risk investment in infrastructure that may not be needed in the future, and also slience the critics on the amount of "excess" held.

 

[FinanceDude]

Large corps with buttloads of cash they have no productive use for should be encouraged to return that money to shareholders, who would either use it more "productively", or spend it on "stuff", increasing aggregate demand, possibly resulting in higher employment and increased tax revenues for the gubmit.

Sounds like "redistribution". If the shareholders don't like the company holding cash, then SELL the stock.........

 

[HFWR]

I don't know, a one-time distribution at a low/no tax rate seems plenty "supply-side" to me.

I should know better than to frequent this forum...

 

[FinanceDude]

I don't know, a one-time distribution at a low/no tax rate seems plenty "supply-side" to me.

I should know better than to frequent this forum...

We are thinking as shareholders, not corporate management. If I can build a facility in Ireland at 1/3 the US corporate tax rate, why would I fight OSHA and EPA and those nice folks to build it here for a lot more money?

 

[HFWR]

We are thinking as shareholders, not corporate management. If I can build a facility in Ireland at 1/3 the US corporate tax rate, why would I fight OSHA and EPA and those nice folks to build it here for a lot more money?

Large corps with buttloads of cash they have no productive use for..

...is what I said. If they're building in Ireland, I'll assume that is a productive use. I did not say anything about the government taxing/confiscating it.

As for the rest, our history of self-policing speaks for itself...

 

[FinanceDude]

...is what I said. If they're building in Ireland, I'll assume that is a productive use. I did not say anything about the government taxing/confiscating it.

I know you didn't, but that is WHY these things are happening. The uncertainty in what direction Congress is going makes those businesses with cash nervous, so they are acting like consumers are cutting back and holding tight.

 

[HFWR]

I know you didn't, but that is WHY these things are happening. The uncertainty in what direction Congress is going makes those businesses with cash nervous, so they are acting like consumers are cutting back and holding tight.

Okay... I believe it's much more complicated than that...

From a WSJ article (hardly the liberal media):

U.S. Firms Build Up Record Cash Piles - WSJ.com

U.S. companies are holding more cash in the bank than at any point on record, underscoring persistent worries about financial markets and about the sustainability of the economic recovery.

The Federal Reserve reported Thursday that nonfinancial companies had socked away $1.84 trillion in cash and other liquid assets as of the end of March...

While renewed confidence in corporate-bond markets has allowed big companies to raise a record amount of money, many are still hesitant to spend the cash on hiring or expansion amid doubts about the strength of the recovery.

But back to my point, plenty of conservatives think that a "tax holiday" would be a good way to get companies to repatriate cash from foreign operations. How is this different?

 

[Hamlet]

I don't think that is what is really happening though. I think they are building the facilities based on where it is cheapest/best to build them, and then booking the revenues in whichever place has the lowest tax rates.

I doubt Microsoft actually has a large footprint in Ireland. But there Ireland corporate subsidiary is booking a larger and larger portion of their revenue. Any overhead expenses get booked to the US subsidiary, thus reducing their taxable income.

It's mostly an accounting trick. When you sell software, what is to prevent you from shifting global expenses to the US company (all of the software development costs), while booking revenues via your tax haven shells?

We are thinking as shareholders, not corporate management. If I can build a facility in Ireland at 1/3 the US corporate tax rate, why would I fight OSHA and EPA and those nice folks to build it here for a lot more money?

 

[jdw_fire]

jdw - I responded that your example was flawed, as it ignored the after-tax value of the profits. You can't ignore the after-tax values, in a discussion on the effects of tax rates! I gave the following example in post #69 - (I added a few notes in "()" for clarity in this context and some underlining for emphasis. Note that we agreed that the increased profits would increase the business value at a 10x rate), showing the effects of tax rates:



The above shows that at higher tax rates, the business persons income is lower (a demotivator), and that the value of added investment in the business is lower (a demotivator).

You said in post #71:


And I responded in post #74:


Maybe you missed all that in the flurry of posts and cross-quoting. I tried to break it out here as concisely as I could, so hopefully it is clear. So, how can higher tax rates motivate a business person to invest in their business more than lower tax rates would, when those higher tax rates bring fewer $ into their pocket, whether they sell their business or not?

-ERD50

i stand by my response of

this isnt correct. the taxes due on the business' profit by the potential buyer of the business may influence whether that buyer does in fact buy it but when the business owner is do an analysis of his/her business to determine its value for sale a business owner doesnt include the personal income taxes s/he would be paying on the profit if s/he still owned it.

however i have noticed that all the posts arguing against my premise dont even attempt to really address it. my premise is basicly that tax payer psychology is the main driver for the investment in small business that i am suggesting will take place and i have mentioned it several times.

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.

i dont understand how you cant see the tax payer psychology i am pointing out when you actually give examples of that very psychology in your post. i highlighted in red where you give an example of a business owner making a decision about his businesses based overwelmingly on the tax implications. you also mentioned lot of schemes that were used to reduce taxes, which you called "stupid". so therefore you are acknowledging that tax payers will do "stupid" things to avoid paying taxes. that is exactly the tax payer psychology i based my premise on.

...
so i will try to address what i think you are thinking by first suggesting you look at my last 2 posts, in which i try to get my point across that i am talking about a tax payer psychology. i have said this to you over and over again and since it is a psychology the proof may not be in the dollar and cents numbers.
...

it is clear you dont agree with, nor like my idea, and unfortunately you also seem to not be seeing the tax payer psychology i have been talking about. granted the example that i highlighted in red was a CG example but so what? i pointed it out because it shows the psychology i am trying to get you all to see. just because it is a CG example doesnt invalidate it in showing that psychology. the other "stupid" schemes to lowering taxes that were also in the post i highlighted, also show that psychology. i have to believe he used the word "stupid" when mentioning those schemes because, to him, they didnt make financial sense. so if people are willing to follow "stupid" schemes to avoid paying personal income taxes, how can you all claim that they wont do something like just plowing those expected profits back into their company (making them expenses instead) in order to reduce their personal income taxes when it carries the added benefit of growing their business?

and the type of response to that i got was an off handed dismissal

Yes, but I feel that any view of tax payer psychology is too subjective to be used to convince anyone. So I keep saying (over and over), show me the kinds of numbers a business person would review with an accountant to say "Yes, let's make this investment!"

well i have allowed you all to do that by not bringing that part of the premise to the forefront and instead i actually provided you with numbers supporting my view. in my opinion your counters to them didnt invalidate them but as they werent my main reason for having this premise i am going back to that part of the premise, tough that it isnt numbers.

it is the tax payer psychology that will provide the stimulus because tax payers in high tax brackets where the actual rates are high will want to pay less in taxes and when they have a small business, an easy way to do that is spend dollars that would otherwise be taxed on something that can be deducted. other posters in this thread have also provided examples of people doing this so i dont see why it wouldnt cause the same reaction if the higher tax brackets had their rates raised now.

 

[jdw_fire]

i said earlier

it is the tax payer psychology that will provide the stimulus because tax payers in high tax brackets where the actual rates are high will want to pay less in taxes and when they have a small business, an easy way to do that is spend dollars that would otherwise be taxed on something that can be deducted. other posters in this thread have also provided examples of people doing this so i dont see why it wouldnt cause the same reaction if the higher tax brackets had their rates raised now.

and here another poster provides explanation of that very thing, i.e. taxpayers (in this case corps.) spending money (expenses, capital investment) to reduce their tax burden via "deductions, depreciation and tax credits".

It would seem that for any corporation to pay ZERO in taxes, that corporation has enough deductions, depreciation and tax credits that bring their profit to zero. Now ...when one thinks about this ...one might realize that all those credits and/or depreciation for capital equipment either 179 or otherwise and/or other loop holes go into the "economy to stimulate growth".
So the question becomes which do we want? Do we want all the tax credits and depreciation and/or so called loop holes to go away which results perhaps in corporations paying more effective tax but leads to less economic stimulation because the corporations won't buy things or do things that stimulate the economy...or do you want it similar to the way it is today...where the corporations get some benefit via the reduced taxation granted them by the federal government for doing their part in stimulating the economy. We can't have both IMHO.
We should be reminded that "for every action there is a reaction" and "consequence".
Now that said, it is extremely "one sided" to present one side of the data by saying they pay zero in taxes. The other side of that are the reasons why...and what those reasons stimulate. They stimulate the economy.

and to top it off, she even says (see the red highlight above) that such spending "stimulate(s) the economy". my premise seems well defended by the above post.

 

[jdw_fire]

JDW...Hamlet has brought up another key issue that is important to your original concept....in that...increasing tax rates on profits will not do anything for the megacorps that keep their profits offshore. They still legally will owe little or no tax to the U.S.

my premise was increasing the individual's tax rates in the higher brackets (i said that many times). it is not as easy for an american citizen to get around paying income taxes.

 

[ERD50]

i stand by my response of

this isnt correct. the taxes due on the business' profit by the potential buyer of the business may influence whether that buyer does in fact buy it but when the business owner is do an analysis of his/her business to determine its value for sale a business owner doesnt include the personal income taxes s/he would be paying on the profit if s/he still owned it.

Well, I figured it would come to this, but at this point I must bow out. I've made my case with numbers, and you won't accept them. You say 'psychology' out weighs the numbers. I don't agree, I think successful business owners who would be the source of growth are generally smart enough to look at the numbers and make business decisions based on those numbers.

For closure, I will summarize my position:

however i have noticed that all the posts arguing against my premise dont even attempt to really address it. my premise is basicly that tax payer psychology is the main driver for the investment in small business...

... and the type of response to that i got was an off handed dismissal

I disagree that it was an offhand dismissal. It was a reasoned dismissal, which I described above (a business looks at numbers).

well i have allowed you all to do that by not bringing that part of the premise to the forefront and instead i actually provided you with numbers supporting my view.

And as I replied at the time - your numbers ignore the effect (on income) of the very taxes that you apply. So no, they don't support your view, they counter it. I'll repeat the criteria this needs to meet to be convincing:

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.

Ring me if you have a new format to make those cases.

On one hand, I don't think it means much that others have not jumped in to support you. Sometimes the lone wolf is correct. But it is surprising, considering the number of vocal 'tax the rich' supporters on this forum, I would have expected more support for you if this was supportable.

Oh well, at least I got out before the thread was closed. It's been an 'interesting' discussion. Thanks for the challenges. Thanks for the insight into how others think. Thanks for keeping it civil.

-ERD50

 

[sheehs1]

i said earlier



and here another poster provides explanation of that very thing, i.e. taxpayers (in this case corps.) spending money (expenses, capital investment) to reduce their tax burden via "deductions, depreciation and tax credits".



and to top it off, she even says (see the red highlight above) that such spending "stimulate(s) the economy". my premise seems well defended by the above post.

I'm bowing out as well. What seems not to be understood...is that the current spending from these companies is done based on good business decisions...not forced taxation. That spending does stimulate the economy. However, there have been many times we did not take the full 179 expense deduction because there was no ROI or did not hire that employee because we did not need them.....or it was not necessary to further our business. No one makes business decisions based on taxation.
It seems you'd rather force it thru higher taxation...or create another hefty expense small business owners have to factor in (as if they don't have enough already)....taking another % of the decisions partly out of the hands of the owners. This is wrong and counterproductive on so many levels. IMHO your view is not a 360 degree view and therefore (fill in the words).
I give up.

 

[jdw_fire]

I'm bowing out as well. JDW...if you don't understand that buying equipment and taking immediate 179 depreciation or hiring an employee or two and receiving a tax credit for it......STIMULATES the economy there is no point in further discussion.
All of those things result in money back into the economy ! Why do you think the government grants it !
I give up.

LOL!!!!! i agree, i have making that point exactly. what you said, in essence, was that you realize that people will look for ways to reduce their taxes and "buying equipment and taking immediate 179 depreciation or hiring an employee or two and receiving a tax credit for it" will stimulate the economy while reducing their taxes. all i have added to that is the premise that the higher the top tax rates are, the more motivation small business owners will have, and hence they will be more likely, to look for ways to reduce their taxes, and therefore more of them will start "buying equipment and taking immediate 179 depreciation or hiring an employee or two". i find it amazing that you choose this (me agreeing with you) as a reason to bow out!

 

[ERD50]

LOL!!!!! i agree, i have making that point exactly. what you said, in essence, was that you realize that people will look for ways to reduce their taxes and "buying equipment and taking immediate 179 depreciation or hiring an employee or two and receiving a tax credit for it" will stimulate the economy while reducing their taxes. all i have added to that is the premise that the higher the top tax rates are, the more motivation small business owners will have, and hence they will be more likely, to look for ways to reduce their taxes, and therefore more of them will start "buying equipment and taking immediate 179 depreciation or hiring an employee or two". i find it amazing that you choose this (me agreeing with you) as a reason to bow out!

Since I didn't provide closure on that part of your position, allow me bow back in long enough to do so.

Yes, lower taxes on specific forms of income can stimulate a shift to those forms. But what you didn't prove, was part C of my earlier statement:

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.

My numeric example showed that the higher tax rates on income lowered the value of the investment and lowered total income to the business owner. That is not an incentive. IOW, yes, lower cap gains tax rates will tend to shift income to cap gains. But further increases in income tax rates lowers incentives across the board, and does not make up the difference to the point the business owner ends up with MORE money in his pocket after taxes. If it did, my numeric example would show that.

You show me a legitimate after-tax numeric example that shows that, and we will talk.


-ERD50

 

[jdw_fire]

i stand by my response of

this isnt correct. the taxes due on the business' profit by the potential buyer of the business may influence whether that buyer does in fact buy it but when the business owner is do an analysis of his/her business to determine its value for sale a business owner doesnt include the personal income taxes s/he would be paying on the profit if s/he still owned it.

And as I replied at the time - your numbers ignore the effect (on income) of the very taxes that you apply. So no, they don't support your view, they counter it. I'll repeat the criteria this needs to meet to be convincing:

i have bought many income producing properties and reviewed the APODs of many more and NEVER have i seen the owners personal income taxes as an expense therefore i dont believe you when you say that an owners personal income taxes will show up on a business' expense report, cash flow report or balance sheet. therefore i stand by my statement, even though you dont like it.

i also think it is kinda backhanded for you to try and dispute my premise (higher tax rates in the top tax brackets will stimulate job/economic growth because the psychology of taxpayers is to try and pay less taxes) by absolutely not discussing said psychology. it seem like you didnt like my premise, couldnt refute it (by discussing said psychology) so you changed the argument away from psychology. your numbers argument says nothing about the psychology of taxpayers and therefore doesnt prove your position.

 

[jdw_fire]

how does any of this

Since I didn't provide closure on that part of your position, allow me bow back in long enough to do so.

Yes, lower taxes on specific forms of income can stimulate a shift to those forms. But what you didn't prove, was part C of my earlier statement:




My numeric example showed that the higher tax rates on income lowered the value of the investment and lowered total income to the business owner. That is not an incentive. IOW, yes, lower cap gains tax rates will tend to shift income to cap gains. But further increases in income tax rates lowers incentives across the board, and does not make up the difference to the point the business owner ends up with MORE money in his pocket after taxes. If it did, my numeric example would show that.

You show me a legitimate after-tax numeric example that shows that, and we will talk.


-ERD50

in any way address this?

LOL!!!!! i agree, i have making that point exactly. what you said, in essence, was that you realize that people will look for ways to reduce their taxes and "buying equipment and taking immediate 179 depreciation or hiring an employee or two and receiving a tax credit for it" will stimulate the economy while reducing their taxes. all i have added to that is the premise that the higher the top tax rates are, the more motivation small business owners will have, and hence they will be more likely, to look for ways to reduce their taxes, and therefore more of them will start "buying equipment and taking immediate 179 depreciation or hiring an employee or two". i find it amazing that you choose this (me agreeing with you) as a reason to bow out!

there is no mention of "lower taxes on specific forms of income" in the post of mine you quoted.

 

[sheehs1]

LOL!!!!! i agree, i have making that point exactly. what you said, in essence, was that you realize that people will look for ways to reduce their taxes and "buying equipment and taking immediate 179 depreciation or hiring an employee or two and receiving a tax credit for it" will stimulate the economy while reducing their taxes. all i have added to that is the premise that the higher the top tax rates are, the more motivation small business owners will have, and hence they will be more likely, to look for ways to reduce their taxes, and therefore more of them will start "buying equipment and taking immediate 179 depreciation or hiring an employee or two". i find it amazing that you choose this (me agreeing with you) as a reason to bow out!

After a second glance at your reply, I had edited my post...but somehow you got the un-edited version of it. Perhaps working on yours as I edited mine. My point stands. Businesses are going to make the best business decision they can regardless of taxation for the reasons already offered.
You have misquoted and misinterpreted the statements. Small businesses do NOT look at ways to reduce their taxes. They spend their time trying to grow their business. I can assure you....not in one board meeting in over 25 years .....have we spoken about ways to reduce taxes. But you seemingly refuse to believe that for some reason.
The End...

 

[ERD50]

how does any of this

in any way address this?

there is no mention of "lower taxes on specific forms of income" in the post of mine you quoted.

It was in the general context of the debate: In our examples, capital gains income is taxed lower than operating income. Specifically, 15% cap gains tax, and we compared 25% and 50% operating income tax rates.

-ERD50