Challenge: Stabilize the Debt

[Texas Proud]

I agree if you work for a mega corp making 250k or even 400k that most tax credits will NOT apply to you.

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

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

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

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

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

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

You got me confused with someone else.... My boss is a small business owner... 22 people in our company...

 

[Texas Proud]

I wonder if he would prefer to live in a 'gated community', clutching a pistol and afraid to go out at night. As Oliver Wendell Holmes Jr. put it, “I like to pay taxes. With them I buy civilization."

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

And you missed my point... They talk about 'cutting taxes' and giving credits to small business owners... but IF that person can not take the credit... then why give them He did what he was supposed to, hire people for research, etc. etc... but when it came time to get the benefits that the gvmt said he would... NADA... sorry, you have to pay AMT and you do NOT get the benefit that we told you you would get... sorry....

 

[samclem]

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

And you missed my point... They talk about 'cutting taxes' and giving credits to small business owners... but IF that person can not take the credit... then why give them He did what he was supposed to, hire people for research, etc. etc... but when it came time to get the benefits that the gvmt said he would... NADA... sorry, you have to pay AMT and you do NOT get the benefit that we told you you would get... sorry....

No. I think you missed the point. We are supposed to pay taxes without complaint as the price of civil order. What--did your boss think that was his money?

AMT is just one "gotcha". With phase-outs, tiny niche requirements ("must hire only someone who has been unemployed for XX weeks to get the credit. . . and be sure to document that!), targeted industries, etc, it's a lot to ask a small business owner who's actually busy trying to make money to study all the hoops and play the game. That's why these pinpoint rifle-shot programs (targeted to this or that favored constituency) accomplish so little compared to a more broad-based pullback of the grasping hand of government.

 

[Emeritus]

No.I think you missed the point. We are supposed to pay taxes without complaint as the price of civil order. What--did your boss think that was his money?

.

Governments allow business to prosper.

 

[ERD50]

Anyone who thinks they can "Make it on their own" without that nasty awful government can just invest in Afghanistan. It's a paradise for those who want to be free of government regulations.

Again, it's a matter of degrees. It's a false argument to say that someone who wants a less intrusive and better government would be in favor of NO government.

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

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

-ERD50

 

[FinanceDude]

Anyone who thinks they can "Make it on their own" without that nasty awful government can just invest in Afghanistan. It's a paradise for those who want to be free of government regulations.

So, you believe in the European way of socialized government? Most rational folks recognize the need for SOME govt, they just have a problem with the "we're from the govt and we're here to help"........

 

[HFWR]

So, you believe in the European way of socialized government? Most rational folks recognize the need for SOME govt, they just have a problem with the "we're from the govt and we're here to help"........

Of course, the problem with that theory is that the small-government crowd has controlled the Presidency for much of the past 30 years, and had a majority in Congress for much of that time, too, and really didn't shrink the government, or reduce the deficit/debt. In fact, many think that the balance was tilted toward the well-off, to the detriment of the less well-off.

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

 

[Texas Proud]

Of course, the problem with that theory is that the small-government crowd has controlled the Presidency for much of the past 30 years, and had a majority in Congress for much of that time, too, and really didn't shrink the government, or reduce the deficit/debt. In fact, many think that the balance was tilted toward the well-off, to the detriment of the less well-off.

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

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


NOW, maybe the next group will actually CUT spending and not go back to 'we spend more on what we want and less on what they want' type of politics.... but alas, I will probably be watching this group just like the last...

 

[M Paquette]

NOW, maybe the next group will actually CUT spending and not go back to 'we spend more on what we want and less on what they want' type of politics...

Having been through this particular fire drill before, I'm not planning on holding my breath. I'll vote, but my expectations are, well:

 

[Emeritus]

So, you believe in the European way of socialized government? Most rational folks recognize the need for SOME govt, they just have a problem with the "we're from the govt and we're here to help"........

So do you believe in personalizing discussions after making an abusive characterization of the other party?

 

[ERD50]

Of course, the problem with that theory is that the small-government crowd has controlled the Presidency for much of the past 30 years, and had a majority in Congress for much of that time, too, and really didn't shrink the government, or reduce the deficit/debt. ...

I don't think it's a problem with the theory - it's a problem with the implementation. The party to which you refer hasn't really been interested in smaller govt either. For most of us, it's a choice between tweedle-dee and tweedle-dum.

-ERD50

 

[dex]

Of course, the problem with that theory is that the small-government crowd has controlled the Presidency for much of the past 30 years, and had a majority in Congress for much of that time, too, and really didn't shrink the government, or reduce the deficit/debt. In fact, many think that the balance was tilted toward the well-off, to the detriment of the less well-off.

I think to be fair we would have to have a deficit/debt projection if 'the small-government crowd has controlled the Presidency for much of the past 30 years, and had a majority in Congress for much of that time' weren't there to see where we would be.

30 years ago only takes us to 1980. Much of our financial course was set in the 1960s and earlier.

 

[samclem]

Governments allow business to prosper.

That's swell of them.

 

[Independent]

The break even point is about risk and reward. If the cost of hiring help is 15k (my example) or 45k (your example) there is risk.

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

In return for taking on those risks, I expect a return. Taxes influence the ROI. Is it worth those risks to add $8400 (your example) to the 500k I already earned?

It seems that these are the same as my example where the marginal revenue turns out to be less than the all-in costs. If unemployment costs you something, the after tax cost is less than the before tax cost. The same is true about disability. Maybe you're assuming a tax situation where those things aren't deductible, but I'm not aware of such a situation.

If the first means that the employee quits and steals customers (?) then the same rule holds. The higher the marginal tax rate, the less the after tax impact of the loss.

Income taxes reduce both gains and losses equally, so the way I look at it, there is no net increase in risk, jsut fewer dollars on the table.

 

[HFWR]

I don't think it's a problem with the theory - it's a problem with the implementation. The party to which you refer hasn't really been interested in smaller govt either. For most of us, it's a choice between tweedle-dee and tweedle-dum.

-ERD50

Make that tweedle-dumb and tweedle-dumber...

I think to be fair we would have to have a deficit/debt projection if 'the small-government crowd has controlled the Presidency for much of the past 30 years, and had a majority in Congress for much of that time' weren't there to see where we would be.

30 years ago only takes us to 1980. Much of our financial course was set in the 1960s and earlier.

Certainly a fair assessment, though if you go back to 1968, there've been only four democrat presidents, though a lot more democratically-controlled Congresses.

I'm fairly non-partisan; don't care much for either major party, and think the Tea Party is just angry (for good reason), but I'm not sure they're angry at the right people, or for the right reasons. After all, when you're index finger is pointing outward, three other fingers are pointing back at yourself...

I don't know if we have the willpower, or the wherewithal, to fix our financial problems. Hope so...

 

[jIMOh]

the hypothetical said "expenses are all in" which elimiantes the 2nd 2

What is
"Risk that the person takes business away"?
not objecting, simply not understanding

If you have a small business with maybe 10-20 clients, then hire a person, what is to stop that person from going on their own and taking business away from you if/when they leave? Depending on the field, that risk is real.

That risk is less with larger companies or longer sales cycles or more complex products/services.

 

[jIMOh]

It seems that these are the same as my example where the marginal revenue turns out to be less than the all-in costs. If unemployment costs you something, the after tax cost is less than the before tax cost. The same is true about disability. Maybe you're assuming a tax situation where those things aren't deductible, but I'm not aware of such a situation.

If the first means that the employee quits and steals customers (?) then the same rule holds. The higher the marginal tax rate, the less the after tax impact of the loss.

Income taxes reduce both gains and losses equally, so the way I look at it, there is no net increase in risk, jsut fewer dollars on the table.

I agree with fewer dollars on the table
However as a percentage of the investment, the small business owner is looking at ROI as much as the total number (I think).

If there was 250k of money (profit) being taxed...
and the cost of hiring someone was 50k, the anticipated increase in revenue would be measured against the 250k vs the 50k (IMO). If I have to spend 50k to add 10k onto the table, might not be worth the risk... where as if I have to spend 50k to add 50k to the table, that might be enough return to justify the risk of hiring.

One way for government to help (or not hurt) is to keep the cost of hiring low (lower SS/medicare taxes and lower taxes on the additional profit). Much of the cost of hiring is in the unemployment side of things (disability and unemployment insurance and in extending Cobra and similar programs for the unemployed) as these actions increase the costs of hiring even when the employee is no longer working.

 

[Emeritus]

If you have a small business with maybe 10-20 clients, then hire a person, what is to stop that person from going on their own and taking business away from you if/when they leave? Depending on the field, that risk is real.

That risk is less with larger companies or longer sales cycles or more complex products/services.

Well I suppose if the boss treats like dirt the people who actually supply what the client needs it will increase the risk that a client would actually prefer to cut out the jerk boss. but businesses sign contracts to deal with this all the time.

 

[dex]

I'm fairly non-partisan; don't care much for either major party, and think the Tea Party is just angry (for good reason), but I'm not sure they're angry at the right people, or for the right reasons. After all, when you're index finger is pointing outward, three other fingers are pointing back at yourself...

I don't know if we have the willpower, or the wherewithal, to fix our financial problems. Hope so...

I agree.
I'm past anger and onto acceptance.

 

[Emeritus]

The problem is not big government or small government, it's dumb government. We had replaced discourse over the quality of government with sound bites designed to appeal to the devoted ignorant voters. Look at the screaming over schools. It must be the unions and the high pay and pensions. But in Germany the teachers are highly paid, heavily unionized and get fabulous pensions. But the students do very well. In Britain the teachers are heavily unionized, have lower salaries and the students don't do as well. Private schools for the elite are common in the UK and rare in Germany. In the USA you can get people foaming at the mouth about teachers. Good efficient government takes smart people and hard work, not slogans. In my youth I spent some time studying military procurement and why societies bought weapons that did not work or were unsuited to the task at hand. Ive looked at a wide variety of public and private and mixed procurement systems. It was hard to find a common thread, but in the main it seemed to come down to brainpower. Countries that insisted on top flight weapon designers and paid attention to their advice on averaged did the best. Those who want to sneer at government design and procurement should study the T-34 tank.

So the key is getting top people, not chanting slogans.

 

[ERD50]

The problem is not big government or small government, it's dumb government.

OK, if we accept that it should be clear why many of us want to limit the scope of this dumb government we seem to be stuck with. As a real-world analogy, if we can't improve the performance of an employee, and it isn't practical to replace them, we generally assign them to less important tasks. Limit their scope. So let's do it with govt too.

[MODERATOR EDIT] This gets interesting:

Look at the screaming over schools. It must be the unions and the high pay and pensions. But in Germany the teachers are highly paid, heavily unionized and get fabulous pensions. But the students do very well. In Britain the teachers are heavily unionized, have lower salaries and the students don't do as well.

I guess you have found some new research since this post:
http://www.early-retirement.org/for...ve-suggestions-wanted-49733-4.html#post928960

There is simply is no research base that shows that can use student performance on standardized tests to demonstrate individual teacher influence on long term educational goals.

So there is a way to tie student performance to teacher performance. I knew it!

-ERD50

 

[dex]

The problem is not big government or small government, it's dumb government. We had replaced discourse over the quality of government with sound bites designed to appeal to the devoted ignorant voters. Look at the screaming over schools.

What smart governments are out there.

It must be the unions and the high pay and pensions. But in Germany the teachers are highly paid, heavily unionized and get fabulous pensions. But the students do very well. In Britain the teachers are heavily unionized, have lower salaries and the students don't do as well.

They look pretty close in the rankings
Educational Score Performance - Country Rankings

Private schools for the elite are common in the UK and rare in Germany.

7% in the UK - common? Looks to include colleges

Prep schools
There are 130,000 pupils in over 500 schools of all types and sizes. Prep schools may be for boys or girls only, or may be co-educational. They may be day schools, boarding schools, weekly boarding, flexi-boarding, or a combination.

 

[BigNick]

7% in the UK - common?

There's "common" and "common". Most middle-class parents in the UK know somebody whose kids are at a private school (typical fees $10K/year and up, without boarding) and perhaps 50% of all mid-level professionals making $80K/year at least think about private education for their children, at least at secondary (grades 6-12) level.

In comparison, most Germans do not know where their nearest private school is. It simply would not occur to most fairly senior German managers making $150-200K/year to send his kids to private education.

 

[Emeritus]

What smart governments are out there.



They look pretty close in the rankings
Educational Score Performance - Country Rankings



7% in the UK - common? Looks to include colleges

Prep schools
There are 130,000 pupils in over 500 schools of all types and sizes. Prep schools may be for boys or girls only, or may be co-educational. They may be day schools, boarding schools, weekly boarding, flexi-boarding, or a combination.

My statement was that private schools for the elite are common.
by definition the elite is a small percentage of the population

 

[dex]

My statement was that private schools for the elite are common.
by definition the elite is a small percentage of the population

What is the definition of an elite?