a question about taxing high income individuals

[Breck62]

Please help me understand this:
The main argument AGAINST raising taxes on incomes over $250k is that it would hit small business owners. They'd have less money to pay salaries and they'd cut hiring and the US
would loose jobs. Seems to make sense.
But, salaries are a business expense. They're paid with pretax dollars. A tax increase on incomes over $250k would not impact money used to pay salaries. It would only impact the owners salary. No?

example: assume a business has revenues of $1M /year and their only expense is salaries and thats $300k/year. The owner of the business takes home each year $700k in profit.
Now the tax increase goes thru. It does NOT decrease the money available to pay salaries.
The $1M is left alone. It ONLY impacts the $700k in profit that the owner gets.
It appears the proposed tax increase would NOT affect jobs.

What am I missing?????

 

[Vel]

Please help me understand this:
The main argument AGAINST raising taxes on incomes over $250k is that it would hit small business owners. They'd have less money to pay salaries and they'd cut hiring and the US
would loose jobs. Seems to make sense.
But, salaries are a business expense. They're paid with pretax dollars. A tax increase on incomes over $250k would not impact money used to pay salaries. It would only impact the owners salary. No?

example: assume a business has revenues of $1M /year and their only expense is salaries and thats $300k/year. The owner of the business takes home each year $700k in profit.
Now the tax increase goes thru. It does NOT decrease the money available to pay salaries.
The $1M is left alone. It ONLY impacts the $700k in profit that the owner gets.
It appears the proposed tax increase would NOT affect jobs.

What am I missing?????

If you're a business owner planning an expansion, that money you have in the bank that the government calls your profit is what you use to make that expansion happen. A business might have cash on hand but that's working capital rather than savings. Sometimes you have to save money to be able to make the investment that you want.

 

[konradv]

Please help me understand this:
The main argument AGAINST raising taxes on incomes over $250k is that it would hit small business owners. They'd have less money to pay salaries and they'd cut hiring and the US
would loose jobs. Seems to make sense.
But, salaries are a business expense. They're paid with pretax dollars. A tax increase on incomes over $250k would not impact money used to pay salaries. It would only impact the owners salary. No?

example: assume a business has revenues of $1M /year and their only expense is salaries and thats $300k/year. The owner of the business takes home each year $700k in profit.
Now the tax increase goes thru. It does NOT decrease the money available to pay salaries.
The $1M is left alone. It ONLY impacts the $700k in profit that the owner gets.
It appears the proposed tax increase would NOT affect jobs.

What am I missing?????

If you're a business owner planning an expansion, that money you have in the bank that the government calls your profit is what you use to make that expansion happen. A business might have cash on hand but that's working capital rather than savings. Sometimes you have to save money to be able to make the investment that you want.

But isn't money you've saved money you've already paid taxes on and any money put back into the business would be deductible? I don't think the OP is missing anything. We're being sold a bill of goods that doesn't exist.

 

[Vel]

Please help me understand this:
The main argument AGAINST raising taxes on incomes over $250k is that it would hit small business owners. They'd have less money to pay salaries and they'd cut hiring and the US
would loose jobs. Seems to make sense.
But, salaries are a business expense. They're paid with pretax dollars. A tax increase on incomes over $250k would not impact money used to pay salaries. It would only impact the owners salary. No?

example: assume a business has revenues of $1M /year and their only expense is salaries and thats $300k/year. The owner of the business takes home each year $700k in profit.
Now the tax increase goes thru. It does NOT decrease the money available to pay salaries.
The $1M is left alone. It ONLY impacts the $700k in profit that the owner gets.
It appears the proposed tax increase would NOT affect jobs.

What am I missing?????

If you're a business owner planning an expansion, that money you have in the bank that the government calls your profit is what you use to make that expansion happen. A business might have cash on hand but that's working capital rather than savings. Sometimes you have to save money to be able to make the investment that you want.

But isn't money you've saved money you've already paid taxes on and any money put back into the business would be deductible? I don't think the OP is missing anything. We're being sold a bill of goods that doesn't exist.

No.. Let's say as a business owner I grossed a one million dollars in 2012. Out of that one million, I have 700,000 dollars in operating expenses leaving $300,000. Out of that $300,000 I used $90,000 as my personal income. I'd like to open another store in the summer of 2013, so the $210,000 dollars left in the bank is what I will use to bankroll my new store. Do you see now?

 

[jillian]

Please help me understand this:
The main argument AGAINST raising taxes on incomes over $250k is that it would hit small business owners. They'd have less money to pay salaries and they'd cut hiring and the US
would loose jobs. Seems to make sense.
But, salaries are a business expense. They're paid with pretax dollars. A tax increase on incomes over $250k would not impact money used to pay salaries. It would only impact the owners salary. No?

example: assume a business has revenues of $1M /year and their only expense is salaries and thats $300k/year. The owner of the business takes home each year $700k in profit.
Now the tax increase goes thru. It does NOT decrease the money available to pay salaries.
The $1M is left alone. It ONLY impacts the $700k in profit that the owner gets.
It appears the proposed tax increase would NOT affect jobs.

What am I missing?????

nothing

 

[konradv]

If you're a business owner planning an expansion, that money you have in the bank that the government calls your profit is what you use to make that expansion happen. A business might have cash on hand but that's working capital rather than savings. Sometimes you have to save money to be able to make the investment that you want.

But isn't money you've saved money you've already paid taxes on and any money put back into the business would be deductible? I don't think the OP is missing anything. We're being sold a bill of goods that doesn't exist.

No.. Let's say as a business owner I grossed a one million dollars in 2012. Out of that one million, I have 700,000 dollars in operating expenses leaving $300,000. Out of that $300,000 I used $90,000 as my personal income. I'd like to open another store in the summer of 2013, so the $210,000 dollars left in the bank is what I will use to bankroll my new store. Do you see now?

So an extra $2,000 is going to ruin all that? Is that what you're trying to say? You'd still have $208,000. Where's the big hit you're supposedly taking?

 

[Rshermr]

But isn't money you've saved money you've already paid taxes on and any money put back into the business would be deductible? I don't think the OP is missing anything. We're being sold a bill of goods that doesn't exist.

No.. Let's say as a business owner I grossed a one million dollars in 2012. Out of that one million, I have 700,000 dollars in operating expenses leaving $300,000. Out of that $300,000 I used $90,000 as my personal income. I'd like to open another store in the summer of 2013, so the $210,000 dollars left in the bank is what I will use to bankroll my new store. Do you see now?

So an extra $2,000 is going to ruin all that? Is that what you're trying to say? You'd still have $208,000. Where's the big hit you're supposedly taking?

Exactly. The company would pay taxes on $300K, of which $250K is exempt from the new tax. That leaves $50K subject to the new tax, which is at 4%. Which would mean $2k in new tax, as you said. So, for that $1M gross business, that $2K is the "massive" tax increase the cons are talking about.

 

[Bill Angel]

But isn't money you've saved money you've already paid taxes on and any money put back into the business would be deductible? I don't think the OP is missing anything. We're being sold a bill of goods that doesn't exist.

No.. Let's say as a business owner I grossed a one million dollars in 2012. Out of that one million, I have 700,000 dollars in operating expenses leaving $300,000. Out of that $300,000 I used $90,000 as my personal income. I'd like to open another store in the summer of 2013, so the $210,000 dollars left in the bank is what I will use to bankroll my new store. Do you see now?

So an extra $2,000 is going to ruin all that? Is that what you're trying to say? You'd still have $208,000. Where's the big hit you're supposedly taking?

The government also provides all manner of investment tax credits.
And if someone has a profitable business and wants to expand they shouldn't have a problem borrowing money at low interest rates to finance the expansion.

 

[Big Black Dog]

Instead of raising taxes on anybody that already pays taxes, why not tap into that nearly 50% of the population that pays no federal income tax at all? Let's see them do their "fair" share for a change.

 

[Rozman]

i love how Liberals are always happy to spend other peoples money...

 

[eflatminor]

Please help me understand this:
The main argument AGAINST raising taxes on incomes over $250k is that it would hit small business owners. They'd have less money to pay salaries and they'd cut hiring and the US
would loose jobs. Seems to make sense.
But, salaries are a business expense. They're paid with pretax dollars. A tax increase on incomes over $250k would not impact money used to pay salaries. It would only impact the owners salary. No?

You're missing a lot. First, there are many arguments against raising tax rates. One of the most important is that it often results in LESS revenue to the government coffers. That's exactly what happen, as we learned last week, when UK raised taxes on their wealthy. Revenues went down big time.

Secondly, such a tax raise would not only hit small business owners. Far more importantly, it would hit the sources of capital. It's wealthier Americans and the groups/companies they form in capital markets that drive new business opportunities and that allow existing businesses to fund job creating expansion. Raise the cost of capital by limiting returns and that money either sits on the sideline (even more so than today) or is invested elsewhere. Either way, we end up with fewer new entrants into markets and less expansion of existing businesses. This means fewer jobs.

Lastly, raising taxes on the wealthy means they have less to spend, and they're the drivers of big ticket purchases, which create a lot of jobs. Just ask the guy working to build luxury yachts or private jets. The more we suppress the ability to make those purchases, the fewer jobs are created.

So, the big questions is "Why would you want to raise taxes on anybody"?

 

[PredFan]

Please help me understand this:
The main argument AGAINST raising taxes on incomes over $250k is that it would hit small business owners.

Correct. Many small business owners list the money they make as personal income. If you increase the taxes on their income they will need to find a way to cut expenses. Many do not have the knowledge or the ability to skirt the taxes like the large corporations do. Thus the tax increase will hurt only them.

They'd have less money to pay salaries and they'd cut hiring and the US would loose jobs.

Not necessarily. Most often they won't have the ability to expand and create new jobs.

But, salaries are a business expense. They're paid with pretax dollars. A tax increase on incomes over $250k would not impact money used to pay salaries. It would only impact the owners salary. No?

True but you are ignoring the fact that the businessman will need to make up that lost revenue somewhere.

example: assume a business has revenues of $1M /year and their only expense is salaries and thats $300k/year. The owner of the business takes home each year $700k in profit.
Now the tax increase goes thru. It does NOT decrease the money available to pay salaries.
The $1M is left alone. It ONLY impacts the $700k in profit that the owner gets.
It appears the proposed tax increase would NOT affect jobs.

What am I missing?????

You're missing a realistic scenario. 1st, the tax is on income not business profit. Also, anyone who takes home as personal income $700k is a fool if he doesn't have financial advisors showing him how to keep more of his money. it's the ones who make a little over $250k that will be in trouble.

 

[PredFan]

No.. Let's say as a business owner I grossed a one million dollars in 2012. Out of that one million, I have 700,000 dollars in operating expenses leaving $300,000. Out of that $300,000 I used $90,000 as my personal income. I'd like to open another store in the summer of 2013, so the $210,000 dollars left in the bank is what I will use to bankroll my new store. Do you see now?

So an extra $2,000 is going to ruin all that? Is that what you're trying to say? You'd still have $208,000. Where's the big hit you're supposedly taking?

Exactly. The company would pay taxes on $300K, of which $250K is exempt from the new tax. That leaves $50K subject to the new tax, which is at 4%. Which would mean $2k in new tax, as you said. So, for that $1M gross business, that $2K is the "massive" tax increase the cons are talking about.

You are completely wrong. The tax is on anyone making over $250k, and it is on all of that 300k, not 50k of it.

 

[PredFan]

Please help me understand this:
The main argument AGAINST raising taxes on incomes over $250k is that it would hit small business owners. They'd have less money to pay salaries and they'd cut hiring and the US
would loose jobs. Seems to make sense.
But, salaries are a business expense. They're paid with pretax dollars. A tax increase on incomes over $250k would not impact money used to pay salaries. It would only impact the owners salary. No?

You're missing a lot. First, there are many arguments against raising tax rates. One of the most important is that it often results in LESS revenue to the government coffers. That's exactly what happen, as we learned last week, when UK raised taxes on their wealthy. Revenues went down big time.

Secondly, such a tax raise would not only hit small business owners. Far more importantly, it would hit the sources of capital. It's wealthier Americans and the groups/companies they form in capital markets that drive new business opportunities and that allow existing businesses to fund job creating expansion. Raise the cost of capital by limiting returns and that money either sits on the sideline (even more so than today) or is invested elsewhere. Either way, we end up with fewer new entrants into markets and less expansion of existing businesses. This means fewer jobs.

Lastly, raising taxes on the wealthy means they have less to spend, and they're the drivers of big ticket purchases, which create a lot of jobs. Just ask the guy working to build luxury yachts or private jets. The more we suppress the ability to make those purchases, the fewer jobs are created.

So, the big questions is "Why would you want to raise taxes on anybody"?

It's called the Laffer Curve.

 

[jillian]

Instead of raising taxes on anybody that already pays taxes, why not tap into that nearly 50% of the population that pays no federal income tax at all? Let's see them do their "fair" share for a change.

you mean like deployed military personnel?

old people on social security?

who's not paying their fair share?

besides the top 1%, that is...

 

[Care4all]

[ame=http://www.youtube.com/watch?v=KTBt5APga7Q]Ronald Reagan: Close Unproductive Tax Loopholes - YouTube[/ame]

 

[eflatminor]

Instead of raising taxes on anybody that already pays taxes, why not tap into that nearly 50% of the population that pays no federal income tax at all? Let's see them do their "fair" share for a change.

you mean like deployed military personnel?

old people on social security?

who's not paying their fair share?

besides the top 1%, that is...

Three questions:
1) Which country has their top 1% of earners paying a larger proportion of the overall tax burden than America?
2) What percentage of Americans do you think should not have to pay any federal income tax? More than pay no fed tax now or less?
3) Since you clearly advocate for higher taxes on wealthy people, what do you think the result of higher tax rates will be?

 

[jillian]

Instead of raising taxes on anybody that already pays taxes, why not tap into that nearly 50% of the population that pays no federal income tax at all? Let's see them do their "fair" share for a change.

you mean like deployed military personnel?

old people on social security?

who's not paying their fair share?

besides the top 1%, that is...

Three questions:
1) Which country has their top 1% of earners paying a larger proportion of the overall tax burden than America?
2) What percentage of Americans do you think should not have to pay any federal income tax? More than pay no fed tax now or less?
3) Since you clearly advocate for higher taxes on wealthy people, what do you think the result of higher tax rates will be?

1. question 1 is irrelevant because they POSSESS the largest proportion of the wealth in this country.
2. question 2 is irrelevant unless you're willing to say that old people on social security and people deployed and serving our country should pay income tax.
3. i think a RETURN to the same tax rates they paid previously is an irrelevancy. They paid it then. They'll pay it now.. and it's still lower than tax rates when Reagan was president.

So why are you taking a position on something that has no bearing on your life?

 

[Intense]

Please help me understand this:
The main argument AGAINST raising taxes on incomes over $250k is that it would hit small business owners. They'd have less money to pay salaries and they'd cut hiring and the US
would loose jobs. Seems to make sense.
But, salaries are a business expense. They're paid with pretax dollars. A tax increase on incomes over $250k would not impact money used to pay salaries. It would only impact the owners salary. No?

example: assume a business has revenues of $1M /year and their only expense is salaries and thats $300k/year. The owner of the business takes home each year $700k in profit.
Now the tax increase goes thru. It does NOT decrease the money available to pay salaries.
The $1M is left alone. It ONLY impacts the $700k in profit that the owner gets.
It appears the proposed tax increase would NOT affect jobs.

What am I missing?????

The premise is make believe. You act like salaries are the only considerations. There are Payroll taxes, SS, Insurance, among others, there are business expenses such as maintenance, utilities, stock, communication, transportation, stock, storage, to name a few.

 

[eflatminor]

you mean like deployed military personnel?

old people on social security?

who's not paying their fair share?

besides the top 1%, that is...

Three questions:
1) Which country has their top 1% of earners paying a larger proportion of the overall tax burden than America?
2) What percentage of Americans do you think should not have to pay any federal income tax? More than pay no fed tax now or less?
3) Since you clearly advocate for higher taxes on wealthy people, what do you think the result of higher tax rates will be?

1. question 1 is irrelevant because they POSSESS the largest proportion of the wealth in this country.

Another one that thinks wealth is a finite pile of cash from which we all must draw. That, or your envy is showing.

2. question 2 is irrelevant unless you're willing to say that old people on social security and people deployed and serving our country should pay income tax.

Half the country is not old or serving. What about everyone else that does not pay federal income tax. You were saying something about fair???

3. i think a RETURN to the same tax rates they paid previously is an irrelevancy. They paid it then. They'll pay it now.. and it's still lower than tax rates when Reagan was president.

Sure, they'll pay them, only less so. Just as the UK learned last week, raising tax rates on the wealthy usually results in LESS revenue. So, why would you want to raise taxes if it isn't going to raise revenues? Envy again?

And by the way, when Reagan was President, we passed the Tax Reform Act, which took tax rates to 15 and 28 percent. The current highest tax rate is 35%...heading higher next year.