For all of you small business owners, you can relate to this
fivemilliondots.com
fivemilliondots.com
I worked in an environment where the business owners subtly questioned the worth of all of their employees once and I'll never do it again. I hope that I'll treat people differently if I'm ever in a similar position.
It seems that the large companies have enough accountants, divisions, and clever ways to avoid taxes that they pay a tiny percent, but small business don't really have much available and end up eating the full bill. I'm paying about 55% between federal and state taxes.
To the author: You're not the navel of the universe. I'm oh so sorry you've had to work hard for your shit. So has everyone else. In your darkest hour of disdain for the hapless employees you've hired to help expand your business, never forget: if it wasn't for all these people, you wouldn't be rich, because you wouldn't be able to hire all those people to make money from you.
First of all, Dick (which is what I'll call the author, since I don't know his name) writes: If you lose your job, it won't be at the hands of the economy; it will be at the hands of a political hurricane that swept through this country, steamrolled the constitution, and will have changed its landscape forever.
Within the context of the article, Dick isn't referring to any actual steamrolling of the constitution that has taken place at the hands of the Bush administration (as long as there are terrorists out there... and there are always terrorists out there... it's apparently un-American to defend the Constitution, civil liberties, etc.). No, in the article, Dick is referring to changes in the tax code that the Obama administration has proposed (though they may not act on them for a year or two).
The funny thing is that Dick appears to believe that these tax hikes will be unprecedented. He believes they will streamroll the constitution and change its landscape forever. In fact, all Obama plans to do is return the top two tax rates to what they were in 2000 (and throughout most of the 90's). Taxes will still be lower than they were in 2000 because he plans to leave the other brackets (which are now at lower rates than they were in 2000) untouched. Even the wealthiest 1% of households (with an average income of $1.6 million per year) will pay less than they paid in '93-'00. So the idea that Obama's tax plan will streamroll the constitution and change its landscape forever is hogwash. His proposed taxes are lower than they were just 8 years ago and in any case, there is absolutely nothing unconstitutional about taxes. I've read the constitution; obviously this guy hasn't.
Even stronger evidence of the ridiculousness of this claim can be found if we look at history. Let's look at the top marginal Federal tax rates seen in recent history:
50% (1982-86) 70% (1965-85) 77% (1964) 91-92% (1946-63) 94% (1944-45)
Under Obama's plan, the highest marginal tax rate starts at an income of $357,700 (in 2008 dollars) and will only be 39.6%. And it's important to note that this is the marginal rate, not the average rate. Someone making $400,000 won't be paying 39.6% of her income to Uncle Sam, she'll be paying 31.6%, making the absurd assumption that she has no deductions. In reality, she'll almost certainly be paying less.
Finally, I'd just like to point out that two people with perhaps the highest tax burdens in the United States (Bill Gates and Warren Buffet) both support Obama and his tax hikes. In fact, Buffet has said it's ridiculous how little tax he is expected to pay. I tend to agree, especially considering our budget deficit (not to mention our national debt). I for one would be happy to pay higher taxes... if I'm doing well, a large part of that success is owed to the country that provided me with my education and the infrastructure and opportunities to make a success of myself. I'd like to see that education and infrastructure get even better. I'd like to see poor kids get preventative health care. It may not be a popular sentiment, but I agree with Biden: paying taxes is patriotic.
About taxes; I don't mind paying taxes if I see some benifit for it. In e.g. Sweden you pay 40-50%, but for this you have free healthcare and free education (plus lodging and food!) for as far as your willing/capable of going.
The US, on the other hand has taxes higher then I would pay in e.g. Switzerland, Lichtenstein, etc. while having a much worse health care system, a much worse public school system, etc., etc.
(NOTE: These comments don't have anything to do with Obama/McCain, just patriotism and taxes)
Patriotism is your conviction that this country is superior to all other countries because you were born in it. -George Bernard Shaw
It's relevant to remember that neither Buffet nor Gates will be paying those rates.
And, even if the proposed laws would affect them, it's worth noting that nothing stopped Buffet or Gates from paying those rates in the past.
Never confuse marginal rates with average rates.
The fact is that the top few percent pay a huge fraction of the income taxes. (SS is retirement and the return is skewed towards low income folks, so it's reasonable to omit it.) When folks don't spend their money, they buy dumb.
> paying taxes is patriotic
If it's so patriotic, why do you want to exclude people from it?
The federal govt is now paid for by a smaller fraction of the population than it was during the Clinton years. During the Clinton years, it was paid for by a smaller fraction of the population than it was during the 80s, and so on.
Is it good for most folks to not have a significant stake in paying for govt services?
I didn't... I clearly stated that those were the top marginal rates and further down in my comment, I noted the difference between what someone making 400K would pay marginally and on average.
When folks don't spend their money, they buy dumb.
I don't understand this comment at all... please explain.
If it's so patriotic [to pay taxes], why do you want to exclude people from it?
I, like Buffet, Gates and many others, believe that those of us who are in a position to pay 40% of our income and still live in extraordinary comfort should do so. Those who aren't in such a position shouldn't be expected to do so. I don't have rich parents and I started out relatively poor... if it wasn't for low tax rates when I was broke and not making much, it would have been much, much harder for me to make a success of myself. Now that I'm doing better, I'm happy to pay it forward to the next generation struggling to make something of themselves and make everyone in the country better off a result. Even from a purely selfish viewpoint, graduated tax brackets make sense.
> I don't understand this comment at all... please explain.
When you're spending your money on something for you, you have to live with both the costs and the benefits.
When you're spending your money on something for someone else, you have to live with the costs but not the benefits.
When you're spending someone else's money on yourself, you have to live with the benefits but not the costs.
When you're spending someone else's money on someone else, you don't have to live with the costs or the benefits.
In what situation are you likely to make the best buying decision? In which situation are you likely to make the worst buying decision?
Buffet and Gates won't be paying 40% in income taxes. And, nothing has stopped them from paying 40% in the past, so ...
Hmm - have you been paying the higher tax rates that you propose? If not, why not?
Most people are employed by folks who make more money. Why don't you want more of that?
And then there's the actual effect of luxury taxes. It turns out that people of modest means are employed making them, so when you reduce the sales of said goods through taxes, said people lose their jobs. What is the benefit that exceeds that cost?
Buffet and Gates have also arranged things so that almost none of their wealth will be subject to estate taxes.
As I've pointed out, the fraction of tax revenue paid by the richest 1, 5, and 10% are much higher now than they were when the top tax rates were higher. And, as the fraction of the tax burden paid by the rich has gone up, the fraction by the poor has gone down, to the point that nearly half don't pay anything.
Higher tax rates for the upper brackets don't lead to less taxes paid by the poor - they lead to more taxes paid by the poor.
Basically, it's a choice between steeply graduated rates and steeply graduated revenue. It's interesting that you choose the former. You claim to be concerned for the poor, yet you advocate a return to a system where they paid more taxes.
Feel free to downmod me for being mean.
"Higher tax rates for the upper brackets don't lead to less taxes paid by the poor - they lead to more taxes paid by the poor."
You're confusing correlation (or, perhaps more accurately in this case, coincidence) with causation here. You correctly point out that "the fraction of tax revenue paid by the richest 1, 5, and 10% are much higher now than they were when the top tax rates were higher", but this obviously can only be the case because the income gap has widened. Despite paying lower marginal rates than they have through much of recent history, the richest 1, 5 and 10% of Americans now make so much compared to the other 90% of Americans that they still account for a larger share of revenue. If the income gap had remained stable or shrunk, the opposite would be the case. Now don't get me wrong... I'm certainly not anti-income gap and I have no agenda around redistributing wealth. I'm simply explaining why your statement is dead wrong.
What I do have an agenda around is making the tax burden distributed in the way that is best for society (and, thereby, individuals within that society, including myself). I feel that this involves heavily graduated taxation, despite the fact that I'm in that uppermost bracket. I'm not being selfish and looking for a handout and I'm not suggesting that there's anything wrong with making obscene amounts of money... I simply feel its better for society to impose higher taxes on those who can more easily afford it. Warren Buffett (and countless others) agree with me. You obviously don't, but that's no excuse to twist facts to support your agenda.
How about we look at the taxes paid by income cohort? We now have a greater percentage of people paying no income taxes than we did when the top rates were higher.
> making the absurd assumption that she has no deductions
Since deductions phase out as income increases, that's not an absured assumption.
> I'd like to see poor kids get preventative health care.
Poor kids are eligible for free preventative health care and have been for years. We're currently arguing about tax subsidized health care for families above middle income.
If your best arguments are falsehoods....
> I for one would be happy to pay higher taxes
Are you happy enough that you're actually doing so? After all, nothing is stopping you from paying as much (more) as you'd like.
Feel free to downmod me for being mean.
I believe in American exceptionalism. I believe that there's something about the immigrant experience that allows people to pull themselves up and live their dreams with lots of hard work. Yes, it takes luck - but so does everything else worth having, including love and health. You can become rich and fabulous and no one will fault you for your accent or your class.
So take my taxes - I'm happy to have a profit enough to pay them. I'm safe in my country's borders, I have 500 channels of TV available to me, I can eat meat every day for every meal if I wanted to, and I get to watch my two favorite teams play baseball day and night during the season.
My father chose to move here for me, before I was even born. Not that India is some kind of hellhole - far from it - but, today, on what would have been his 60th birthday were he alive, I know what gift he gave me.
When things get tough and my motivation ebbs, I think of my 2 grandfathers. As teenagers, they left everything and everyone they ever knew with no assurance of ever seeing them again to come here. Why? So that I could have a better life. I have to get back to work; I simply can't let them down.
And to be really controversial I think we are perilously close to creating ethnic Americans and I don't think that's what we should want.
Finally, I believe that any business that can afford to do so can instantly increase its profit by 25% simply by moving to Ireland. That's my strongest belief of all, simply because it's based on running the tax numbers.
Sure. Why would I care what Americans think about themselves? Why would I care what Americans think about me?
And, on a more objective note, the argument for American exceptionalism isn't that America does so well, but that other countries do so badly.
After all, let's compare the stereotypical American with the stereotypical European and then look at the aggregate results. Some might argue that the stereotypes are wrong. Others give credit to the flying spaghetti monster. Maybe the Illuminati are to blame. And so on.
I'm okay with "American exceptionalis refers to the belief that the United States differs qualitatively from other developed nations, because of its national credo, historical evolution, distinctive political and religious institutions, ethnic origins and composition, or national ideals." from http://en.wikipedia.org/wiki/American_exceptionalism
You seem to think that non-Americans should be bothered by American exceptionalism. Why?
Is that belief that the United States is better, or just different?
Let's go with the one that bothers you. Why do you care?
Or, if you intend "ethnocentrism and classism" in a less malign form, to the extent that it's bad, it will work to the US' disadvantage. Are you opposed because you want the US to succeed?
So, dissent against Obama is necessarily good, right?
Dissent, like change, isn't necessarily good or bad. The specifics matter.
I love my customers. They are very important to me. If there is a bonnie lass who has booked my evening, then their emails can wait a few hours. I'm an engineer -- I'm perfectly capable of creating automated systems which generally function whether I am physically present Right This Minute or not.
If they tend to not do that, you can either code better (not sarcastic -- every time I lose money or time on date night as a result of a bug, my appreciation for proper testing increases) or pay somebody to worry about it for you.
The "...this is the type of change you can keep" is a dead giveaway.
I don't find that threat credible. If the guy wants to retire, he will sell his company, not shut it down. Even if it's unprofitable, he might still find a buyer who hopes to turn it around, or values a part of it. This often comes with layoffs, but firing every single employee would probably be stupid.
There is a substantial difference between the startup founder who employs 15 and is the hardest working guy in the bunch and the executives of something like GM or AIG who are still not quite sure why its wrong to ask for a bailout while flying around in multiple corporate jets and taking fancy executive retreats.
Its going to be very important in the next couple of years to be sure that the needed reforms that will reign in the recklessness of the latter does not adversely affect the former.
I don't think government is the most efficient thing in the world, but I do think they have an important role in business development, if not the most important.
After living in developing countries (China, Turkey, Ethiopia), you come to appreciate the little things that our taxes pay for - firemen, policemen, roads, schools, hospitals. I am a small business owner and do not enjoy parting with money to an arguably inefficient government either, but taking it out on employees like that is childish at best.
All paid for by local taxes and usage fees.
Now what, exactly, does he get for the 40% of his income that he sends to the federal government?
My attitude is the polar opposite however. I worked so hard over the last couple years so that I could create the best environment on earth for me and my friends/employees. We have fun at work and because of that our products are excellent. There is no debt or guild about them having a good time while I wasn't, in fact I do have a good time now because they do.
Outside of the business, the reasons we live well, are directly related to the taxes we pay. Can you imagine stepping out of your office and hitting a dirt track? Taxes payed the paved street. Can you imagine that sprawling towns, such as the ones we live in, would function for a moment without Police and oversight? Do you think software businesses could be made outside of sprawling towns?
There is a certain basic infrastructure that needs to be in place to get the best out of people and that's what good government provides. I lived in Germany and Canada, both countries with welfare systems and health systems that the states now finally aspires to, and I have enjoyed (relatively) good government for my entire life.
If we cut out taxes of all kind we will end up without those basic infrastructure and the foundation on what the OP build his business will no longer exist.
He's using a straw man argument to cover for his personal greed and ideology. Randian indeed.
Yeah right.
While Obama didn't go with the worst from Chicago's education gang, their best isn't all that good.
A convincing counter-argument will cite actual results from Chicago, a noted bastion of educational excellence....
Maybe that's all there is, but if you have any advice, I would be very interested in hearing it. (devon@digitalsanctuary.com)
The biggest one is expensing things you'd have to pay for anyway (e.g. health club memberships [if applicable], insurance, cell phones, health savings account, home internet & computers [if you work at home enough], parking passes, subway cards, business mileage on your cars and lumping personal trips & business trips together [careful with this one]. These take advantage of pretax dollars. I encourage you to do same for your employees since you're offering real perks with pretax dollars. Just make sure you talk to your accountant first
If you operate on a cash-basis (as opposed to an accrual basis) make any capital improvements/major purchases at the end of the quarter or fiscal year instead of the beginning of the next quarter or fiscal year. You can get around some of the 401k limitations if you own your own business. Finally, sometimes it's cheaper, in a tax sense to issue dividends to yourself and fellow equity holders. All of this varies significantly by legal formation and state.
Finally - and I can't emphasize this enough - invest in a good accountant. There's so many write-offs & tricks that the average person would never even think of and the laws, in typical US fashion, are filled with red tape & loop holes. Having someone to help you navigate them is crucial.
The election is over, you know.
It doesn't stop Canadians from operating businesses. RIM is Canadian, EA has a huge operation in Canada. When you hear of companies moving from Canada to the US, I believe it is more often brain drain than due to the taxes.
Maybe the two are related somehow.
Canada Tax Estimate Calculator: http://www.ey.com/GLOBAL/content.nsf/Canada/Tax_-_Calculator...