The plumber said "Your tax policies are going to ruin my business"
Barack Obama wants to reduce taxes for roughly 95% of the United States while raising taxes on the other 5% - those making more than $200,000 per year. John McCain wants to lower taxes on everyone, and attacks Obama’s tax increase on the upper 5% as destroying small businesses and jobs. I decided to do some research on this issues to see if, in fact, raising taxes on those individuals making more than $200,000 would reduce employment or not, and I found out some interesting things.
The conclusion, however, is this: Obama’s tax increase on the wealthy will not directly harm small businesses. At. All.
First, some definitions so we all know what I’m talking about. So far as I can tell, the only small businesses that pay taxes at the personal income rate are “sole proprietorships”, the simplest type of business in the U.S. According to NOLO.com, a sole proprietorship may have employees, but the census indicates that the bulk of sole propreitorships do not - they’re considered nonemployers, and they are the largest portion of all U.S. businesses. In 2005 (the last year for which there is both data on nonemployers and employers at the U.S. Census Bureau), there were 20,392,068 nonemployers with a total income of $951 billion (Source: Nonemployer Statistics, 2005, Total for all sectors, United States). Small business employers1 numbered 5,878,784 (Source: Statistics of U.S. Businesses, All Industries, 2005). The total number of all employer and nonemployer businesses in 2005 was 26,375,614, of which 26,270,852 (or 99.6%) would qualify as small businesses as I’ve defined it above. This would be why people respond when you threaten to increase taxes on small businesses - there’s a LOT of small businesses. But look closer at those numbers. The average income per nonemployer small business is the total income divided by the number of employers, which in this case is only $46,635. What that means is that the vast majority of nonemployer small businesses (which we can probably fairly say are mostly sole proprietorships) would be unaffected by the Obama tax cut. In fact, since they make so little, they’d get a tax cut, not a tax increase. Yes, you read that right: the average small business would get a tax cut under Obama’s tax plan, not a tax increase as McCain has suggested.
Let’s broaden the definition to assume that all small business employers with less than 10 employees are also sole proprietorships. From the employer Census link for 2005 above, there were 4.72 million employers with fewer than 10 with a total of 12.83 million employees. Let’s assume that, as above, no more than 3% of those employers fall into the $200,000+ individual pay bracket. That’s a total 110,000 employers and 31,000 employers for businesses with 0-4 employees and 5-9 employees respectively. Again, if we assume that there’s a 5% increase in business failures equally through both sizes of businesses (from 9% to 14%), that’s a total of 5500 businesses sized 0-4 employees and 2790 businesses sized 5-9 employees that would fail due to the tax increase. The average number of employees for all businesses in the 0-4 employees category is 1.66 employees per business. The average number of employees for businesses in the 5-9 employees category is 6.66 employees per business. Calculating the job losses we get 8,855 employees in those 5500 newly failed businesses (0-4 employees), plus 5500 for the owners themselves, and 18,582 employees in the other 2790 businesses (5-9 employees) plus another 2790 for the owners. Total is 35,036 extra employees losing their jobs. Adding that to the 31,000 sole proprietorships from the first analysis, that’s a total of roughly 66,000 jobs lost every year. And just in sole proprietorships alone (never mind the newly expanded 0-9 employees category) we created 167,000 new jobs. Include the 1% decrease in employer small business failures (from 9% to 8%) on businesses sized 0-9 employees and that’s an additional 176,000 new jobs, for a total of 343,000 new jobs across all nonemployer and employer small businesses. Put bluntly, even if we assume the worst case cost of 66,000 jobs and that every business with fewer than 10 employees is a sole proprietorship (and it’s not), the Obama tax plan is still creating 277,000 new jobs every year.
I really don't see how this is socialism, when we are just talking about tax policy. Rasing taxes, lowering taxes is just part of the game of politics as old as taxes themselves. The money is allocated to what the President thinks is going to stimulate the economy and I dont know why thats is so hard to understand for some. In a perfect world no taxes should be paid, but this isn't one. Bush tried with his taxcuts and it hasn't worked, now is time to try something different and sadly McCain wants MORE of the same.
One of Barack Obama's most potent campaign claims is that he'll cut taxes for no less than 95% of "working families." He's even promising to cut taxes enough that the government's tax share of GDP will be no more than 18.2% -- which is lower than it is today.
APIt's a clever pitch, because it lets him pose as a middle-class tax cutter while disguising that he's also proposing one of the largest tax increases ever on the other 5%. But how does he conjure this miracle, especially since more than a third of all Americans already pay no income taxes at all? There are several sleights of hand, but the most creative is to redefine the meaning of "tax cut."
For the Obama Democrats, a tax cut is no longer letting you keep more of what you earn. In their lexicon, a tax cut includes tens of billions of dollars in government handouts that are disguised by the phrase "tax credit." Mr. Obama is proposing to create or expand no fewer than seven such credits for individuals.
Here's the political catch. All but the clean car credit would be "refundable," which is Washington-speak for the fact that you can receive these checks even if you have no income-tax liability. In other words, they are an income transfer -- a federal check -- from taxpayers to nontaxpayers. Once upon a time we called this "welfare," or in George McGovern's 1972 campaign a "Demogrant." Mr. Obama's genius is to call it a tax cut.
The Tax Foundation estimates that under the Obama plan 63 million Americans, or 44% of all tax filers, would have no income tax liability and most of those would get a check from the IRS each year. The Heritage Foundation's Center for Data Analysis estimates that by 2011, under the Obama plan, an additional 10 million filers would pay zero taxes while cashing checks from the IRS.
The total annual expenditures on refundable "tax credits" would rise over the next 10 years by $647 billion to $1.054 trillion, according to the Tax Policy Center. This means that the tax-credit welfare state would soon cost four times actual cash welfare.
The political left defends "refundability" on grounds that these payments help to offset the payroll tax. And that was at least plausible when the only major refundable credit was the earned-income tax credit. Taken together, however, these tax credit payments would exceed payroll levies for most low-income workers.
It is also true that John McCain proposes a refundable tax credit -- his $5,000 to help individuals buy health insurance. We've written before that we prefer a tax deduction for individual health care, rather than a credit. But the big difference with Mr. Obama is that Mr. McCain's proposal replaces the tax subsidy for employer-sponsored health insurance that individuals don't now receive if they buy on their own. It merely changes the nature of the tax subsidy; it doesn't create a new one.
Raising taxes during a recession...no matter who it is..it's going to make it worse.
Obama and McCain Tax Proposals According to a new analysis by the Tax Policy Center, a joint project of the Urban Institute and the Brookings Institution, Democrat Barack Obama and Republican John McCain are both proposing tax plans that would result in cuts for most American families. Obama's plan gives the biggest cuts to those who make the least, while McCain would give the largest cuts to the very wealthy. For the approximately 147,000 families that make up the top 0.1 percent of the income scale, the difference between the two plans is stark. While McCain offers a $269,364 tax cut, Obama would raise their taxes, on average, by $701,885 - a difference of nearly $1 million.
Where have we seen this deranged fiscal strategy before?
Remember Ronald Reagan and Supply Side Economics? In the early 1980s, Reagan promised the nation that if we lowered tax rates on the wealthy, the economy would grow so much the federal budget would be balanced "within three years, maybe even two."
Sober people were skeptical-and rightly so. Reagan's Republican opponent for the 1980 presidential election, George H.W. Bush called it "voodoo economics." His own Budget Director, David Stockman, called it a "Trojan horse," a scam intended really to funnel more money to the already rich. Stockman was quickly dismissed. The results, we now know, were a disaster. In 1982, the first full year after the tax cuts were enacted, the economy actually shrank 2.2%, the worst performance since the Great Depression. And the effect on the federal budget was catastrophic. Jimmy Carter's last budget deficit was $77 billion. Reagan's first deficit was $128 billion. His second deficit exploded to $208 billion. By the time the "Reagan Revolution" was over, George H.W. Bush was running an annual deficit of $290 billion per year. Yearly deficits, of course, add up to national debt.
When Reagan took office, the national debt stood at $994 billion. When Bush left office, it had reached $4.3 trillion. In other words, the national debt had taken 200 years to reach $1 trillion. Reagan's Supply Side experiment quadrupled it in the next 12 years.
Is there anything to compare this to? When Bill Clinton took office he intentionally reversed the Supply Side formula, raising taxes on the wealthy and reducing them on the lowest wage earners. Supply Side true believers predicted the arrival of the Apocalypse. Bob Dole said the stock market would collapse. Newt Gingrich said the world would fall into another Great Depression. What actually happened? Between 1992 and 2000, the U.S. economy produced the longest sustained economic expansion in U.S. history. It created more than 18 million new jobs, the highest level of job creation ever recorded. Inflation fell to 2.5% per year compared to the 4.7% average over the prior 12 years.
Originally posted by sos37
Capitalism - Creation of resources that are redistributed to the most productive members of society
Socialism - Confiscation of resources that are redistributed to the least productive members of society
His comment sounds all well and good until it's YOUR wealth he wants to spread around, right?
How can this not be anything but socialism?
[edit on 14-10-2008 by sos37]