Why trickledown economics works!
The purpose of this thread is to explain to people why trickledown economics works. With the news of the government only expanding the bush tax cuts
to people making under $250,000 and increasing the so called “rich” Americans, I wanted to explain why this is a bad idea.
Update: Nancy stretch face just announced the house will not vote on extending the tax cuts for no one. So everyone’s taxes are going up from 3-5%.
I’m trying to be the lest political I can but the most ignorance I find on this board comes from liberals or democrat supporters. Their arguments
come as “if you give tax breaks to the rich they are just going to send their money to off shore bank accounts.” Or “they are so rich what’s
another million extra dollars when they have 10 million already” another favorite is “the rich get richer and the poor get poorer” I find all
these statements as talking points from the MSM. They provide no evidence and no substance and come from people who I believe have no concept of the
market and how business is ran.
Why do the “RICH” need tax breaks? Simple, they need more money to start businesses and open up branches in new markets. Let’s create a business
model. Let’s say the federal corporate tax is 35 %( I believe this number is correct) and state corporate tax is another 10%. (California) So right
off the bat you are going to pay 45% in any gross profit.
Let’s say your net sales is $5,200,000 (revenue) for the year and you’re a small construction company
A good guess of goods sold would be (cost to supply jobs and finish)
Labor and Burden $1,213,000
Total Cost are $3,500,000
This leaves us with $1,700,000 Gross Profit and 32.69% margin (margin is the percentage of return on our sale, our $5,200,000 number)
But wait we must now pay for overhead! (the cost to keep the doors open and pay admin)
General and Admin expenses
Facilities Expenses $84,000
Vehicle expenses $241,000
Total overhead expense $1,218,000
We are now left with $1,700,000- $1,218,000 = $482,000 profit at 9.27% margin (margin is the percentage of return on our sale, our $5,200,000
Now its April 15th, Time to pay taxes!!! Our profit of 482,000 must now be taxed at 45% so $216,418 gets taken for taxes. We are now left with
$265,582 our company made for the year at 5.10% Margin (margin is the percentage of return on our sale, our $5,200,000 number) and this is a very
conservative number. Company usually make about 3% return on investment!
So we invested 5.2 million dollars to make $265,582! These are true life real numbers. It takes a lot of money to invest and make money. And to be
able to finance this work for the year the company need to have 5.2 million in the bank! So when you libs talk about company hording money in banks
that’s not the case. The companies need this money in the bank to finance the jobs and as insurance if anything goes wrong.
So the next year we have 265,582 to invest with. We need at least $350,000 to open another branch and start work but since 45% went to taxes we have
to wait and save till next year to open up another branch and hire more people to bring in more money. If we were taxed only 25% this number would
have been achieved and we would have hired more people and started up more jobs!
These are the number and numbers don’t lie. You need a large bank roll now a day to make a little money. If only our taxes were cut for company it
would take less money to start up more companies in more markets to gain more jobs. simple as that.
Remember the owner of the company is forking out 5.2 million of his own money for this company. if it falls he loses it all ( unless you know obama
and he bails you out) other wise he is intiteled to the win falls and the money the company makes. would you be willing to lay your life on the line
like that to make a buck. lucky your have bosses who are. other wise you would not have a job.
like a coments said below dont forget the owner will take out 60k for himself in this company so we are left with $205,582 to invest in growing the
company. Not alot!
edit on 24-9-2010 by camaro68ss because: Adding good points