[turtle777]

Obama claims that only a small fraction of small business will be affected by the tax hike for housholds earning more than $ 250,000. Is that so ?

1. Two-thirds of small business profits are earned in households making more
than $250,000 per year -- the very households Obama is shouting from the
rooftops that he will raise taxes on (Source: IRS Statistics of Income
Bulletin).
2. Small businesses pay income taxes at the household level. This means
that the Obama plan to raise tax rates is a direct tax hike on small
businesses -- sole proprietorships, partnerships, S-corporations, and
family farms
3. The tax rate on the lion's share of small business income could
reach 54.9 percent under a President Obama (the individual top rate will
climb from 35 percent to 39.6 percent and the Social Security/Medicare
tax rate could climb from 2.9 percent to 15.3 percent. Put those
together, and you get 54.9 percent) (Source: www.barackobama.com)
4. This 54.9 percent tax rate would be the highest since the Carter
Administration, when America suffered through double-digit inflation and
unemployment (Source: Congressional Budget Office)
5. America's 26 million small businesses employers give a paycheck to
116 million employees (Source: Census Bureau). When small business taxes
go up, millions of these employees will be at risk of being laid off.

http://www.marketwatch.com/news/stor...7%7D&dist=hppr

Is Obama's claim that only a small fraction of small businesses are affected just BS ?
What's the "upside" for small businesses in America under Obama ?

-t

[Chongo]

Another way to look at it: Why expand and grow your business, hire more people, if that will put you above $250k and then get slammed by more taxes? SBOs will have incentive to NOT expand their business, or shrink it to get under $250k.

BTW is that $250k pre or post tax?

[Paco500]

Originally Posted by Chongo 

Another way to look at it: Why expand and grow your business, hire more people, if that will put you above $250k and then get slammed by more taxes? SBOs will have incentive to NOT expand their business, or shrink it to get under $250k.

That doesn't make any sense. Unless this tax is implemented in a way completely different than the rest of the federal income tax, the higher tax rate only applies to income above the $250k level. In other words, all your income up to $249,999.99 is taxed at one rate (not really, as there are different levels as you go down) and any income above that line is at a higher tax rate. Once you go over $250k, you don't pay the higher rate for all income below this level. Earning more money will always allow you to keep more money.

EDIT:

My last statement was a bit too definitive, as there are likely some circumstances in our crazy tax laws where this is not true. However, I've seen nothing to suggest that this is the case here.

[tie]

Originally Posted by Paco500 

Earning more money will always allow you to keep more money.

Smells fishy to me. Isn't Obama a secret Muslim?

[Uncle Skeleton]

In the debates, Obama said that small businesses are exempt from his new >250K tax, so the whole argument is moot (if he was telling the truth)

[Doofy]

Study after study after study has shown that as the small businessman reaches the next tax barrier he tends to slack off and not hit the barrier rather than hit the barrier and work himself to the bone for less profit per hour. This tends to translate to less expansion, generating less jobs.

So yes, it'll hurt small business.

Meanwhile, the winners of the Cold War have a 13% flat tax rate.

[Doofy]

Oh, and 54.9% plus state and city taxes.

That's more than the French pay. Bugger me America, where did you go so wrong?

[hyteckit]

Two-thirds of small business profits are earned in households making more
than $250,000 per year -- the very households Obama is shouting from the
rooftops that he will raise taxes on (Source: IRS Statistics of Income
Bulletin).

That's like saying Two-thirds of the US salaries are earned in households making more than $1 million per year. There a small business owners making millions of dollars a year, while most small business owners make less than $250,000 per year.

Instead of saying 2/3 of small business profits, why not say 5% of small businesses make up 2/3 of small business profits.

[Paco500]

Originally Posted by Doofy 

Study after study after study has shown that as the small businessman reaches the next tax barrier he tends to slack off and not hit the barrier rather than hit the barrier and work himself to the bone for less profit per hour. This tends to translate to less expansion, generating less jobs.

So yes, it'll hurt small business.

Meanwhile, the winners of the Cold War have a 13% flat tax rate.

I've never seen the studies, so I can't comment on that, but what were talking about, as I understand it, increasing the tax rate from 15% to 20% on Capital Gains for families earning more than $250k a year. So, if a small business owner is affected by this (and were talking Capital Gains, not income) and chooses to stop working because they would than make $5 less for each $100 earned, I'm not sure they have what it takes to make it in business anyway.

[Uncle Skeleton]

The tax plan on Obama's website explicitly exempts small businesses from ALL cap gains taxes:

Originally Posted by barackobama.com

Eliminating Capital Gains Taxes for Entrepreneurs and Investors in Small Business. Barack Obama
understands that small businesses are the engines of our economy, and he will eliminate all capital gains
taxes on investments in small and start up firms.

[Krusty]

You guys seem to be desperately confused about marginal tax rates, the difference between a small business proprietor and a corporation, and the magic $250k number in Obama's proposal. I don't even know where to begin to unwind your assumptions. But I'll try.

1) Families below $250k will get a net tax CUT. Meaning less than they paid before. That doesn't mean that once you hit $250k, you are going to get a hike, it means that you will not get a CUT. If you've looked at the plans, under the Obama plan families between $250k and about $600k will actually have roughly even taxes to what they have now (on average a $12/year increase in their total tax bill ... essentially zero). So, don't believe the FUD that if you make over $250k you get a tax hike. $250-$600k is roughly flat and under $250k is a CUT. So, if you are worried about people getting an actual measurable tax HIKE, that's pretty much going to start at the $600k level.
2) Small businesses are taxed at the household rate because they are not corporations and their "profits" are actually one in the same as the owner's salary. So, don't confuse that with corporate "profits". If an owner grows his business, the measure of how much taxes he pays depends only upon what he decides to pay himself as the sole proprietor of that business ... that is his personal income and that personal income is taxed at the rate it is taxed whether he's a small business owner, a stock trader, or a professional athelete or entertainer.
3)The third point is absurd ..it's trying to lump together the owner's personal income tax rate with the taxes he pays for employees (also known as business expenses). The latter taxes are written off as business expense and are not part of that 39.6% rate he may be paying on the top portion of his own salary. To get an accurate measure of how much more this guy will be paying, you need only look at 2 things: His marginal rate will increase from 35% to 39.6% ( a 4.6% increase ONLY on those dollars he makes above the top bracket). Also, Obama's plan calls for a 4% FICA tax on people who make over $250k. So, at most, he'll pay 8.6% more on his own personal taxes ... but again, this has nothing to do with his business expenses (i.e. what he pays for FICA on his employees ... that does NOT come out of his salary or personal profit).

The source of your article is on marketwatch but its actually a stump posting from "Americans for Tax Reform" which is just front group for flat tax advocates. The actual details of the two plans have analysed at great length and its pretty clear who would pay more and less in this system. What you have posted is some more scare tactic rubbish to make people fear the Obama tax plan who shouldn't. Note, that the Obama tax increase from the 35 to 39.6% rate is just putting it back to where it was under Clinton, is lower than the top rate during most of the Reagan years, and is FAR FAR below the 70+% top rate that prevailed from WWII through the early 80s (yes, even under Eisenhower, Nixon, and the first part of Reagan, the prevailing top rate was MUCH higher than under anyone in the last 25 years ... including Clinton).

Here's the real tax breakdown (and this is just one link ... look for info at any reputable site and this is the nuts and bolts numbers they will report). There's even and easy-read chart over on the right for those of you who are reading impaired.
http://money.cnn.com/2008/06/11/news..._tpc/index.htm

[Paco500]

Originally Posted by Doofy 

Oh, and 54.9% plus state and city taxes.

That's more than the French pay. Bugger me America, where did you go so wrong?

I'm thinking the original poster's source has his facts muddled. As I understand it, the additional SS and Medicare tax is really only an increase of 2-4%, which is in addition to the 12.4% which is now split between employee and employer. So the article compared, I think, a portion of the current individual tax burden to the entirety of the proposed combined tax burden. Either he did not understand what he was writing, or he was being intentionally misleading.

Add to that, no American actually pays the tax rate on the label, so to speak. There are more deductions than one could reasonably list, and even those garden variety wage earners without a fancy accountant get a "standard deduction," so take those percentages with a grain of salt.

[turtle777]

Originally Posted by Uncle Skeleton 

In the debates, Obama said that small businesses are exempt from his new >250K tax, so the whole argument is moot (if he was telling the truth)

Under the current tax law and system, it's not possible to just exclude them.

Sole proprietorships, partnerships, S-corporations, and family farms file under the same tax status as someone who earns money as an employee. They are NOT taxed as companies, that's the whole point.

-t

[turtle777]

Originally Posted by Uncle Skeleton 

The tax plan on Obama's website explicitly exempts small businesses from ALL cap gains taxes:

Methinks you don't really understand what that means.

Most small businesses have no significant amount of cap gains, so that stunt won't help.

-t

[Uncle Skeleton]

Originally Posted by turtle777 

Methinks you don't really understand what that means.

Most small businesses have no significant amount of cap gains, so that stunt won't help.

-t

I was responding to this: "increasing the tax rate from 15% to 20% on Capital Gains for families earning more than $250k a year. So, if a small business owner is affected by this (and were talking Capital Gains, not income)"

[Uncle Skeleton]

Originally Posted by turtle777 

Under the current tax law and system, it's not possible to just exclude them.

Sole proprietorships, partnerships, S-corporations, and family farms file under the same tax status as someone who earns money as an employee. They are NOT taxed as companies, that's the whole point.

-t

Exemptions? Deductions? Rebates? Ever heard of any of those things?

[Doofy]

Originally Posted by Paco500 

I'm thinking the original poster's source has his facts muddled.

Right, that'd explain stuff. I thought it was on about income tax (as the OP quote suggests), not capital gains (as you suggest).

Originally Posted by Paco500 

As I understand it, the additional SS and Medicare tax is really only an increase of 2-4%, which is in addition to the 12.4% which is now split between employee and employer.

But we're talking small business owners, who are self-employed. So it's 15.3%, no?

Originally Posted by Paco500 

Add to that, no American actually pays the tax rate on the label, so to speak.

As in every other country. Family tax credits, yadda, yadda, yadda.

[Big Mac]

The only thing BHO has been consistent on is his insistence that those making above $250,000 will see a tax increase. Everything else like exemptions for small businesses is just empty campaign rhetoric, as evidenced by BHO's response to a man who said he worked hard all his life and is now buying a business that will make a bit more than $250,000 a year. BHO's response? "Well, if we distribute your success so that other people have a chance to be successful, the country as a whole will be more successful," or something along those Socialist lines. He believes firmly in income redistribution. Small businesses will be harmed under a BHO presidency, there is no question in my mind.

[Chongo]

We've been promised tax cuts before. We got our taxes raised instead, retroactively.

[Paco500]

Originally Posted by Doofy 

But we're talking small business owners, who are self-employed. So it's 15.3%, no?

Possibly, but his numbers didn't really add up properly for that either- but even if that was true, we are only taking about a possible increase of 2-4%, not 2.9% to 15.3%. That was the distortion I was pointing out.

Originally Posted by Doofy 

As in every other country. Family tax credits, yadda, yadda, yadda.

I can only speak from my experiences in the US vs. UK, but my "taxable" income was between 45-50% percent of my actual income, I didn't have any especially unusual deductions or tax dodges, only those pointed out by Turbo Tax. Yes there are some tax credits in the UK (but not for me thanks to the terms of my work permit), but nothing approaching the scale as exists in the US. I think you will find almost every comparative study puts the tax burden in the US well below most European countries- if you ignore Monaco, etc.

[Uncle Skeleton]

Originally Posted by Chongo 

We've been promised tax cuts before. We got our taxes raised instead, retroactively.

Are you talking about Bush the elder?

[hyteckit]

How well have been tax cuts working the past few years? Save $1000/yr in taxes, pay an extra $3000/yr in higher energy and food cost. Net effect is ending losing more money.

[Krusty]

Originally Posted by Big Mac 

The only thing BHO has been consistent on is his insistence that those making above $250,000 will see a tax increase.

Once again, your espousing this falsehood that the right seems to be latching on to as truth.
<$250k = Tax CUT
$250k to ~$600k = On average, neither a cut nor an increase.
>$600k = fairly large increase
>$2.9 million = very large increase.

Note: increases at the top levels are effectively just a return to the rates BEFORE the Bush tax cuts (i.e. Clinton era rates ... which were rather low in the greater scheme of things just a little higher than the presidents directly before and after him).

[BRussell]

Originally Posted by hyteckit 

Two-thirds of small business profits are earned in households making more
than $250,000 per year -- the very households Obama is shouting from the
rooftops that he will raise taxes on (Source: IRS Statistics of Income
Bulletin).

That's like saying Two-thirds of the US salaries are earned in households making more than $1 million per year. There a small business owners making millions of dollars a year, while most small business owners make less than $250,000 per year.

Instead of saying 2/3 of small business profits, why not say 5% of small businesses make up 2/3 of small business profits.

This is exactly what I thought when I read those statistics. Clearly, it is intended to mislead. They're hoping people just don't read it very carefully and come away thinking that 2/3 of small businesses would have their taxes increased.

Anyway, here's Obama talking to a guy today about this. Clearly the guy doesn't like Obama's tax plan, but he's very civil, and it's interesting to watch what Obama says to him.

http://www.youtube.com/watch?v=vFC9jv9jfoA

[BRussell]

Originally Posted by Krusty 

Once again, your espousing this falsehood that the right seems to be latching on to as truth.
<$250k = Tax CUT
$250k to ~$600k = On average, neither a cut nor an increase.
>$600k = fairly large increase
>$2.9 million = very large increase.

Note: increases at the top levels are effectively just a return to the rates BEFORE the Bush tax cuts (i.e. Clinton era rates ... which were rather low in the greater scheme of things just a little higher than the presidents directly before and after him).

And I think it is important to point out that this is Bush's and the Republicans' tax increase, not Obama's. They specifically passed tax cuts that would expire, and they did it to fudge the long-term budget outlook.

Maybe it's a minor point, because it's true that Bush and McCain now want to make those tax cuts permanent, and Obama and the Democrats oppose making them permanent. But it's worth pointing out that Obama is just following the original Bush/Republican plan to let these tax cuts expire.

[turtle777]

Originally Posted by BRussell 

This is exactly what I thought when I read those statistics. Clearly, it is intended to mislead. They're hoping people just don't read it very carefully and come away thinking that 2/3 of small businesses would have their taxes increased.

This intention is on Obama's side.

If you just define the profit threshold that include small businesses "small" enough, then you effectively say this:

All "small" small businesses (i.e. mom and pop shops that are so small that they don't have many employees) will have their taxes lowered.

All "big" small businesses (those that create jobs) will have their taxes raised. Yeay.

Thanks, great Obama.

-t

[Doofy]

Originally Posted by Paco500 

Possibly, but his numbers didn't really add up properly for that either- but even if that was true, we are only taking about a possible increase of 2-4%, not 2.9% to 15.3%.

As I understand it, it's 15.3% right now for the self-employed?

[hyteckit]

As a small business, if I wanted to avoid the higher tax rate, I would reinvest the profits back into my company and expanding my business by buying/leasing new equipment and hiring more employees.

I can write off $250,000 in equipment deductions for 2008. New shining MacBooks for me. Yeah.

[Chongo]

Originally Posted by Uncle Skeleton 

Are you talking about Bush the elder?

No, he promises no new taxes, then "compromised" with the (D)s. Bill Clinton promised a middle class tax cut, then went on national TV and said the deficit was more than he thought it was going to be(the deficit was actually less than the amount he was quoting during his campaign), and I'm going to have to raise taxes. Not only did we not get a middle class taxes, The (D)s raised the bottom rate from 10% to 15% (by 1/3) and raised the taxable amount of SS income. This was retroactive to 1/93
1992 debate

[Krusty]

Originally Posted by turtle777 

All "big" small businesses (those that create jobs) will have their taxes raised. Yeay.

Thanks, great Obama.

-t

That's not necessarily so. If a business creates jobs, those added employees, their salaries and benefits, and all supplies/materials purchased in support of them are business expenses (i.e. write-offs, NOT TAXABLE). The only thing that will cause a tax rise for the business owner is his personal income .... how much he pays himself. So, if business owner double from 5 to 10 employees, his taxes do NOT necessarily increase, they only increase if HIS personal income increases and then only on the amount of the increase will it go from a marginal 35% to a marginal 39.6.
If you want a nice theoretical example. If a small business owner makes $250k/yr, under the current tax structure, if he expands, hires people, and now makes $500k/yr, he will pay a 35% marginal rate on the $250k increase he's seen ($87.5k). Under the Obama plan, that next $250k would be taxed at 39.6% instead of 35%. So, instead of paying $87.5k, he'll pay $99k -- 11.5k more. Are you seriously trying to push the idea that a small business wouldn't bother hiring or expanding because taking home $162.5k of that 250k is "worth it" but if they only got to take home $151k of that $250k, it just wouldn't be worth the trouble anymore ? As always, I urge anyone on these boards to take a real hard look at tax policy not just for the last 20 years but for the last 70. The US economy and small businesses ROARED along for decades under much higher tax burdens than either 35% or 39.6% but the Right would want you to believe that the real go-getters of this society are so fragile that they'd just throw in the towel rather than suffer a 4.6% tax increase.
I don't know about you, but I would not give up the opportunity to make an extra million bucks because my tax rate on it went from 35% to 39.6% ... and historically, nobody ever has. More jobs were created during the Clinton administration than at any time in US history ... the 39.6% top tax rate that prevailed at that time didn't seem to stop the go-getters from going and getting anyway.

[hyteckit]

It depends on how the small business is structured. Sole proprietorship, LLC, LLP, S-corporation, and so forth. I pay myself a certain salary. I'm being taxed on that. The profits from my company goes back into expanding the business by hiring more employee, buying new equipment, to spend on advertisement to build my brand name, or to invest in new opportunities.

[finboy]

Originally Posted by Uncle Skeleton 

In the debates, Obama said that small businesses are exempt from his new >250K tax, so the whole argument is moot (if he was telling the truth)

That's just it -- he WAS telling the truth if he said that, just being either disingenuous or stupid. Small businesses pay taxes AS THOUGH THEY WERE individuals in most cases, so unless he's going to invent some kind of brand new qualification system, he's talking about taxing away incentives at the small business level.

[finboy]

Originally Posted by hyteckit 

As a small business, if I wanted to avoid the higher tax rate, I would reinvest the profits back into my company and expanding my business by buying/leasing new equipment and hiring more employees.

Don't get caught doing that. The IRS can sock it to you if they think you're just doing that to avoid paying taxes they'll hit you with the accumulated earnings tax. OR you can pay higher capital gains tax rates (assuming you escape the AET) when you sell. Either way, they get you. AND YOU STILL have to plow profit back into the company and hire more people and lease more stuff just to remain competitive and healthy as a small business.

What bothers me most is that at the national level we have people talking about things that they just have no understanding of. Small business impact and incentive structures, for instance. I can excuse someone's background on, say, foreign relations (they need to at least understand the dynamics in a general sense) but with something like the lifeblood of America, small business, there's no reason why they shouldn't have thought about it before becoming successful. Said differently, anyone who gets to the candidate's level without understanding small business incentives is either a moron or they refuse to accept the premise that small business is important. Either way, they don't need to be president.

[hyteckit]

Originally Posted by finboy 

Don't get caught doing that. The IRS can sock it to you if they think you're just doing that to avoid paying taxes they'll hit you with the accumulated earnings tax. OR you can pay higher capital gains tax rates (assuming you escape the AET) when you sell. Either way, they get you. AND YOU STILL have to plow profit back into the company and hire more people and lease more stuff just to remain competitive and healthy as a small business.

What bothers me most is that at the national level we have people talking about things that they just have no understanding of. Small business impact and incentive structures, for instance. I can excuse someone's background on, say, foreign relations (they need to at least understand the dynamics in a general sense) but with something like the lifeblood of America, small business, there's no reason why they shouldn't have thought about it before becoming successful. Said differently, anyone who gets to the candidate's level without understanding small business incentives is either a moron or they refuse to accept the premise that small business is important. Either way, they don't need to be president.

IRS caught me what? Buying and leasing more equipment and hiring more employees? They encourage you to do that.

[turtle777]

Originally Posted by hyteckit 

It depends on how the small business is structured. Sole proprietorship, LLC, LLP, S-corporation, and so forth. I pay myself a certain salary. I'm being taxed on that. The profits from my company goes back into expanding the business by hiring more employee, buying new equipment, to spend on advertisement to build my brand name, or to invest in new opportunities.

Very well said.

That's what the Obamas of the world don't get: the difference between businesses that are taxed like individuals, and businesses that have a corporate structure like LLC or Inc.

-t

[Krusty]

Originally Posted by turtle777 

Very well said.

That's what the Obamas of the world don't get: the difference between businesses that are taxed like individuals, and businesses that have a corporate structure like LLC or Inc.

-t

Perhaps the confusion arose because you posted this:

2. Small businesses pay income taxes at the household level. This means
that the Obama plan to raise tax rates is a direct tax hike on small
businesses -- sole proprietorships, partnerships, S-corporations, and
family farms

.... which seems to imply that the topic of debate was those small businesses that are taxed like households.

As far as the small businesses that have a corporate tax structure, Obama's plan doesn't touch corporate tax rates, it just don't cut them further like McCain's plan. Leaving a tax alone is not a tax hike.

[turtle777]

I don't see how my post caused any confusion.

Obama claims his cuts won't harm small businesses.

He seems to forget that many "bigger" small businesses are taxed like individuals, because they don't have a corporate structure. Therefore, his current tax proposals WILL indeed harm those "bigger" small businesses. And these are exactly those that create jobs.

-t

[Chongo]

Originally Posted by turtle777 

I don't see how my post caused any confusion.

Obama claims his cuts won't harm small businesses.

He seems to forget that many "bigger" small businesses are taxed like individuals, because they don't have a corporate structure. Therefore, his current tax proposals WILL indeed harm those "bigger" small businesses. And these are exactly those that create jobs.

-t

About 30-40% of those receiving BO's "tax cut" don't pay taxes at all. How can you give someone a tax cut that doesn't pay taxes?

[turtle777]

Originally Posted by Chongo 

About 30-40% of those receiving BO's "tax cut" don't pay taxes at all. How can you give someone a tax cut that doesn't pay taxes?

Yes, but that's a different can of worms.

In essence: it's not a tax cut, it's a socialist wealth transfer. Obama is "spreading the wealth around".

-t

[Krusty]

Originally Posted by Chongo 

About 30-40% of those receiving BO's "tax cut" don't pay taxes at all. How can you give someone a tax cut that doesn't pay taxes?

Are you saying that 30-40% of the people who make less than $250k/yr don't pay any taxes ? Can you cite a source for your claim ??

[tie]

I thought everybody paid taxes. Maybe if you don't have a job (so can avoid payroll taxes) and only buy food or things online (so can avoid sales taxes), you could get by without paying anything. But does that fit 30-40% of Americans? That's pretty depressing, actually, if true.

[Krusty]

Originally Posted by tie 

I thought everybody paid taxes. Maybe if you don't have a job (so can avoid payroll taxes) and only buy food or things online (so can avoid sales taxes), you could get by without paying anything. But does that fit 30-40% of Americans? That's pretty depressing, actually, if true.

Almost anyone who works pays a flat 7.62% for the combination of SS and Medicre with no deductions or exemptions. It's funny how people like to describe Medicare and SS as "entitlement" programs in the same way they'd refer to Welfare or Food Stamps. The difference is that currently, and for at least the next 30 years or so, Medicare and SS are fully funded by the same people who receive it through deductions from their paychecks which are matched by their employers and are paid out proportionally to the amount they paid in. Welfare comes from OTHER peoples paychecks.
After years of being the champions of SS, I'm surprised that conservatives have tried to turn away from it. It's the most regressive tax there is and does not come out of either corporate taxes nor out of capital gains, and it cuts off at about $96k meaning that the more money you make, the proportionally LESS you contribute to it. Rather than destroying it, I'd think the conservatives would want to make all taxes work the way this one does.

[turtle777]

Fact is: Right now (latest numbers from 2006), 41% of Americans don't pay federal income taxes.

http://www.taxfoundation.org/research/show/1410.html

During 2006, Tax Foundation economists estimate that roughly 43.4 million tax returns, representing 91 million individuals, will face a zero or negative tax liability. That's out of a total of 136 million federal tax returns that will be filed. Adding to this figure the 15 million households and individuals who file no tax return at all, roughly 121 million Americans—or 41 percent of the U.S. population—will be completely outside the federal income tax system in 2006.

Under Obama, this will go up to about 50% if he implements his plans.

At that point, we are (theoretically) outnumbered by people who benefit by wealth distribution. Future elections are in a catch 22: those folk will NOT agree to any "negative" change, so from there on, you are in a downward spiral. Fewer and fewer people have to pay up for more and more recipients of wealth distribution.

Welcome to socialist Europe.

Thanks, o great Obama

-t

[Uncle Skeleton]

Originally Posted by turtle777 

At that point, we are (theoretically) outnumbered by people who benefit by wealth distribution.

The beneficiaries outnumbered "you" from the first day, that's the whole point. Anyone who enjoys government services like highways and defense but who is not in the highest tax bracket benefits by wealth distribution. You talk as if taxes are supposed to take money from everyone and hand it to a privileged few. Like a king collecting a tithe. The fact that it's not like that is a good thing.

[BRussell]

Originally Posted by turtle777 

Fact is: Right now (latest numbers from 2006), 41% of Americans don't pay federal income taxes.

http://www.taxfoundation.org/research/show/1410.html


Under Obama, this will go up to about 50% if he implements his plans.

At that point, we are (theoretically) outnumbered by people who benefit by wealth distribution. Future elections are in a catch 22: those folk will NOT agree to any "negative" change, so from there on, you are in a downward spiral. Fewer and fewer people have to pay up for more and more recipients of wealth distribution.

Welcome to socialist Europe.

Thanks, o great Obama

-t

1. Everyone pays taxes. Due to the proliferation of tax credits for everything under the sun, it's true that lots of people don't pay federal income taxes, but they still pay payroll taxes, sales taxes of all kinds, fees, etc. Those other taxes tend to be highly regressive, and the federal income tax is the one place where these other regressive taxes can be balanced out a bit. So what happens? Conservatives all complain about the progressivity of the one progressive tax we have, rather than the regressivity of all the other ones.

2. The earned income tax credit and child tax credit and the like are conservative Republican ideas, intended to be better alternatives to welfare and other government programs. For that matter, the whole idea of cutting taxes without thought of the consequences is a conservative Republican idea - hell, it's THE conservative Republican idea. If this is a big concern, that's where your ire should be directed, not at Obama, who is only adding a small amount to this overall trend.

[hyteckit]

Is turtle complaining about Pres. Bush's tax cuts? Did I read that right?


Anyway, those who run a small business and don't make enough money or losses money in their business don't pay Federal Income taxes.

You want those who made zero income or negative income to pay Federal Income taxes? They do pay other types of taxes though.

Guess what happens when many more small business start to loss money due to Pres. Bush economic policies? Even more people not paying Federal Income taxes.


Also, many mothers have to work part time jobs in recent years in order to have enough money to buy food for their kids. However, they don't make enough money to be subjected to Federal Income Taxes. There are just a lot more part-time workers trying to make ends meet. We are talking about less than $10,000/yr.


http://www.taxfoundation.org/research/show/542.html

Broadly speaking, the 42.5 million zero-tax filers are: low-income, young, female-headed households, part-time workers, and beneficiaries of the $1,000 per-child tax credit or the Earned Income Credit. (See Table 3.)

[turtle777]

Originally Posted by BRussell 

... but they still pay payroll taxes, sales taxes of all kinds, fees, etc. Those other taxes tend to be highly regressive.

Huh ?

How is sales tax regressive ?
Do you pay 5% when you spend $ 100, and 2% when you spend % 1,000 ?

It's a FLAT tax.

-t

[BRussell]

Originally Posted by turtle777 

Huh ?

How is sales tax regressive ?
Do you pay 5% when you spend $ 100, and 2% when you spend % 1,000 ?

It's a FLAT tax.

-t

You're right, sales tax rates aren't regressive. But payroll taxes are regressive due to the high income exclusion (I believe it stops around $100,000?), and that's the biggie. And sales taxes have a regressive effect (even if rates are flat) if lower-income people pay a greater percentage of their money in sales taxes than higher-income people, and I'd be willing to bet that's true.

[Krusty]

Sales tax is somewhat regressive but not because of the tax rate. It's somewhat regressive only because poor people typically have to spend far greater portions of their incomes on necessities that are taxed. A rich person does not have to spend his entire income on necessities and can divert a good chunk of it away to non-taxable items (tax shelters, such as a second home) or investments that actually provide income. If you have a person that makes $400k/yr vs someone who makes $40k/year, the first person doesn't have to spend 10x the amount for gas, food, clothes, or even consumer goods than the person making $40k.

So, the sales tax is technically a flat tax but it has a twinge of regressiveness due to the proportion of income a person is forced to spend on taxable things.

However, sales tax is the least worrisome of regressive taxes IMHO.

[hyteckit]

But a rich person making a lot of money should pay more for national defense.

They are worth more, thus they should pay more for national defense because they have more to loose. Consider it "Homeland Security" Insurance.