I'm gonna print this out and pin it on my bulletin board .. seriesly ! 
Posted on 08/23/2011 9:32:38 AM PDT by Harry Callahan SFPD
"The fact is the idea that tax rates have anything to do with business creation is a myth. Nobody who has a great idea and good prospects is going to not go for it because of tax rates." -quote by a Liberal
(Excerpt) Read more at thesituationist.wordpress.com ...
Why? He appears to be asking a legitimate question.
;-)
Taxes represent a factor in the cost to open and operate a business. When the Business Plan is developed, part of it is start up costs, which includes taxes as well as projected net revenue which also factors in taxes.
If the projected revenue is <= 0, you don’t open the business. Many businesses operate on a 5-15% margin. A 4% higher tax could very well be the difference between the decision to open or not.
Your professor has clearly never owned a business nor done the proper due diligence to arrive at the decision to open one or not. His analogy is flat out inapplicable.
And also, taxes are a part of operating costs. What you give to the government is not available for supplies, goods or employees. Taxes certainly may be the difference between having 10 employees and having 12.
Finally, having a governmental philosophy oriented towards increasing taxes establishes uncertainty. No one wants to open a new business without being able to reasonably project costs, including and especially taxes, which is the major cost that is beyond the business owner’s control.
I hope that helps.
“You’re making 100K at 25% rate. If you have a chance for a raise to 150K at 35% rate, everyone is going to take the raise.”
If I was doing $100K-level work and someone was going to overpay me $50K, I think I’d not be a worried about the taxes, either.
BUT, if I’m doing $150K-level work, I’m going to negotiate ways to receive my compensation in forms other than taxable.
Check the poster’s hit-and-run posting history.
A raise is not the apropo analogy.
A more proper one would be paying for overtime.
Some folks will work more than 40 hours, or on weekends because of the time and a half rate.
How many would do it at a three-quarter time rate?
I'm gonna print this out and pin it on my bulletin board .. seriesly !
Please. Investment theory 101 requires you to include the tax implications of an investment. Your professor is out to lunch. Businesses do not operate in a world of guaranteed tenured synecures, where a 150k job at one university at a 35% incremental tax rate is clearly better than a 100k job across town at a 25% incremental tax rate.
Business investment is a gamble. The payoff is the profit to be realized from the gamble. If a third party, say the government, says, “Heads, I win, tails, you lose.”, in other words says that if your investment pays off, it’ll take a third of the profits, but if it goes sour, that’s your problem, then certain investments that looked marginally attractive are strongly discouraged.
Many investments are slam dunk, almost no tax practical tax rate will discourage them. For instance, drilling an oil well in a proven field. Other investments are much more dicey, for instance, drilling an exploratory well in an undeveloped area, in the hope that if oil is found, you can get the leases and permits to extract the oil and then still make a profit if oil prices don’t collapse.
I changed jobs as a software engineer around 1990. After the job change, I was contracting in spare time for my former employer. After adding up all the taxes for that part-time work, I decided it wasn’t worth it. My salary was only in the upper middle income range but the taxes were taking over half of what I was making in the part time position. I had the option of not working and earning the extra income. I choose to do other things. A major reason was the taxes as well as the hassle of filing the forms.
“High marginal tax rates discourage voluntary overtime.”
Out of the 50K raise example, you receive about 22K after federal taxes. Take another 6K for state income taxes, 5K for FICA, and that leaves 11K (or less) of which another 1K will go for sales taxes on anything you buy.
Obviously you're going to have extra responsibilities, work longer hours and have added stress to justify the 50K raise (even though you'll only see 10K). Don't forget inflation and dollar depreciation. That 10K will likely loose 1K a year in purchasing power.
So the government, after you do the paperwork and mail them their 40K out of your 50K, gets to buy votes, brain wash your child, take expensive jaunts, impress people, receive accolades, and reward their cronies.
Tell me who is stupid and who is smart. The game has been rigged in favor of the house and the odds keep climbing in their favor.
So how much is your life worth? How long to you expect to live? How long will you continue to play THEIR GAME???
Thankfully, once you've made enough for the essentials, anything else (i.e. buying new toys) just becomes a burden on the amount of time you have to spend around those you love or in simply enjoying life.
Always remember, the best things in life truly are free or cost very little.
Starve the "Beast" and save those great ideas for when the odds are in your favor and use your time to prepare for trouble ahead. The size of the federal government, and some states, has grown larger than the ability of the people to support it and is literally surviving on "borrowed" time.
Regards,
I don’t know that he is, but it seemed a concern troll question to me. I could well be wrong, though, and you might well be right.
Wow! That was right in the middle of my posting ... Poof!
nope. Looks like the mods agreed with me.
ok
Yes, exactly so.
In the prof’s example.
100k vs 150k.
40 hours a week vs 60 hours a week.
You’re actually getting the exact same pay for the hours that you work, except now, instead of getting 75k take home, you’re getting, 97.5k.
On a per hourly basis, you’d expect to earn at least 112.5k. Instead, you’re getting 15k less.
On an efficiency basis, you’re getting paid less to work more. Makes no sense, economically.
And who the hell gets a 50% raise from 100k to 150k in one go?
My brother runs a small business and has had NUMEROUS complaints by workers that his incremental merit and time increases in gross pay work out to less take home pay because of “bracket creep”.
And businesses often “make or break” based upon very small profit margins.
If taxes were lower, any number of business plans that are not presently economically viable WILL be profitable.
If taxes are increased, any number of business plans that are currently economically viable will no longer be profitable and thus they will go out of business.
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