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When a tax plan isn’t a tax plan
Posted by: McQ on Wednesday, October 15, 2008

Speaking of Karl Marx, he's not doing so badly here either:
The fracas over Obama's tax plan broke out Sunday outside Toledo when Joe Wurzelbacher approached the candidate.

Wurzelbacher said he planned to become the owner of a small plumbing business that will take in more than the $250,000 amount at which Obama plans to begin raising tax rates.

"Your new tax plan is going to tax me more, isn't it?" the blue-collar worker asked.

After Obama responded that it would, Wurzelbacher continued: "I've worked hard . . . I work 10 to 12 hours a day and I'm buying this company and I'm going to continue working that way. I'm getting taxed more and more while fulfilling the American Dream."

"It's not that I want to punish your success," Obama told him. "I want to make sure that everybody who is behind you, that they've got a chance for success, too.

Then, Obama explained his trickle-up theory of economics.

"My attitude is that if the economy's good for folks from the bottom up, it's gonna be good for everybody. I think when you spread the wealth around, it's good for everybody."
And who would be this "spreader of wealth" - well certainly not the system of capitalism. The system of government is what he's talking about. And he's hidden the "how" of his redistributionist scheme in the snake oil of his "95% of Americans will get a tax break" nonsense.

Also note that Wurzelbacher represents exactly who McCain claimed would be effected by the tax increase (and who Obama denied would be effected) in the last debate - small business.

How many times does one have to hear that small businesses are the engine that drives our economy to understand how foolish raising taxes on them is.

If your economic priority is jobs, why would you deincentivize growth among small business? Higher taxes? Guess that new job they were going to add will go unfilled.

Multiply that by the millions of small businesses this will effect and you get the point.

Secondly, there's a difference between earning one's way and being handed money for doing nothing. What incentive is there to do better if a person is satisfied with the level they've attained by receiving redistributed monies? They keep doing what they're doing "officially" and work "off the books" or "under the table" to supplement their income.

The "95%" plan will create a new welfare class which will become perfectly complacent with the "tax credits" they receive each year in the form of a check. A class totally dependent on government payments and focused on maintaining that income stream. Any guess who they'd be inclined to support in future elections?

Marx, of course, would describe Obama's plan as "from each according to his ability, to each according to his need."

Wurzelbacher and any small business owner is in the first category. Obama is trying to put a significant portion of America in the second category and provide incentives for them to remain there. That, of course, will provide a future "market problem" to be solved by even more government.

Sounds like a gem of plan for this economy, doesn't it?
 
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Comments
The plumber is a rich fat cat. What a greedy SOB, making money off poor people to unplug their drains?? Unplugged drains are a RIGHT, the same as health care.
 
Written By: Marxist College Professor
URL: http://
Hey, stop posting about issues, and get back to snarky posts about Obama’s association with terrorists, convicted financiers, and voter fraud...

And when the economy starts really tumbling after the triumvirate starts passing redistribution of wealth, what’s their excuse going to be?

I know if they don’t get the filibuster proof majority that is expected, they’ll just blame the Republicans for not going along with their "compromise" bills (ie, everything the Dems want, and a bone for Reps.)

Thinking about a future under O/P/R is scary. They could fundamentally change the rules for decades. And not in a good way. If they had any competence what-so-ever, they would have been able to accomplish something positive over the last two years.

It fills me with Fear Uncertainty and Doubt. And I know that right there is a market killer.
 
Written By: Keith_Indy
URL: http://asecondhandconjecture.com
Obama’s uncharacteristic "Share the Wealth" moment of honesty reminds me: does anyone know a poem called "Give Money to the Government"? I read it years ago in an SF anthology edited by Jerry Pournelle. I remember only one part, something like:

"Give money to the governemnt? Whatever for?"
Give money to the government? They’d only start
another war?"

Does anyone know who wrote it or where I might find the full text? I believe it was written circa 1900. It’s somewhat Kiplingesque but not by Kipling.
 
Written By: Bilwick
URL: http://
I’m in the same situation as the plumber. If the "redistribution" is too heavy, we’ll simply scale back. I’ll still have a job but 2 or 3 of my employees won’t, because I simply won’t be able to afford to keep them. But I’m sure the tax breaks Obambi plans for the 95% will lift them up, right?
 
Written By: Linus
URL: http://
I completely agree about your mindless harping of Obama’s supposed "association" with socialists.

His alleged "association" with socialists has no bearing on the topic here.

However, I must point out that most Americans agree the dirty, fat-cat plumbers need to be put in their place.
 
Written By: Marxist College Professor
URL: http://
"2 or 3 of my employees won’t, because I simply won’t be able to afford to keep them"

I am pretty sure the tax will be on personal income, which would come from the profit of a business, not the gross income of a business.
 
Written By: timactual
URL: http://
So, the tax would be on profit. Profit would decrease with higher taxes. Costs (jobs) will be cut to compensate. Not sure I understand.
 
Written By: Is
URL: http://
[QUOTE]I am pretty sure the tax will be on personal income, which would come from the profit of a business, not the gross income of a business. [/QUOTE]

And if profits go down, then the business needs to cut back on expenses to keep profits up. Have you ever tried running a business? Taxing profits is no different than taxing the gross income. Taking money from the operations of a business is taking its money, no matter where the money comes from (e.g. why corporate taxes hurt the American, because corporations just raise their prices in response to taxation).
 
Written By: Samra
URL: http://
First - here is an extended interview with Mr. Wurzelbacher, who appears to be very astute about what he’s getting into as a small business owner, and his evaluation of Sen Obama.

Second, speaking as a small business owner myself, I wonder if timactual is aware how ignorant his post is... or maybe he can direct me to a magic pot of money somewhere that makes it possible to pay higher taxes and not affect profitablity.

hmmm. to paraphrase our likely next president - "from each according to his ability, to each according to his need"

hey, it’s worked so well wherever its been tried so far.
 
Written By: JH
URL: http://
He needs to pay more taxes. If he can afford to buy that business, then he can afford to give the rest of us some of it. I can’t believe My man Obama isn’t raising taxes on anyone making over $50,000. I’m sure he will wise up once he gets in the White house. And if the dumbass is stupid enough to work 10-12 hours a day, then its his own damn fault. I think most of you dumbasses should work more.

A smart man can figure out how not to work, and let some other dumbass work for him. This country is getting better all the time, and I can’t wait to start getting some more of your rich asses money once we take control of this selfish country.

 
Written By: TheBad
URL: http://
A smart man can figure out how not to work, and let some other dumbass work for him. This country is getting better all the time, and I can’t wait to start getting some more of your rich asses money once we take control of this selfish country.
I am pretty sure this is parody, but there are a lot of people who feel like that
 
Written By: capt joe
URL: http://
Someone once said it is good to define terms;
"In the accounting sense of the term, net profit (before tax) is the sales of the firm less costs such as wages, rent, fuel, raw materials, interest on loans and depreciation....

Gross profit is profit before Selling, General and Administrative costs (SG&A), like depreciation and interest; it is the Sales less direct Cost of Goods (or services) Sold (COGS),

Net profit after tax is after the deduction of either corporate tax (for a company) or income tax (for an individual).

Operating profit is a measure of a company’s earning power from ongoing operations, equal to earnings before the deduction of interest payments and income taxes."

http://en.wikipedia.org/wiki/Profit_(accounting)


" that makes it possible to pay higher taxes and not affect profitablity."

Nobody said it wouldn’t. In fact, I specifically said "... which would come from the profit of a business...".


"Profit would decrease with higher taxes. Costs (jobs) will be cut to compensate"

Yes, profits would be decreased by higher taxes. Costs may or may not be cut, depending on whether these costs were necessary for the operation of the busines. For instance, why would the plumbing contractor lay off plumbers if they were producing income?

Since I am assuming that small businesses would opt for subchapter S tax status,

"In general, S Corporations do not pay any income taxes. Instead, the corporation’s income or losses are divided among and passed through to its shareholders. The shareholders must then report the income or loss on their own individual income tax returns."

"Example: Widgets Inc, an S-Corp, makes $10,000,000 in net income (before payroll) in 2006 and is owned 51% by Bob and 49% by John. Keeping it simple, Bob and John both draw salaries of $94,200 (which is the Social Security Wage Base for 2006, after which no further Social Security tax is owed).

Employee salaries are subject to FICA tax (Social Security & Medicare tax) —currently 15.3 percent—half of which is paid by the employer and half by the employee. The distribution of the additional profits from the S-Corp will be done without any further FICA tax liability.

Widgets Inc now has $9,797,187 of net income for 2006, after paying salaries ($10,000,000 - $94,200 * 1.0765 [employer FICA] * 2 employees). On Bob’s personal tax return, he will report $4,996,565 of business income (in addition to his $94,200 salary), and John will report $4,800,622. Also, remember that Bob and John each had the employee half of the FICA tax withheld from their salaries (94,200 * 0.0765 = 7,206.30 each.)"

http://en.wikipedia.org/wiki/S_corporation


"Have you ever tried running a business? Taxing profits is no different than taxing the gross income"

Have you ever tried taking an accounting class?

"Gross income is commonly defined as the amount of a company’s or a person’s income before all deductions or any taxpayer’s income, except that which is specifically excluded by the Internal Revenue Code, before taking deductions or taxes into account."

http://en.wikipedia.org/wiki/Gross_income
 
Written By: timactual
URL: http://
And you know profits need to be penalized. Profits are bad. Except when the State profits. That’s good.
 
Written By: Bilwick
URL: http://



When you see a Democrat, give them this message from me:







 
Written By: James Marsden
URL: http://
"Have you ever tried running a business? Taxing profits is no different than taxing the gross income"

Have you ever tried taking an accounting class?
The point is, either way you tax it, you are reducing available capital.
 
Written By: Keith_Indy
URL: http://asecondhandconjecture.com
Timactual - the plumber may end up laying off employees because demand will decrease for his services. Demand will decrease because plumbers, being taxed more, will raise their prices to compensate as much as possible. If demand decreases enough, he will not be able to keep his staff busy enough to cover their costs. He may not raise prices enough to fully compensate for the tax and he may find a balance that allows him to keep everyone employed. Chances are that will mean he, as the owner, will take the only - or the largest (if he can work out pay cuts for his employees) - decrease in his net income. Now, faced with the prospect of making less than before a tax increase, he might not be so interested in working as hard. He may even, under onerous enough conditions, fold up as the extra work of running a business is not worth the lackluster profits.
 
Written By: Grimshaw
URL: http://
This is your first and only notice that your blog has been found to be unfair to President Obama’s Revolutionary Government. You will receive no further notices. You are advised to settle your affairs and present yourself to the nearest Ministry of Revolutionary Justice Official Receiving Station. Failure to do so will result in destruction of your home and everyone residing there.

Yours in Justice,

FDR
 
Written By: Fairness Doctrine Rep
URL: http://
"The point is, either way you tax it, you are reducing available capital."

Eventually, all capital comes from profits, not just business profits but also the personal profit of after tax income from wages. In days of yore farmers saved a portion of each crop for the next years seed. If the landlord took that profit/surplus for taxes, there was no crop the next year. If the government takes too much in taxes there is no surplus to invest for new machinery, etc., and economic growth fades away and jobs disappear as old machinery wears out and is not replaced.


." Demand will decrease because plumbers, being taxed more, will raise their prices to compensate"

And just how many plumbers make $250K? College seems to be a waste of time and money.

"...work of running a business is not worth the lackluster profits."

You must make a heckuva lot of money if $250k+ is "lackluster". No sympathy here.
 
Written By: timactual
URL: http://
Stark raving madness.

Small businesses:
http://www.kansas.com/news/nation_world/story/554219.html

The record: Obama has proposed tax increases for workers and businesses earning more than $250,000 a year. The vast majority of small businesses — 90 percent or more by some estimates — fall well below that $250,000 threshold.

http://blogs.zdnet.com/ITFacts/index.php?blogthis=1&p=12239

6 million non-sole prop small businesses in US. So... 600K small businesses. And we’re talking.. what, five percentage points? Ten? And, as Tim points out, this is net, not gross income. Let me put it gently: even the Freidrich Hayek, black-box, hold-everything else-constant calculations of job losses here are not even statistical blips against the *enormous* layoffs coming from how business *and* personal income is affected by the $2 trillion in stock market losses this year.

But, of course, in the real world, you have to balance the increases against the jobs that are going to be added by the increased income available to 95% of Americans getting the tax cuts.. about which you also wildly fabricate. BUt we’ll get to that. You also have to add the what Americans are saving in not having to pay off an extra X trillion in national debt, which we’d be adding to *without* said tax increases - unless of course you wanted to cut government spending. Which, of course, you would. But tell me, how do you magically make thse government spending cuts *not also* end up costing jobs among the vendors and contractors and Social Security recipients (and middle-aged adults who will have to quit working to take care of parents after you scrap the program, or move into the stock market, same thing)

But back to the lunacy:


The "95%" plan will create a new welfare class which will become perfectly complacent with the "tax credits" they receive each year in the form of a check. A class totally dependent on government payments and focused on maintaining that income stream. Any guess who they’d be inclined to support in future elections?


What? Obama’s plan is going to turn 95% of the US population into people sitting around and waiting for a check from the government? Hello, these are *tax cuts*. The refund credits and so forth are subtracted from the rest of the tax liabilities, and the net result is *not* a check unless a) your taxes have been withheld from your paychecks and you don’t owe additional money - which means you *have a job*, or unless you are already not paying any taxes. And let’s say, hypothetically, you’re one of these much-ballyhooed people who don’t pay income taxes (minus retirees, minus children under 18, minus the vast majority who *do* pay payroll taxes, capital gains taxes, etc)- are these people going to feed themselves for a year on Obama’s $1000 in tax credits? Do you know how many of them are, in fact, "dependent" on government and not actually employed?

PS: Any of the more factually-oriented Q&O editors want to try to come up with the much smaller number of Americans who pay no federal taxes of any kind, rather than the bogus income tax number?

Marx, of course, would describe Obama’s plan as "from each according to his ability, to each according to his need."

Congradulations, you’ve once again delivered a searing indictment of Obama’s tax plan - and John McCain’s tax plan - and every 21st century tax system on earth. Even flat tax plans on the outer fringes of the far right meet your version of "from each according to his ability", because a flat 10% tax on everyone *still* taxes more absolute dollars from people with higher incomes. You have managed to effortlessly prove that the entire planet lives under a Communist system because people who make more money pay (in theory) more money in taxes. And that, of course, *is* communism. That was the key insight of the Soviet Union’s famous communist economy! Percentile tax brackets!

[sarcasm> So, now that you’ve exposed this master plan for a nation of government dependents, I want to hear more about his plan convert the whole country to Islam! [/sarcasm>
 
Written By: glasnost
URL: http://
During tax season, I volunteer at our local community center doing tax returns for folks eligible for EITC (Earned Income Tax Credit). Are you aware that people who work for a government or quasi government entity and who are entitled to EITC can actually get the money included in their paychecks? Instead of having Federal income tax deducted, they get a portion of their notional EITC added to their check. Since it looks like these folks will be receiving a lot more money, isn;t it nice that they won’t have to wait all year to receive it? Right now some of them receive up to $4800.

In addition, it looks like the Obama plan will enlarge the number of people who are eligible for the credits - even if they don’t pay any taxes. We had record numbers of people last year who don’t normally file a tax return because they don’t get enough money come in to file for the supplement.

I have always found it interesting the the bottom quintile of the income scale spends much more than its putative income - now I know why.
 
Written By: fiona
URL: http://
Timactual -

The lackluster profits are the possible outcome IF taxes are raised. But either way, apparently there is some income threshold where you don’t care who is taxed or how much. At least you’re upfront about your classism and economic ignorance.

As to your comment about the income of plumbers and college - what’s the point? That’s a complete non sequitur. Do you have something against people who make a lot of money without a college education? By chance are you a Democrat? That would fit.
 
Written By: Grimshaw
URL: http://
"not even statistical blips against the *enormous* layoffs coming from how business *and* personal income is affected by the $2 trillion in stock market losses this year."
I wasn’t aware of many businesses who fund their payroll and operations in the stock market Glasnost. Please do enlighten us.

 
Written By: Grimshaw
URL: http://
On balance, I would worry more about the increase in tax credits and less about the increase in taxes. We have proven that taxes can be cut - in fact its one way the GOP gets into power. But goodies and give-aways are much harder to kill.

Now, in fact, I am not against some income re-distribution, but I would limit it to the bottom decile or quintile, and label it a SUBSIDY instead of tax credit. Just so we don’t forget what it actually is and make sure net tax payers are always a large majority of our population.

EITC at least gets people working and offsets the regressive payroll tax.
Child Tax Credits at least will be paid back when the kiddies grow up and pay taxes themselves, especially social security which needs the extra workers.

I’d be willing to drop the Child Tax credit if the SS stopped being generational or if we could tax single people who will take SS but did not breed to keep the ponzi scheme going..(tongue in cheek here...)
 
Written By: Harun
URL: http://
But, of course, in the real world, you have to balance the increases against the jobs that are going to be added by the increased income available to 95% of Americans getting the tax cuts..
And we come back ’round to this canard.

The government is going to give certain people money, by taking it away from others.

They aint talkin’ about tax cuts, they’re not even talking about tax credits, they’re talking, CASH for their desired soc!al outcomes. Don’t pay taxes, no problem, they’ll still give you money.

No need to make a new label for it, it’s called WELFARE. And Obama is basically promising to make middle class Americans welfare recipients.
 
Written By: Keith_Indy
URL: http://asecondhandconjecture.com
"But, of course, in the real world, you have to balance the increases against the jobs that are going to be added by the increased income available to 95% of Americans getting the tax cuts.."

Yep. And if you also factor in the economic costs of shuffling all this money around, you probably get a net loss to economic productivity and growth. Take a job from Peter to hire Paul. It is a government program voted for by an idiot, full of sound and fury but improving nothing.

*********************************

"apparently there is some income threshold where you don’t care who is taxed or how much"

Yes and no. Emotionally I really do not have any sympathy for the poor little rich folks who may have to get a new Mercedes every other year instead of every year. On the other hand, I dislike taxes of any sort for several reasons, and I do recognize the economic costs involved. I also have little patience for sloppy thinking, poor reading comprehension, and invincible ignorance(including my own, if that is any consolation).

"That’s a complete non sequitur"

Not completely, but it also was not completely serious, either. Lighten up.

***************************

"On balance, I would worry more about the increase in tax credits and less about the increase in taxes."

Me too. If I recall correctly, the economy grew pretty well even when marginal tax rates were much higher than they are now.

 
Written By: timactual
URL: http://

 
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