Obama's 3-Point Plan to Fix Everything

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Still@jones's picture
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Joined: 2009-03-22

anonymous wrote:Still@jones wrote:$350,000/year is a good income. When you are making that kind of cake, I'm sure you aren't worrying about paying for kids education. As for job creation, I think the argument that it spurs job creation is counter-intuitive just because employees are deductible. I believe you would be more inclined to hire a junior with a tax increase. Another point I could make is that marginal tax rates help promote capital expenditures. If you know you are approaching $400k for a year; you might be more inclined to purchase a new computer network or a new company car (which you will use more for personal use but still take the deduction).  I think the better argument is that tax reductions lead to more investment, in general, which has an overall positive effect. I believe this might be true. I only question it because I believe a business owner can invest more efficiently in their own business.

 
Still, you've got this pretty much backwards.   Let's assume that you make $300,000 and are paying $100,000 in taxes and taking home $200,000.  If taxes go up and you are now paying $150,000 in taxes and taking home $150,000, the last thing that you are going to do is hire an employee.   You start to get worried about paying your own bills. 
 
Imagine things go in the other direction and your after tax pay goes from $150,000 to $200,000.  You now have $50,000 "extra" that your family isn't used to spending.  That money can be reinvested in your business to try to make more money.
 
Let's use an extreme example.  Taxes are very low for incomes of below $300,000 and very high for incomes above $300,000.  You make $300,000.  Would you hire someone?  The answer should be "no".  There is no benefit.  If you don't recoup the expense, the hiring costs you money.  If hiring someone helps you make money, it doesn't give you much benefit because of the higher taxes.  Instead, you would simply choose to work less because high taxes take away one's incentive to make more money.  I feel like I've beaten this point to death. Why would anyone reinvest post-tax dollars into their business??? They wouldn't. Pre-tax dollars are what get invested into a business (and are unaffected by tax rates for most small businesses). Post tax dollars go towards personal consumption. If you raise taxes on consumption dollars, small business owners will be more inclined to invest in their own businesses. Please tell me where this logic is wrong?

Moraen's picture
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Joined: 2009-01-22

Still@jones wrote:

anonymous wrote:Still@jones wrote:$350,000/year is a good income. When you are making that kind of cake, I'm sure you aren't worrying about paying for kids education. As for job creation, I think the argument that it spurs job creation is counter-intuitive just because employees are deductible. I believe you would be more inclined to hire a junior with a tax increase. Another point I could make is that marginal tax rates help promote capital expenditures. If you know you are approaching $400k for a year; you might be more inclined to purchase a new computer network or a new company car (which you will use more for personal use but still take the deduction).  I think the better argument is that tax reductions lead to more investment, in general, which has an overall positive effect. I believe this might be true. I only question it because I believe a business owner can invest more efficiently in their own business.

 
Still, you've got this pretty much backwards.   Let's assume that you make $300,000 and are paying $100,000 in taxes and taking home $200,000.  If taxes go up and you are now paying $150,000 in taxes and taking home $150,000, the last thing that you are going to do is hire an employee.   You start to get worried about paying your own bills. 
 
Imagine things go in the other direction and your after tax pay goes from $150,000 to $200,000.  You now have $50,000 "extra" that your family isn't used to spending.  That money can be reinvested in your business to try to make more money.
 
Let's use an extreme example.  Taxes are very low for incomes of below $300,000 and very high for incomes above $300,000.  You make $300,000.  Would you hire someone?  The answer should be "no".  There is no benefit.  If you don't recoup the expense, the hiring costs you money.  If hiring someone helps you make money, it doesn't give you much benefit because of the higher taxes.  Instead, you would simply choose to work less because high taxes take away one's incentive to make more money.  I feel like I've beaten this point to death. Why would anyone reinvest post-tax dollars into their business??? They wouldn't. Pre-tax dollars are what get invested into a business (and are unaffected by tax rates for most small businesses). Post tax dollars go towards personal consumption. If you raise taxes on consumption dollars, small business owners will be more inclined to invest in their own businesses. Please tell me where this logic is wrong?I actually have to agree with Still@jones here.I don't re-invest post tax dollars in my business.I have no problem raising taxes on consumption dollars as long as it is fair.  Just lower my income taxes.

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