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  • Tax hikes

    What is the real objection to hiking taxes for those that make >250K?

    I understand, though do not agree with, those that are simply against taxes and think they should fight them at all times.

    But one of the things I keep hearing is that it will hurt small business owners the most.

    How? The proposal is to increase income taxes for those bringing home >250K. If a small business owner has their income taxed how does that hurt the actual business? They could decrease their income (they own the business after all) and pump that money back to the business. Doing that they would both avoid the tax increase and make their business stronger, right?

    Do I misunderstand something? Or are the objectors simply stating that most that make >250k own small a small business?

    If so then what the objectors are really saying is that owning a successful small business make you more sympathetic and lovable than somebody that works for said business owner?
    I’m not racists, I have republican friends. Radio show host.
    - "The essence of tyranny is the denial of complexity". -Jacob Burkhardt
    - "A foolish consistency is the hobgoblin of little minds" - Emerson
    - "People should not be afraid of it's government, government should be afraid of it's People." - Line from V for Vendetta
    - If software were as unreliable as economic theory, there wouldn't be a plane made of anything other than paper that could get off the ground. Jim Fawcette
    - "Let me now state what seems to me the decisive objection to any conservatism which deserves to be called such. It is that by its very nature it cannot offer an alternative to the direction in which we are moving." -Friedrich Hayek
    - "Don't waist your time on me your already the voice inside my head." Blink 182 to my wife

  • #2
    Re: Tax hikes

    Rough understanding from my dad who moans about it a lot. He has a small construction company. He pays some crazy taxes. He pays some crazy insurance. He pays some crazy licensing, permit, and bonding fees. You can not write off 100% of some things, or any of other things. They have to be amortized (sp). So even though he spent the money to improve his business, it still counts as income. Couple that with (gasp) saving money for lean times or big purchases. He is old school, pay for it when you have the money for it. He has a choice now. Pay for it outright but take the tax hit if he is saving for 2-3 years to get it, or take a loan and pay the bank "tax".

    He doesn't have a staff of accountants to find every loophole for him. He immigrated here for the American dream, earned his citizenship, and made that dream come true. Now between the crazy nitpicky laws, overzealous inspectors, a litigous society, and the costs of being in business, he makes more money but takes home less. 250k on paper is not the same as 250k in your pocket. The only reason he stays in business now is because my brother works for him. He would have retired several years ago and taken a city job till retirement otherwise.

    Of course this is my view from his rantings (usually his main topic when we call). I couldn't tell you how reflective that is of the real world :)
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    • #3
      Re: Tax hikes

      My theory is that most people that make >250k are just like most others, live barely within their means and are in debt up to their eyeballs. They don't really have more money, just more stuff that they have to pay for, and live "paycheck to paycheck" without any more disposable income than those that earn a fraction of what they do. Of course I only base this on people I know personally and celebrity "millionaires" I hear about filing bankruptcy that perhaps shouldn't have bought that 7th house and that 15th car.
      Last edited by Harlequin; 08-11-2010, 06:51 AM.

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      • #4
        Re: Tax hikes

        It is a lot more that the sunsetting tax hikes.
        http://www.atr.org/userfiles/111809p...eid%283%29.pdf
        Individual Mandate Tax (Page 324/Sec. 1501/$8 bil/Jan 2014): Starting in 2014, anyone not buying “qualifying” health insurance must pay an income surtax according to the following schedule (capped at 8 percent of income):

        Single Single +1 Single +2


        2014 $95 $190 $285
        2015 $350 $700 $1050
        2016, etc. $750 $1500 $2250


        Exemptions for religious objectors, undocumented immigrants, prisoners, those earning less than the poverty line, members of Indian tribes, and hardship cases (determined by HHS).

        Employer Mandate Tax (Page 348/Sec. 1513/$28 bil/Jan 2014): If an employer does not offer health coverage, and at least one employee qualifies for a health tax credit, the employer must pay an additional non-deductible tax of $750 for all full-time employees. Applies to all employers with 50 or more employees.

        If the employer requires a waiting period to enroll in coverage of 30-60 days, there is a $400 tax per employee ($600 if the period is 60 days or longer).

        Excise Tax on Comprehensive Health Insurance Plans (Page 1979/Sec. 9001/$149.1 bil/Jan 2011): Starting in 2013, new 40 percent excise tax on “Cadillac” health insurance plans ($8500 single/$23,000 family). Higher threshold ($9850 single/$26,000 family) for early retirees and high-risk professions. CPI +1 percentage point indexed.

        From 2013-2015, the 17 highest-cost states are 120% of this level.

        Employer Reporting of Insurance on W-2 (Page 1996/Sec. 9002/Min$/Jan 2011): Preamble to taxing health benefits on individual tax returns.

        Medicine Cabinet Tax (Page 1997/Sec. 9003/$5 bil/Jan 2011): No longer allowable to use health savings account (HSA), flexible spending account (FSA), or health reimbursement (HRA) pre-tax dollars to purchase non-prescription, over-the-counter medicines (except insulin)

        HSA Withdrawal Tax Hike (Page 1998/Sec. 9004/$1.3 bil/Jan 2011): Increases additional tax on non-medical early withdrawals from an HSA from 10 to 20 percent, disadvantaging them relative to IRAs and other tax-advantaged accounts, which remain at 10 percent.

        FSA Cap (Page 1999/Sec. 9005/$14.6 bil/Jan 2011): Imposes cap on FSAs of $2500 (now unlimited).

        Corporate 1099-MISC Information Reporting (Page 1999/Sec. 9006/$17.1 bil/Jan 2012): Requires businesses to send 1099-MISC information tax forms to corporations (currently limited to individuals), a huge compliance burden for small employers

        Excise Tax on Charitable Hospitals (page 2001/Sec. 9007/Min$/immediate): $50,000 per hospital if they fail to meet new "community health assessment needs," "financial assistance," and "billing and collection" rules set by HHS.

        Tax on Innovator Drug Companies (Page 2010/Sec. 9008/ $22.2 bil/Jan 2010): $2.3 billion annual tax on the industry imposed relative to share of sales made that year.

        Tax of Medical Device Manufacturers (Page 2020/Sec. 9009/$19.3 bil/Jan 2010): $2 billion annual tax on the industry imposed relative to shares of sales made that year. Exempts items retailing for <$100.

        Tax on Health Insurers (Page 2026/Sec. 9010/$60.4 bil/Jan 2010): $6.7 billion annual tax on the industry imposed relative to health insurance premiums collected that year.

        Eliminate tax deduction for employer-provided retirement Rx drug coverage in coordination with Medicare Part D (Page 2034/Sec. 9012/$5.4 bil/Jan 2011)

        Raise "Haircut" for Medical Itemized Deduction from 7.5% to 10% of AGI (Page 2034/Sec. 9013/$15.2 bil/Jan 2013): Waived for 65+ taxpayers in 2013-2016 only

        $500,000 Annual Executive Compensation Limit for Health Insurance Executives (Page 2035/Sec. 9014/$0.6 bil/Jan 2013)

        Hike in Medicare Payroll Tax (Page 2040/Sec. 9015/$53.8 bil/Jan 2013): Current law and changes:

        Wages (Employer/Employee) Self-Employment Net Income
        Current Law and New Rate on First $200,000 ($250,000 MFJ) 1.45%/1.45% 2.9%
        New Rate on Amount Which Exceeds $200,000 ($250,000 MFJ) 1.45%/1.95% 3.4%


        The 0.5% new rate addition is not deductible for the self-employment tax adjustment.

        Blue Cross/Blue Shield Tax Hike (Page 2044/Sec. 9016/$0.4 bil/Jan 2010): The special tax deduction in current law for Blue Cross/Blue Shield companies would only be allowed if 85 percent or more of premium revenues are spent on clinical services

        Tax on Cosmetic Medical Procedures (Page 2045/Sec. 9017/$5.8 bil/Jan 2010): New 5% excise tax on elective cosmetic surgery to be paid by the surgery patient.
        some of the tables came out skewed....the PDF file is linked above.
        You have to be trusted by the people that you lie to,
        So that when they turn their backs on you,
        You'll get the chance to put the knife in.Pink Floyd "Dogs"

        Comment


        • #5
          Re: Tax hikes

          Originally posted by Spur View Post
          Rough understanding from my dad who moans about it a lot. He has a small construction company. He pays some crazy taxes. He pays some crazy insurance. He pays some crazy licensing, permit, and bonding fees. You can not write off 100% of some things, or any of other things. They have to be amortized (sp). So even though he spent the money to improve his business, it still counts as income. Couple that with (gasp) saving money for lean times or big purchases. He is old school, pay for it when you have the money for it. He has a choice now. Pay for it outright but take the tax hit if he is saving for 2-3 years to get it, or take a loan and pay the bank "tax".

          He doesn't have a staff of accountants to find every loophole for him. He immigrated here for the American dream, earned his citizenship, and made that dream come true. Now between the crazy nitpicky laws, overzealous inspectors, a litigous society, and the costs of being in business, he makes more money but takes home less. 250k on paper is not the same as 250k in your pocket. The only reason he stays in business now is because my brother works for him. He would have retired several years ago and taken a city job till retirement otherwise.

          Of course this is my view from his rantings (usually his main topic when we call). I couldn't tell you how reflective that is of the real world :)
          Small businesses that concentrate the income into the payroll, as it sounds like your dad is doing, are negatively affected because they aren't being handled the same as a larger corporation. He will pay taxes and insurance when it is considered his income, and he most likely pay less if he was running the business with a different structure like a corporation where the money could be kept in the company and not be considered income. This wouldn't be tax free, but it might offer a lighter tax burden.

          Even then, he shouldn't be able to write anything off 100%. As a business the point of having the tax to start with is that taxes will be collected. If his business includes $250,000 income for him then he is doing quite well. If his business is $250,000 in business income and he pays out of that for company expenses then he would most likely be better off separating the business from his income since his income is not $250,000.

          For example, let's take a little shop that brings in $250,000, of which the owner takes home $40,000 after expenses and is liable for any lawsuits. If the business was changed to separate the business as a business and paid the owner $40,000 in income then the business could be sued and fold without bankrupting the owner and the owner would be paying income taxes on the $40,000 and the other $210,000 would be handled as a business. Depending on the circumstances this might be less expensive or more.
          |TG-6th|Snooggums

          Just because everyone does something does not mean that it is right to do.

          Comment


          • #6
            Re: Tax hikes

            Originally posted by snooggums View Post
            Small businesses that concentrate the income into the payroll, as it sounds like your dad is doing, are negatively affected because they aren't being handled the same as a larger corporation. He will pay taxes and insurance when it is considered his income, and he most likely pay less if he was running the business with a different structure like a corporation where the money could be kept in the company and not be considered income. This wouldn't be tax free, but it might offer a lighter tax burden.

            Even then, he shouldn't be able to write anything off 100%. As a business the point of having the tax to start with is that taxes will be collected. If his business includes $250,000 income for him then he is doing quite well. If his business is $250,000 in business income and he pays out of that for company expenses then he would most likely be better off separating the business from his income since his income is not $250,000.

            For example, let's take a little shop that brings in $250,000, of which the owner takes home $40,000 after expenses and is liable for any lawsuits. If the business was changed to separate the business as a business and paid the owner $40,000 in income then the business could be sued and fold without bankrupting the owner and the owner would be paying income taxes on the $40,000 and the other $210,000 would be handled as a business. Depending on the circumstances this might be less expensive or more.
            That is what I was thinking. A LLC (limited liability company) would mean the owners get paid from the company. As long as you pay yourself a set amount you don't have to worry about the higher tax brackets. You just have to plow the profits back into the business and they cannot be taxed as income. At least that is how I understand a LLC to be.
            I’m not racists, I have republican friends. Radio show host.
            - "The essence of tyranny is the denial of complexity". -Jacob Burkhardt
            - "A foolish consistency is the hobgoblin of little minds" - Emerson
            - "People should not be afraid of it's government, government should be afraid of it's People." - Line from V for Vendetta
            - If software were as unreliable as economic theory, there wouldn't be a plane made of anything other than paper that could get off the ground. Jim Fawcette
            - "Let me now state what seems to me the decisive objection to any conservatism which deserves to be called such. It is that by its very nature it cannot offer an alternative to the direction in which we are moving." -Friedrich Hayek
            - "Don't waist your time on me your already the voice inside my head." Blink 182 to my wife

            Comment


            • #7
              Re: Tax hikes

              It depends, but it can be beneficial to do it that way. It does get taxed in other ways though, someone needs to pay the taxes after all.
              |TG-6th|Snooggums

              Just because everyone does something does not mean that it is right to do.

              Comment

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