The party of no-

[nathanm]

An AGI of 1.9 million is not a very big company when you have 12-14 employees to support. 

The $1.9 million doesn't support 12-14 employees. AGI (for a pass-through entity) is what's left over after deductible expenses. So basically, before-tax profit (income minus COGS, retirement expenses, payroll not accounted for in COGS, rent, taxes, and insurance) and retained earnings.

I'm not seeing how the owner(s) getting to take home $80,000 less a year is going to make a big difference to your employer. If the businesses' receipts for the year are $1.9 million, it's mathematically impossible that the scheduled reversion to the former tax structure will cost that business $80,000 in extra income tax, unless there's a profit margin somewhere north of 80% involved.

[Gaspar]

The $1.9 million doesn't support 12-14 employees. AGI (for a pass-through entity) is what's left over after deductible expenses. So basically, before-tax profit (income minus COGS, retirement expenses, payroll not accounted for in COGS, rent, taxes, and insurance) and retained earnings.

I'm not seeing how the owner(s) getting to take home $80,000 less a year is going to make a big difference to your employer. If the businesses' receipts for the year are $1.9 million, it's mathematically impossible that the scheduled reversion to the former tax structure will cost that business $80,000 in extra income tax, unless there's a profit margin somewhere north of 80% involved.

No, you're still not getting it. a company like ours has to make significantly more than 2 mil to support 12-14 employees.  I was referring to your AGI estimate above.  If we were to retain an agi of 1.9 it would not make us a very big company. 

You were talking as if 1.9 million was "Big Business."  It's not.  And because small companies can have an AGI in the millions does not give you or anyone else the right to dictate how they should spend that money.

I'm not seeing how the owner(s) getting to take home $80,000 less a year is going to make a big difference to your employer.

And therein lies the problem. . .You are saying that $80K (in your opinion) should be of little consequence to a successful business owner.  You are not accounting for anything outside of this narrow view.  What if their is the future acquisition of another business at stake?  What if there are plans for expansion or a larger workforce.  Business owners invest in their companies to grow, and sometimes even to make payroll.
To imply that the government has the right to take an extra $7,000 a month and that won't have any effect on the growth is wrong.

[guido911]

I'm not seeing how the owner(s) getting to take home $80,000 less a year is going to make a big difference to your employer. If the businesses' receipts for the year are $1.9 million, it's mathematically impossible that the scheduled reversion to the former tax structure will cost that business $80,000 in extra income tax, unless there's a profit margin somewhere north of 80% involved.

Do you, right now, own a business that employs people or that is interested in succeeding?

[nathanm]

No, you're still not getting it. a company like ours has to make significantly more than 2 mil to support 12-14 employees.  I was referring to your AGI estimate above.  If we were to retain an agi of 1.9 it would not make us a very big company. 

Once again you're missing the distinction between before-tax profit and gross receipts. A company would be doing very, very well to have an AGI of $1.9 million on revenues of $9.5 million. In most industries, that would be great even on revenues twice that.

Given that I don't know the particulars of the business you work for, I can't say whether a 20% profit margin is accurate. If it is, bully for your owners, but if your company was at the median, it would be more like $27 million in revenue to book $1.9 million in profit.

Surely you can see where my skepticism comes in.

[Gaspar]

Once again you're missing the distinction between before-tax profit and gross receipts. A company would be doing very, very well to have an AGI of $1.9 million on revenues of $9.5 million. In most industries, that would be great even on revenues twice that.

Given that I don't know the particulars of the business you work for, I can't say whether a 20% profit margin is accurate. If it is, bully for your owners, but if your company was at the median, it would be more like $27 million in revenue to book $1.9 million in profit.

Surely you can see where my skepticism comes in.

I don't really care about your "skepticism" that's a straw-man in this discussion, so I would like to divert you back to the subject.  No matter what size, shape or color the company is, if you confiscate profit, it will affect growth in a negative way.  Take $10,000, $30,000, or $1,000 extra from a company's profit and it will harm the growth of that company and affect decisions related to expansion and growth.

Somehow attempting to make the point that "It won't matter, because they won't even notice it, because they make too much money anyway" is a load of crap.

When a company makes a profit that profit is used to grow the company.  If it is not, then it's no business of yours.  Perhaps it's used to buy a fancy house boat, or a really kool pimped-out airplane.  Either way it gets re-invested and used.  It does not belong to you.  It does not belong to the government.  Neither of which will spend it more efficiently.

One thing is certain though, if you fark up by raising taxes on people you can kiss what little confidence is left good by and be assured that what profit is left is put in a safe place until policies change.  I think we're seeing a lot of that caution now. . .preemptive measures.  If you also threaten to raise capital gains taxes in an effort to capture some of this, then you will see a massive market dump now and that money will be even less visible in the future. 

The more penalty levied on an exchange of currency the more scarce the exchanges become.

Oh, and I'd like to reiterate again, CUT GOVERNMENT SPENDING (it's been at least a page, so I didn't want to get accused of not supporting spending cuts again).

[guido911]

Here is an interesting, albeit snarky, take at tax policy and soaking the rich.

http://www.denverpost.com/opinion/ci_16763469

[nathanm]

I don't really care about your "skepticism" that's a straw-man in this discussion, so I would like to divert you back to the subject.  No matter what size, shape or color the company is, if you confiscate profit, it will affect growth in a negative way.  Take $10,000, $30,000, or $1,000 extra from a company's profit and it will harm the growth of that company and affect decisions related to expansion and growth.
...
When a company makes a profit that profit is used to grow the company.  If it is not, then it's no business of yours.  Perhaps it's used to buy a fancy house boat, or a really kool pimped-out airplane.  Either way it gets re-invested and used.  

If the business expands with "profit", it's no longer taxed as such, it's either a business expense or a capital expenditure that is depreciated.

Also, the entire point is that it's not getting re-invested and used, the money in most cases is sitting idle in bank accounts.

You keep asserting that our tax rates are hampering growth when that's clearly not the case. You're trying to apply your ideology to a crisis instead of looking at it and seeing what the real problem is and fixing that.

Guido, 39.6% is not "soaking the rich." (especially when the effective tax rate usually ends up at 30% or less) The 97% top marginal rate we used to have during Eisenhower, that qualifies as soaking the rich.

[eDuece]

Good discussion guys, thanks for taking two viewpoints and keeping the discussion relatively civil but let me ask a question and add an observation.

   Question. Doesn't this big tax bill and the "Bush Tax Cuts" really apply only to personal income taxes, i.e. 1099 type take home pay and what the CEO gets from investments and deals himself in salary. Aren't taxes on or within a corporate structure/small business filed with different tax forms that aren't a part of this bill?

   Added note. I just wish every one who calls for slashing big government spending would take a moment to picture how many paying and (probably non-productive) government jobs that means. I've heard numbers like a 10% cut in governmentt spending equates to 200, 000 paying jobs. The economy struggled to create just over 90, 000 jobs this month and everyone is celebrating. That's a lot of folks to put on the bricks.

[guido911]

Guido, 39.6% is not "soaking the rich."

Says the person that's not going to be paying that rate.

[nathanm]

   Question. Doesn't this big tax bill and the "Bush Tax Cuts" really apply only to personal income taxes, i.e. 1099 type take home pay and what the CEO gets from investments and deals himself in salary. Aren't taxes on or within a corporate structure/small business filed with different tax forms that aren't a part of this bill?

It depends. If an entity such as an LLC or S corp chooses pass through taxation, as most do, the owner(s) pay individual income tax on the profit and retained earnings of the business. If they choose corporate taxation, the business pays corporate income tax and the owner(s) pay tax only on what they get paid by the company. Sometimes paying the individual income tax results in a lower tax bill, and sometimes paying the corporate tax results in the lower tax bill. It's highly dependent on individual circumstances.

This is why it's important to have a good accountant (or, more unlikely, a lot of spare time to figure it out) if you run a business.

[nathanm]

Says the person that's not going to be paying that rate.

Says the person who can look at historical tax rates in this country and current tax rates in other countries.

[guido911]

Says the person who can look at historical tax rates in this country and current tax rates in other countries.

So freakin what people paid back in the fifties in federal income tax or what they pay overseas. In my view giving 40 cents of every dollar I earn (note, that I EARN from years of hard work and sacrifice) is outrageous. Throw in state and property taxes, which in part goes to funding public schools that my children do not attend, then where are we? I am thankful that the U.S. Senate put the brakes on giving tax breaks to only one segment of our society today.

[Hoss]

So freakin what people paid back in the fifties in federal income tax or what they pay overseas. In my view giving 40 cents of every dollar I earn (note, that I EARN from years of hard work and sacrifice) is outrageous. Throw in state and property taxes, which in part goes to funding public schools that my children do not attend, then where are we? I am thankful that the U.S. Senate put the brakes on giving tax breaks to only one segment of our society today.

Was that a burrito?

[nathanm]

So freakin what people paid back in the fifties in federal income tax or what they pay overseas. In my view giving 40 cents of every dollar I earn (note, that I EARN from years of hard work and sacrifice) is outrageous. Throw in state and property taxes, which in part goes to funding public schools that my children do not attend, then where are we? I am thankful that the U.S. Senate put the brakes on giving tax breaks to only one segment of our society today.

You'll be astounded to learn that we collectively have been paying the same level of tax relative to GDP as we have since 1950. Federal tax cuts just end up being replaced by increased state and local taxes.

Also, the "middle class tax cut" applies equally to all taxpayers who aren't subject to AMT. Why do you think the rich should get a second tax cut the rest of us don't get?

Further, it's mathematically impossible for you to pay 40% in federal income tax on your income. It's also mathematically impossible for you to pay 39.6% of your income in federal income tax. Or 35% presently.

[Red Arrow]

Further, it's mathematically impossible for you to pay 40% in federal income tax on your income. It's also mathematically impossible for you to pay 39.6% of your income in federal income tax. Or 35% presently.

Giving 35% of any dollar I earn to the feds directly in income tax is too much.  Fortunately, I don't make enough to be in that bracket.