The kind of "change" Obama wants - Jay Maynard

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Monday, 27 October 2008


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1552 - The kind of "change" Obama wants

"I’m not optimistic about bringing about major redistributive change through the courts." -- Barack Obama

That speaks as clearly to what his true goals are as anything the man's ever said.

He's gonna "redistributive change" everyone in small business right out of a job with his "spread the wealth" tax increase.

Anyone wanna buy an airplane? I'm not going to be able to afford it soon, when my employer is taxed out of existence...

location: 56031
current mood: [mood icon] terrified

(23 comments | Leave a comment)

Comments:


[User Picture]
From:tabbiewolf
Date: - 0000
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Personal opinion: If your business makes more than a quarter-million dollars a year, it's not small.

Purely personal opinion, though -- I make less than thirty-thousand a year and can't afford to finish college (but can't stop working because I can't lose my health insurance), so really, I don't know much when it comes to that: I've never had my own business, though I've looked into starting an LLC.

Also that quote is taken out of context; if you read the whole thing it leads you to believe that Obama has a much more conservative (economically, anyway) viewpoint: "What the critics are missing is that the term 'redistribution' didn’t mean in the Constitutional context equalized wealth or anything like that. It meant some positive rights, most prominently the right to education, and also the right to a lawyer," [Cass] Sunstein said. "What he’s saying – this is the irony of it – he’s basically taking the side of the conservatives then and now against the liberals."

But again, somewhat uneducated workin' stiff here. I don't know much, I just like getting the information from both sides of the aisle =)
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From:kazriko
Date: - 0000
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In the business world, 250k is peanuts. I think that number of employees is a far better measure of if something is small or not. How many people do you employ? How much do they make? The major factor in how much an employee costs, which is roughly double their salary. If you're making 33k per year, and the social security matching costs and all other costs of employment such as workman's comp insurance, liability insurance, health insurance, unemployment insurance, training, retraining, vacations, etc adds up to another 33k, then a business with 5 employees is higher than the cap. And that doesn't even count profit for the owner or any supplies that must be purchased. Imagine somewhere that is open on the weekends. How many people do you need to do a certain job? To do that job for more than 8 hours per day? To do it on the weekends? At least double the number to do it merely 8 hours a day 5 days a week. It depends on the requirements of the job.

Where I work would be considered very small, about as small as an automation company can possibly be given the diverse range of specialties involved, and we have 10 employees. We will definitely be hit by the new taxes.

The small business administration defines the size of a small business by its income, but the limits of a small business by their definition is much higher. I've heard of some categories of businesses having a cap of 250k, but some are 10 million. I'm not sure how useful a measure that is, but 250k is provably wrong as a cap for small businesses.
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From:howardtayler
Date: - 0000
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Agreed. $250k/yr isn't a small-business. It's a micro-business.

How many employees do you have if you're a "small business?" Eight? Ten? Twenty? Now let's pay each of them a lower-middle-class living wage (say $30k/yr). If the business ONLY has salaries for expenses (absurd) then it can have eight full-time employees who don't make enough money.

If small businesses want to be able to pay their employees well ($70k) then with a $250k cap on small business there can be only three of them.
[User Picture]
From:frijole
Date: - 0000
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If a "micro-business" can pull $250k/year in taxable income then I'm doin' it wrong.
From:sethb
Date: - 0000
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There's clearly a confusion here between gross and taxable (net) income.
[User Picture]
From:tabbiewolf
Date: - 0000
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I like your method of determining whether it's a small business or not by employee number -- not being sarcastic, I actually think that idea is way better than by earnings.

I guess when I think "small business" I think "local bakery down the street" or "the knick-knack shop on Main Street." I suppose in comparison to today's Super Businesses, I'm thinking...well, small.

As it is, no one really knows the exact numbers for either candidate's small business plans; the current numbers being growled at (on both sides) are directed more towards individuals -- at least, I think. And of course, we're all working on the estimates that either candidate will actually get their plans and ideas through Congress. So it's more of a "I guess we just have to wait and see" situation, which sort of sucks.

But still, everyone at each others' throats over quotes from ages ago is kinda grinding on me =p I am glad it leads to thoughtful discussion of opinions, ideas, and concepts like this one, though!
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From:jmaynard
Date: - 0000
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The problem here is that many small businesses are taxed on their proprietors' personal income taxes. For them, there is no distinction.

If Obama is elected, and a filibuster-proof Senate is there to help, there'll be no check on the power of the Left to enact every harebrained wealth redistribution scheme they can come up with. After all, they know better than anyone else what people need to earn, and to keep. Just ask them.
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From:kazriko
Date: - 0000
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Thanks for the nice reply.

I've always pictured small business to be anything less than about 25 employees. Where you can get all the people working for the company around one table to talk. The trick is where is the breakover point between companies with 5-10 employees and the big corporations with tens of thousands of employees?

There are OSHA rules that only take effect when you have over 10 employees, so that might be one breakover point. Far from perfect though. We're just starting to really expand here, so we've just fallen under those OSHA rules in the last year to year and a half. We also went from an S-corp (small corporation, all business income is taxed directly as if it is the owner's own personal income) to a full corporation in the last couple months, so I guess we're not really a small business anymore.

On the subject of if they'll be able to get their ideas through congress, the current projection is that the Democrats will have between 58 and 60 senate seats. If they do end up with 60, then they'll be able to push anything they want to through the senate if they have a friendly president.

Obama is certainly a friendly president to a democratic senate, and McCain has been friendly to democrats in the senate in the past as well. What we would see with the Obama presidency is everything that he wants being pushed through and signed with no meaningful opposition in the house. McCain presidency would be similar, but it would instead be everything that the senate democrats want, slightly watered down so that they can get McCain to sign it. McCain's ideas might have some influence, but only in slightly pulling the democratic legislation a little to the center.

Past the debate on full democratic ideas vs. watered down democratic ideas, the only real reason to pick one or the other candidate is their supreme court appointees. There's 2 liberal and 1 centrist justice likely to retire in the next 8 years. If Obama gets in, then the court will edge ever so slightly to the left, and we probably won't get any more rulings like overturning the DC Gun ban for quite awhile. (One centrist turned into a Ginsberg is all it takes to make perpetual 5-4 rulings in their favor forever.) If McCain gets in, he's not going to have the power to appoint truly conservative justices because of the senate and house, but he will likely bring in 2-3 centrist justices and keep the court somewhat balanced, but more likely to lean towards the original interpretation of the constitution. (4 conservative, 2 liberal, 3 centrists)

Essentially, Obama means a one-party government much like China has with all checks and balances flipped in their favor, whereas McCain means a Centrist executive, Centrist court, and a leftist legislature.

For the republicans in the audience, you should probably think which one you truly want. Obama will be harsh, and horrible in the short term for conservatives, but it'll allow the republicans to show that they're not the truly corrupt party in government and show how bad one party rule can be the other direction. With McCain, some truly awful policies will get through, and because it's not a one-party government, there's a convenient republican scapegoat they can blame everything on when the wheels come off.
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From:argonel
Date: - 0000
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According to the nice siney poster on the wall. the state of Minnesota cosiders any company that grosses over $625,000 per year to be a large company. This number is likely to be different depending on your specific location.
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From:kazriko
Date: - 0000
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And regulations are likely to be different for the federal government and your state, so even if 625k is the limit for your state, that would probably only affect state programs and taxes, not federal programs and taxes.
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From:kazriko
Date: - 0000
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Look on the bright side. Obama will be printing as much money as he's taking from us, so Weimar republic style inflation will soon be upon us. When that happens, you'll be able to pay your airplane off with pocket change. Just bring a big enough wheelbarrow to carry your pocket.

Hope for change, because that's all you'll have in an Obama administration. ;)

From:sethb
Date: - 0000
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Do you really understand taxes as poorly as Joe the unlicensed plumber? The amount your employer pays you is not part of his taxable income.
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From:jmaynard
Date: - 0000
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However, if his taxes go up, he's got three choices: 1) Raise prices; 2) accept a lower profit margin; or 3) reduce expenses. The Left would suggest he accept lower profits, since profits are eeeeeeeeevil, but that only goes so far. He can't raise prices, lest he run off business. Guess what? He must cut expenses. Since substantially all of his expenses are in salaries for his employees, guess what that means?
From:sethb
Date: - 0000
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He keeps the same pre-tax profit margin.

If he cuts expenses, he pays more taxes, because the expenses were deductible. To the extent that the employee paid for himself in increased revenues, he takes a loss by eliminating that employee. If the employee didn't cover his own costs, it isn't cost-effective to hire that employee under any tax regime (except maybe one that has negative taxes on payroll).
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From:jmaynard
Date: - 0000
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Your arguments make it sound like taxes are free. Just where do those increased taxes come from? The owner can't pull them out of thin air. Those taxes come out of his profits, and he's gotta make it back somewhere.
From:sethb
Date: - 0000
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If he could increase his total profits by firing you in a high-tax system, then he can increase his (pre-tax) profits just as much by firing you in a low-tax system.

In either case, his incentive is to maximize (after-tax) income; given that taxes have a marginal rate under 100%, the way to do that is to maximize pre-tax income. That applies whether taxes are 5% or 95%.
[User Picture]
From:jmaynard
Date: - 0000
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This still doesn't make sense. I ask again: Where are those increased taxes coming from? They're not pulled from thin air.

No businessman is just going to accept lower profits as his taxes increase. He's going to take some action.
From:sethb
Date: - 0000
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Suppose you get paid $50,000/year, and you generate revenue of $100,000/year. At a marginal tax rate of 20%, is he better off keeping you or firing you? At a marginal tax rate of 80%, is he better off keeping you or firing you? (Hint: either way, he's $50,000 * (1-tax rate) better off by keeping you, so as long as the tax rate in under 100%, the answer is the same.)

Suppose you get paid $50,000/year and you generate revenue of $40,000/year. At what tax rates is he better off keeping you than firing you?

The extra taxes come out of his take-home pocket, but he still maximizes after-tax income by maximizing pre-tax income whether the tax rate is 20% or 80%.
[User Picture]
From:jmaynard
Date: - 0000
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If he cannot change pre-tax income, however, then what does he do to maximize his income? How does he replace what the government has stolen?
From:sethb
Date: - 0000
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If he can't change his pre-tax income, he's worse off with higher taxes. But that doesn't affect whether or not keeping you employed is to his benefit.
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From:wakkowarner
Date: - 0000
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Shhhh!!! Don't bring logic or reason into this!!
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From:michaelmink
Date: - 0000
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Actually, it might also depend (though not in your case) if the business was Subchapter-S, in which case, I believe, the net income of the corporation is treated as the income of the shareholder.
[User Picture]
From:michaelmink
Date: - 0000
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One of the other ironies, vide profits are evil, is that socialist governments very often are heavily dependent on that very thing. For example, the profits the USSR made on selling grain abroad in the 1920s and early 1930s helped fuel heavy industry development (and famine in the Ukraine, but who's counting that, eh?). Cuba relies heavily on profits from sugar, tobacco and tourism (and just you try meddling with "their" trademarks like Bacardi and Cohiba), Venezuela from oil. If profits, or vast profits, were evil, then why sell at the market price?

Pace Orwell, all profits are equal, but some are more equal than others.

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