Ending the Bush Tax Cuts

[jackson33]

Post 18, this thread swansont;

Here's what I don't get. We tax profits, right? The businessman who said that he would lose ~$120k to additional taxes is paying about 3% more in taxes. Which means his business makes upwards of $4 million a year in profit.[/Quote]

 

swansont; Those comments were to offset your previous notion, taxes paid are the reflections of only income. In my years of filing, I have filed one form, all encompassing and rarely has over half come actual wages, in fact many years no incomes came from any employer.

 

Since all we have to work with are the Administrations plans for increased taxation, Congress has yet to addressed, alone Capital Gains Taxes will increase from 10% Short Term 15% long term to 20% in 2011. Targeted deductions and other suggested features, will impact those final figures a whole lot more than a 3 or 3.6% increase on taxable incomes. If you haven't already seen a capsule summery of the Administration proposal, you might take a gander....

 

http://money.cnn.com/2010/02/01/pf/taxes/obama_budget_tax_changes/

 

http://money.cnn.com/2010/02/01/news/economy/Obama_budget/index.htm?postversion=2010020117

 

Stock options and grants are a form of non-salary compensation. It's disingenuous to suggest that millions of dollars of income from this is from an "investment;" it's a way of funneling more money to executives and get around the $1 million limit on corporate income tax deductions for executive pay. The article also notes that it is not including rents and royalties as income, either. So if you are e.g. an author, or own and run an apartment building, your income in not being counted in this assessment. [/Quote]

 

No sir, Stock options and benefits/perks are designed to reward performance, if not to attack the best and brightest in a particular business sector. While I wasn't aware of the 1M$ payroll deduction limit, I can assure you any major Corporation would absorb whatever required to attract the best and brightest and frankly wonder if that 1M$ deduction limit is actually Constitutional. Last I heard, Government could not dictate wages or punish (in any way) employers for paying too much to an employee. I might check this out and figure in a case, where Federal Employees are in fact paid TWICE (wages/benefits) as the free market employee.

 

No doubt there are new tax laws, but until 1995 rental incomes and expenses were based on the taxable income bracket of the filer. Today the sale of such property remains important and taxed differently (Capital Gains)...

 

pioneer; I hate see anybody make two lengthy post and apparently be ignored. While I THINK you are agreeing (I might have missed your point), please answer these questions, without any analogies...

 

Do you feel the Bush Tax Cuts of 2001-3, if allowed to sunset, will hurt the general US economy?

 

If you would prefer a portion being extended and those to the wealthy being cut, do you feel the economy will be hurt any more than if the whole program was continued, say five years and why?

[Pangloss]

Of course there's a gray area here, because we're talking about actions of congress that haven't even taken place yet (and in fact the odds are pretty darn good that they won't even act). But none of that seems to change your point (if I've read it right).

 

There was a rather stunning development on this today when Senate Minority Leader John Boehner said this morning on "Face the Nation" that he would vote for the extension of just the tax cuts for those making less than 250,000/yr, if that were his only option.

 

http://www.foxnews.com/politics/2010/09/12/obama-economic-adviser-afford-tax-cuts-high-end-earners/

 

Coming from the GOP leader this is a huge opening for the administration, which has previously met only with resistance from the GOP on this issue. I have been guessing that they would refuse to support such a measure, hoping that the tax "increase" to middle-income earners would drive more Americans to vote Republican (opposition to the "Bush" tax cuts has been well-associated with Democrats). But I guess they ran the numbers and came up with a different result. Perhaps it's not too surprising in light of recent polls suggesting that Republican candidates aren't a whole lot more popular than Democratic ones. It's also possible that he simply did not have unilateral agreement amongst Republicans to block such a vote (currently it only takes one to give the Dems a victory if their own side is unanimous).

 

There's still a huge cost to extending the tax cuts to middle-income Americans, but if it goes down this way I think it'll be very much better for the recovery than if they are allowed to fully expire, and I think it's even a sign of greater bipartisanship in the second half of Obama's first term.

[swansont]

 

swansont; Those comments were to offset your previous notion, taxes paid are the reflections of only income.

 

I pay taxes, too. I have no such notion. Perhaps you should explain this to the people in the interview in the link provided in the OP, since they were specifically discussing the increase in tax on small businesses, instead of trying to make it apply outside of that context.

 

Do we or do we not tax the profits of businesses? (Yes) The businessman in the interview claimed that the change in the small business tax would cost him $120k.

 

 

Since all we have to work with are the Administrations plans for increased taxation, Congress has yet to addressed, alone Capital Gains Taxes will increase from 10% Short Term 15% long term to 20% in 2011. Targeted deductions and other suggested features, will impact those final figures a whole lot more than a 3 or 3.6% increase on taxable incomes. If you haven't already seen a capsule summery of the Administration proposal, you might take a gander....

 

By "the administration's plan" you of course mean the Bush administration, who passed the tax legislation that is going to expire, right? That what is being discussed is a partial mitigation of this tax increase that was signed into law by Bush.

 

No sir, Stock options and benefits/perks are designed to reward performance, if not to attack the best and brightest in a particular business sector.

No, really, they are a dodge to mitigate the effect of the deduction cap, though more recent legislation that forces companies to count stock options as expenses make it somewhat less attractive than it was. By all means, read up on it. But more to the point, they are still compensation that doesn't show up as salary in your example.

[Mr Skeptic]

Yes, we tax profits and not revenue. Walmart could not exist if we taxed revenue. Even for individuals, we tax "profits" and subtract from taxable income things like food (not even a sales tax) and childcare, although as standardized deductions because individuals would not appreciate having to itemize every single thing they buy. For individuals they also try to write the tax as a percentage of revenue so that the taxpayer won't owe taxes at the end of the year and preferably so the government owes them tax return.

 

Some people create themselves a small business which then allows them to write off certain things as business expenses that they wouldn't as individuals, such as a car and gasoline "for their business", "business dinners", etc.

[jackson33]

I pay taxes, too. I have no such notion. Perhaps you should explain this to the people in the interview in the link provided in the OP, since they were specifically discussing the increase in tax on small businesses, instead of trying to make it apply outside of that context. [/Quote]

 

Those increased tax cost are not necessarily based on the business income if filing other than under the Corporate System. Your welcome to reverse this and say some business that produce near -0- profit, may in fact will pay additional taxes (far above that 3/3.6% increased level in 2011 profit/income), via any number of TAGETED credits or in fact non-business related investments. Trying to connect a 3% value to added taxes and the business profits simply won't compute.

 

As for the opening post, I've tried to explain SOME of the complexity, as I see it, that determine the different factors. I was going to go over some of the ERRORS made by absolutely every Government Auditing Agency, but figured that would be a lost cause. For instance, Johnson's people suggested (1965/68) the "War on Poverty" would by (think) 1978, be cost neutral, not today's ONE TRILLION DOLLAR, cost to States and the Federal annually.

 

Do we or do we not tax the profits of businesses? (Yes) The businessman in the interview claimed that the change in the small business tax would cost him $120k.[/Quote]

 

Yes, but we also file under a system which also taxes investments/Capital gains/other items, and for all I know that 120k$ anticipated increase, was based on other than business profit. Frankly I find it interesting, anyone would estimate an actual income 16 months in advance, the probability then being based on the current years estimate.

 

By "the administration's plan" you of course mean the Bush administration, who passed the tax legislation that is going to expire, right? That what is being discussed is a partial mitigation of this tax increase that was signed into law by Bush. [/Quote]

 

Since we're now going to obfuscate the issues, technically we're going back to the Clinton Taxes and yes, in order to get passed Bush had to allow the sunset clause. I've gone over this earlier, but what was in the late Clinton years, the following Bush years and is reality today are not the same. We have a stagnant GDP today and as each year passed in the Federal reductions, States more than wiped out the savings to ALL the "tax brackets", not to even mention this ridiculous Keynesian approach to what IMO, should have been a run of the mill recession which happens about every ten years or so.

 

Note; For the record, I wouldn't oppose a total return to the Clinton Tax Structure if the GDP had continued to rise after 2008. The cuts had worked, the economy grew and we had record unemployment rates, yet unfortunately a growing pending National economical obligation, which is going to have to be covered.

 

No, really, they are a dodge to mitigate the effect of the deduction cap, though more recent legislation that forces companies to count stock options as expenses make it somewhat less attractive than it was. By all means, read up on it. But more to the point, they are still compensation that doesn't show up as salary in your example. [/Quote]

 

Is this deduction cap in the recent 'Financial Reform Bill' or have something to do with regulating listed Corporations? I know from the link offered earlier, one Obama suggestion (not Clinton) is to greatly reduce the "deduction limits" on individuals in 2011, but to a Corporation, which is taxed on profits (figured into wholesale cost), an expense is an expense.

 

There are just so many people qualified to manage and run the major Corporations in the US. These 400-500 majors are all after a finite number of people, as to some degree other smaller Corporations. While they can and do try to grow their own from with in the Company, if the Board of Directors (many set on several boards) has access to a noted CEO/COO/CFO, they are going to try and get that felt competent person. They have always negotiated salary, perks and retirement packages to the needs of the company and the person, they are trying to hire. This didn't start last week or 15 years ago.

[swansont]

 

Is this deduction cap in the recent 'Financial Reform Bill' or have something to do with regulating listed Corporations? I know from the link offered earlier, one Obama suggestion (not Clinton) is to greatly reduce the "deduction limits" on individuals in 2011, but to a Corporation, which is taxed on profits (figured into wholesale cost), an expense is an expense.

 

I don't recall when the $1 million limit was passed, but I think it was Clinton or before.

 

 

There are just so many people qualified to manage and run the major Corporations in the US. These 400-500 majors are all after a finite number of people, as to some degree other smaller Corporations. While they can and do try to grow their own from with in the Company, if the Board of Directors (many set on several boards) has access to a noted CEO/COO/CFO, they are going to try and get that felt competent person. They have always negotiated salary, perks and retirement packages to the needs of the company and the person, they are trying to hire. This didn't start last week or 15 years ago.

 

And the amount of compensation is not the issue. What is the issue is when an executive gets $3 million salary and $10 million in stock gifts or options, you can't turn around and claim that the $10 million was investment income.

[jackson33]

Yes, we tax profits and not revenue. Walmart could not exist if we taxed revenue. Even for individuals, we tax "profits" and subtract from taxable income things like food (not even a sales tax) and childcare, although as standardized deductions because individuals would not appreciate having to itemize every single thing they buy. For individuals they also try to write the tax as a percentage of revenue so that the taxpayer won't owe taxes at the end of the year and preferably so the government owes them tax return. [/Quote]

 

Skeptic; Except for the bold print, your briefly indicating what my point as been on this thread.

 

We tax individual and business incomes (revenue) based on an end result of "NET" Income/Profit. How that net is computed/achieved, involves thousands of variables, including Governments (Local/State/Federal) and their tax codes. An individual can be paid virtually any high figure or a business generate billions in income, yet either can end up with a zero obligation in taxes, or the reverse, a small investment can and often does lead to extraordinary taxing obligations many times multiple times the original investment.

 

Some people create themselves a small business which then allows them to write off certain things as business expenses that they wouldn't as individuals, such as a car and gasoline "for their business", "business dinners", etc. [/Quote]

 

While I understand your point, nobody just creates a business for intended tax savings, more likely to create additional income. Even to establish the business or use for any taxing purpose (even if filing as an individual) you must be registered (have a number) in one of the States. Then if you employ even one person (family or not) that will set off all kinds regulations, that will come from every jurisdiction in your area and/or at the National Level.

 

As for qualified deductibles (variables, above) these have changed over the years and with the now accepted use of "targeted", Government can manipulate business in any direction it chooses.

 

 

And the amount of compensation is not the issue. What is the issue is when an executive gets $3 million salary and $10 million in stock gifts or options, you can't turn around and claim that the $10 million was investment income. [/Quote]

 

swansont; Any options price is established the day of transfer. The receiver is then liable for any gain or loss (taxes), at that price. The very idea, is to create the incentive for that person to increase the value of that equity. In most cases even a 5% value increase over a few years, the Company value can increase billions of dollars making that persons value to the Company worth any cost to the employment of that person, worth while. Lee Iacocca as I recall, agreed to a 1.00/year salary, in the 80's with Chrysler, but accepted a great deal of future stock options and I don't think any person ever questioned his motives or his end profits. Don Imas, with Sirius Radio and probably most that accept stock option instead of a salary don't fare quite as well.

[swansont]

 

swansont; Any options price is established the day of transfer. The receiver is then liable for any gain or loss (taxes), at that price. The very idea, is to create the incentive for that person to increase the value of that equity. In most cases even a 5% value increase over a few years, the Company value can increase billions of dollars making that persons value to the Company worth any cost to the employment of that person, worth while. Lee Iacocca as I recall, agreed to a 1.00/year salary, in the 80's with Chrysler, but accepted a great deal of future stock options and I don't think any person ever questioned his motives or his end profits. Don Imas, with Sirius Radio and probably most that accept stock option instead of a salary don't fare quite as well.

 

Yes, all true and all completely beside the point.

[jackson33]

swansont; While not wanting to go off topic this thread or start a new thread, this was all I could find on the suggested cap for executive Corporate Pay and wish to address...Not only is it a "Targeted" rule, it eliminates your argument for alternative (performance pay) and simply a tax increase for a specific sector of business activity.

 

Congress is using the new health- care law to limit tax deductions for executive pay at medical insurance companies in a bid to prevent corporate officers from personally benefiting from expanded enrollments.

 

The rule applies to UnitedHealth Group Inc., WellPoint Inc. and other insurers that earn 25 percent or more of premium revenue from health plans, cutting the deduction to $500,000 from $1 million on income per employee.

 

This change, plus the elimination of a provision on performance-based payout's, will translate into higher payroll taxes for this sector, according to data compiled by Bloomberg. [/Quote]

 

http://www.bloomberg.com/news/2010-08-11/health-law-limiting-tax-deductions-for-executive-pay-at-insurance-firms.html

 

Basically, it's simply another unconstitutional RULE, to participate in the markets the Federal is involved with, no less than limitations of what Hospital/Clinics/Doctors or testing facilities can receive per predetermined event (one size fits all).

 

I'm pretty sure we all agree the intended end results of the HCB is a Central Federally Controlled "Single Payer System" and I'd suggest without an alternative, from the private sector. Insurance Companies, I would think are desperately operating on the idea, this bill in total will either be repealed or moderated down to the point, it becomes a moot factor, maybe leaving certain people covered by Medicare. If they are wrong, they know and most everyone else knows, most these multi billion dollar Corporations and their several million work force will go out of business, as practiced today. I believe several areas are unconstitutional, a few, forcing parents in insure (pay) for their kids to age 26, forcing anybody to buy any openly available product or forcing everyone to insures themselves for things they neither want insurance for or would likely ever even need.

[swansont]

swansont; While not wanting to go off topic this thread or start a new thread, this was all I could find on the suggested cap for executive Corporate Pay and wish to address...Not only is it a "Targeted" rule, it eliminates your argument for alternative (performance pay) and simply a tax increase for a specific sector of business activity.

 

 

My alternative for performance pay? I don't understand where you're going with this. I was simply pointing out that not all compensation is salary, so "non-salary income" in the statistics you cited can be a form of compensation — it's not all from investment of prior income. I also mentioned why stock options have been such a popular form of compensation the last couple of decades, but that's not crucial to the main point.

[lemur]

It's easy to be seduced by the idea of taxing super-wealth a little more and saving poor and middle-class people a lot relative to their incomes. The problem with that, however, is that it is equivalent to making poor and middle-class people dependent on government subsidies funded by the wealthy. Why is this a problem, though? Well, for one thing it creates an incentive for the managers of wealth to utilize government as a tool to increase their revenues. From their perspective, they are getting saddled with maintenance costs for the entire population, which puts them in the position of utilizing that population to make back the money they are losing in taxes. Presumably, this will mean that prices and costs of just about everything will go up to fund the higher taxes being paid by the wealthy. In that sense, the poor and middle class will still be paying those taxes, just in the form of corporate revenues. So the question is what benefit there is in shifting the tax burden to the wealth when they maintain their wealth by excising revenues from the masses anyway? Wouldn't it make more sense for the masses to pay their own taxes and have more control over their abatement as a result?

 

Actually, I've changed my mind. I've decided that if the wealthy get to manage the tax-burden, it will be the same as shifting taxes on the masses from income tax to sales tax, since this is how the wealthy make their income. So if you're for sales tax instead of income tax, it makes sense to support tax increases for the wealthy - I think anyway (is my logic flawed somehow?).

Edited September 16, 2010 by lemur

[Mr Skeptic]

It's easy to be seduced by the idea of taxing super-wealth a little more and saving poor and middle-class people a lot relative to their incomes. The problem with that, however, is that it is equivalent to making poor and middle-class people dependent on government subsidies funded by the wealthy. Why is this a problem, though? Well, for one thing it creates an incentive for the managers of wealth to utilize government as a tool to increase their revenues. From their perspective, they are getting saddled with maintenance costs for the entire population, which puts them in the position of utilizing that population to make back the money they are losing in taxes. Presumably, this will mean that prices and costs of just about everything will go up to fund the higher taxes being paid by the wealthy. In that sense, the poor and middle class will still be paying those taxes, just in the form of corporate revenues. So the question is what benefit there is in shifting the tax burden to the wealth when they maintain their wealth by excising revenues from the masses anyway? Wouldn't it make more sense for the masses to pay their own taxes and have more control over their abatement as a result?

 

Actually, I've changed my mind. I've decided that if the wealthy get to manage the tax-burden, it will be the same as shifting taxes on the masses from income tax to sales tax, since this is how the wealthy make their income. So if you're for sales tax instead of income tax, it makes sense to support tax increases for the wealthy - I think anyway (is my logic flawed somehow?).

 

Sooo, what you're saying is that if it weren't for progressive taxes, the rich would not exploit/make money off the poor, or not as much? Because the way I learned economics, the objective is to maximize profits and progressiveness of tax rates don't really factor into that (not for microeconomics anyways). While it is true that any tax burden is shared by the producer and consumer, the consumer will still be economically better off if the producer is taxed an extra dollar and the consumer one dollar less and then has to pay back part of that in higher prices. Just not better off by the full dollar.

[lemur]

Sooo, what you're saying is that if it weren't for progressive taxes, the rich would not exploit/make money off the poor, or not as much? Because the way I learned economics, the objective is to maximize profits and progressiveness of tax rates don't really factor into that (not for microeconomics anyways). While it is true that any tax burden is shared by the producer and consumer, the consumer will still be economically better off if the producer is taxed an extra dollar and the consumer one dollar less and then has to pay back part of that in higher prices. Just not better off by the full dollar.

 

$1=$1. If producers are taxed an extra dollar, then relative to their previous net revenues, they are making one dollar less than they were, correct? So they can either accept the loss or attempt to raise revenues to re-establish previous revenue levels. If they can't get their revenues back up, then they continue losing net-growth, right? So at that point they would either cut expenditures and investments to try to slow down their losses, or try to come up with investments that increase their revenues. If they cut expenditures and investments, people lose revenues, i.e. jobs and income. If they invest in increasing revenues, people get more jobs and income but they have to expend more of it to generate the increased revenues sought by the investors.

 

In the end, the real question is not whether consumers will benefit from shifting the tax-burden to producers but what will change, if anything about the way the economy works and distributes resources and money. Yes, government could probably get away with doing with taxes what the bolshevic revolution did with the bullets to the Czars; or they could just reduce the wealthy to middle-class levels, but what would be the purpose and result of that? What economic benefit is there in increasing the middle-class? What does that class produce except middle-management of actual labor?

 

Wouldn't the economy be better served by shrinking the middle-class, or at least taxing it at a level where it would consume less? As it is now, the middle-class drives global labor demand and creates more jobs and wealth for itself by its own consumption and management of the labor and resources it consumes. It is a self-destructive economic force because it controls both the means of production and revenue. It's like a horse-jockey that wins more horses by winning races. The more horses it pushes to the point of collapse, the more horses it has available to push to the point of collapse.

 

Personally, I would rather see more responsible economics instead of this consumption-revenue driving consumption driving labor etc. I don't think it is sustainable, but it may not be until all wealth is taxed and put into circulation that people will see for themselves that the markets will still not generate the kind of lifestyles they seem to want to achieve by increasing taxation and fiscal stimulus. I just wish there was some clear economic analysis that could address economics at the qualitative level instead of just shifting taxation and spending around with the assumption that whatever happens as a result of GDP-growth is desirable and sustainable.

[swansont]

If the product is paid for with discretionary income, there will always be some consumers who choose not to buy it if the price goes up. The producer has to determine whether the price increase will actually result in recovery of the income, and consider the extent to which their competitors are raising prices. That was a theme that's been fairly common in the recent economy — companies not raising prices despite increased costs, in an attempt to not lose business when customers might have less money to spend.

 

So I don't think the financial burden of higher taxes would be completely transferred. And we already know that the economy can do just fine under these tax conditions, since this is just a return to tax levels similar to those under Clinton, and even those are low compared to the pre-Reagan era. People have to stop pretending that this is an unprecedented level of taxation, either historically for the US or in comparison to other developed nations.

[lemur]

If the product is paid for with discretionary income, there will always be some consumers who choose not to buy it if the price goes up. The producer has to determine whether the price increase will actually result in recovery of the income, and consider the extent to which their competitors are raising prices. That was a theme that's been fairly common in the recent economy — companies not raising prices despite increased costs, in an attempt to not lose business when customers might have less money to spend.

 

So I don't think the financial burden of higher taxes would be completely transferred. And we already know that the economy can do just fine under these tax conditions, since this is just a return to tax levels similar to those under Clinton, and even those are low compared to the pre-Reagan era. People have to stop pretending that this is an unprecedented level of taxation, either historically for the US or in comparison to other developed nations.

 

Your whole analysis seems to hinge basically on the assumption that demand is inelastic except in special cases and that supply is primarily driven by coordination among firms rather than competition. That is highly at odds with the premise of free market dynamics.

[swansont]

Your whole analysis seems to hinge basically on the assumption that demand is inelastic except in special cases and that supply is primarily driven by coordination among firms rather than competition. That is highly at odds with the premise of free market dynamics.

 

No, I'm pretty sure I was assuming elastic demand when I said that some people won't buy something if the price goes up. Inelastic demand is when you will buy it regardless of price.

 

http://www.investopedia.com/terms/e/inelastic.asp

 

And that part about worrying about whether competitors raise their prices — that's competition.

[lemur]

No, I'm pretty sure I was assuming elastic demand when I said that some people won't buy something if the price goes up. Inelastic demand is when you will buy it regardless of price.

I guess I read your "some people" as saying that rationality is the exception to the rule. Generally, I think the assumption is that people will buy less of something as the price goes up. Obviously there is enough irrationality in practice to make demand less elastic, but the rational ideal is that as price goes up, consumers seek substitutes.

 

 

And that part about worrying about whether competitors raise their prices — that's competition.

Isn't competition when they lower their prices to try to gain market share? Plus, you treated input costs as fixed, but these are also supposed to be subject to price competition where multiple firms compete for contracts based on lower prices. The conservative consumption at the demand level is key, though. It is when sales are scarce that firms have to compete at every level. If sales are abundant, other factors take over and everyone just creates their own niche to avoid price competition.

 

 

[Pangloss]

People have to stop pretending that this is an unprecedented level of taxation, either historically for the US or in comparison to other developed nations.

 

On another tangent, I think the argument that our taxes are insufficiently high because the taxes of other nations are higher is far from perfect. First because it's a comparison typically made with a premise that their tax levels are somehow objectively correct (which is made without support), and second because plenty of western nations have undesirable economic situations, with problems both past and current, many of them operating in the red and often running into crises, which supports the notion that higher taxes produce unsustainable situations.

 

Not that European taxes definitively support the argument against high taxes either, I'm just pointing out that they're not exactly a heaven-sent gift of support for aggressive progressive taxing and spending. Nor is there an objective source to say that a 30-35% high-end bracket is too low, nor too high, nor "just right". None of these things are demonstrable in any way. Not even the demand that "Americans pay too much". It's all subjective.

 

Which I suppose probably makes taxation a local argument, with variables unique to each polity.

[iNow]

So I appreciate the second source, and I wonder why it would make sense to anyone to hurt 900,000 businesses during a stalled recovery.

As pointed out already by swansont, this number itself is questionable.

 

I'm calling BS on the 894,000 number, in terms of impact on employment. What we really want to know is how many employers are affected. Luckily, this issue of small business tax came up in the past two elections, so there's already work debunking it. The problem is that ABC probably asked the wrong question: how many small business owners fall into the top tax rates. The problem with that is that anyone who reports any business income is included, even if they earned just a dollar and/or have no employees, e.g. it includes people like the President, who made money from his book but has a job; his "small business" has nobody else on the payroll. If 2.5% represents 894,000 small businesses, then there must be more than 35 million small businesses, who, at best could employ an average of about 4 employees (10% unemployment is about 15 million workers, so we have 150 million workers, and 150/35 = 4.3. And there are big companies out there who employ millions) For evey small business which employ dozens of people, there have to be a whole lot which employ just one. And some of those make more than $200k (or $250k filing jointly)

 

 

 

http://www.factcheck.org/elections-2008/mccains_small-business_bunk.html

 

 

 

Further, as indicated in the very first reply to this thread, it's an invalid metric. It's a red herring.

 

Let's take as given that the plan causes the loss of 900K jobs. Let's assume that's valid. What your framing of this issue misses is the number of jobs created by the plan... As net job creation may, in fact, circumvent the initial job loss.

 

If the plan causes the creation of 3 million jobs, then lamenting about the loss of 900K is a waste of time since 2.1 million net were still created overall.

 

 

As I said, you've framed this issue in a way which is completely irrelevant, and also which totally ignores whether or not the tax cuts are more beneficial to the economy than the revenue collected upon expiration of those cuts.

 

 

 

I will say this, though: While I'm not claiming this is the goal, I can't help but observe the fact that eliminating small businesses that are run in this manner is a wonderful, holy-grail-level dream of the progressive movement.

You say shit like this, and somehow I'm the one who gets suspended from the site for a week for responding to it defensively like a normal human being. Thanks for reinforcing my user title so tangibly, Cap'n.

 

 

 

 

Krugman didn't say that. He didn't even come close to saying that. The statement was in the future tense, not the past, he said majority, not all, and your numbers are way off.

Thanks for noticing. My challenges went unaddressed because of hurt feelings or some such crap like that.

 

 

And... just as a general observation... The number of irrelevant and completely non-sequitur comments made in this thread by various posters (i.e. lemur, jackson, pioneer) during my suspension... The vast inability to comprehend peoples points accurately... is somewhat sickening exasperating nauseating awe-inspiring.

Edited September 17, 2010 by iNow

[swansont]

 

Isn't competition when they lower their prices to try to gain market share?

 

Yes, or in this case, not raising price in order to not lose market share. If you have an additional cost in the form of taxes, and you want to raise prices to compensate (which was your contention, a few posts back), you may suffer a loss of sales if your competitors do not, even if demand is inelastic.

 

Plus, you treated input costs as fixed, but these are also supposed to be subject to price competition where multiple firms compete for contracts based on lower prices. The conservative consumption at the demand level is key, though. It is when sales are scarce that firms have to compete at every level. If sales are abundant, other factors take over and everyone just creates their own niche to avoid price competition.

 

We were talking about the effect of taxes. Unrelated costs are irrelevant to the discussion.

 

On another tangent, I think the argument that our taxes are insufficiently high because the taxes of other nations are higher is far from perfect. First because it's a comparison typically made with a premise that their tax levels are somehow objectively correct (which is made without support), and second because plenty of western nations have undesirable economic situations, with problems both past and current, many of them operating in the red and often running into crises, which supports the notion that higher taxes produce unsustainable situations.

 

Not that European taxes definitively support the argument against high taxes either, I'm just pointing out that they're not exactly a heaven-sent gift of support for aggressive progressive taxing and spending. Nor is there an objective source to say that a 30-35% high-end bracket is too low, nor too high, nor "just right". None of these things are demonstrable in any way. Not even the demand that "Americans pay too much". It's all subjective.

 

Which I suppose probably makes taxation a local argument, with variables unique to each polity.

 

I agree, saying our taxes are insufficiently high because others are higher is silly. Our taxes are insufficiently high because we spend more than we take in, and nobody is willing or able to cut spending. But, it still remains a fact that the most recent balancing of the budget came with higher taxes, and the economy was doing OK in that era.

[lemur]

Yes, or in this case, not raising price in order to not lose market share. If you have an additional cost in the form of taxes, and you want to raise prices to compensate (which was your contention, a few posts back), you may suffer a loss of sales if your competitors do not, even if demand is inelastic.

 

We were talking about the effect of taxes. Unrelated costs are irrelevant to the discussion.

 

 

I agree, saying our taxes are insufficiently high because others are higher is silly. Our taxes are insufficiently high because we spend more than we take in, and nobody is willing or able to cut spending. But, it still remains a fact that the most recent balancing of the budget came with higher taxes, and the economy was doing OK in that era.

 

Ok, I thought you were just getting into talking about the general economics of price-driven behavior. The problem, in your words, is that people aren't willing or able to cut spending. Too many assume fixed costs because of the popular business culture that has developed where product-differentiation in terms of price has replaced price-negotiation. No matter, I don't think all prices can uniformly deflate and re-establish the production and consumption patters of the past anyway. I think people are going to have to re-structure their spending and business activities in a way that lets them do and make more with less. This is the way economic efficiency has always progressed, but the problem with it is that there are so many people who see it as an opportunity to get more money, which results in inflationary pressures. Taxes are part of this.

 

Consider an example: Let's say Facebook figures out they can cut their employees retirement payments in half by building a retirement town somewhere themselves at a lower cost than any other pension plan (maybe a silly sounding example, but just hypothetical). If Facebook does this, it could theoretically double its operations and staff because it is paying them half as much. Still, because the per-capita spending of their personnel/business was halved, this reduces per-capita contribution to GDP, which creates recessionary/deflationary pressure. Now let's assume that another company, say Google, finds that due to Facebook's cuts, their advertising revenues are halved. That puts them under pressure to do something similar with their pension plan as facebook, or cut jobs, or find some other cost-cutting measure.

 

The problem arises, imo, when someone decides they are going to make cuts without seeking to cut costs by changing the way they do something. For example, if Google cuts jobs instead of copying Facebook's pension strategy, they are effectively paying double for their retirement plan what Facebook is. This creates the idea in the pension industry that there are more lucrative contracts to compete for instead of restructuring to all compete with the Facebook plan. This is what government does when it resists lowering taxes. It basically takes the position that the salary-levels of its employees and its costs are not subject to innovation and restructuring to do more with less. Of course, it's hard to blame them when you know that if non-governmental businesses get the chance, they will raise their revenues and salaries as high as possible.

 

So, basically I think everyone is in a price-standoff at present. Ideally, innovations will occur that allow people to go ahead and live well with long-term depression but I wonder what those can or will be. Whenever you hear about a public transit project or some other innovation that would allow many people to live better for less, the price tag on the project is usually high enough to try to generate a lot of high-paying jobs. But ideally you would see things like public transit emerge that provide people with ways to live better with less income, which would mitigate the pain of these recessions in a sustainable, long-term framework.

 

Then, if government employees could live better with less income along with everyone else, taxes could either be cut or more jobs could be generated by existing taxes to allow government to accomplish more with persistent tax levels.

Edited September 17, 2010 by lemur

[swansont]

There's a lot here, but I will comment on this for the moment:

 

This is what government does when it resists lowering taxes. It basically takes the position that the salary-levels of its employees and its costs are not subject to innovation and restructuring to do more with less.

 

The government has been doing this, and government civilian employee compensation comprises about 7% of the total budget, so it's not like many companies, where compensation is a large fraction of the budget.

[Pangloss]

Let's take as given that the plan causes the loss of 900K jobs. Let's assume that's valid. What your framing of this issue misses is the number of jobs created by the plan... As net job creation may, in fact, circumvent the initial job loss.

 

If the plan causes the creation of 3 million jobs, then lamenting about the loss of 900K is a waste of time since 2.1 million net were still created overall.

 

I'm not sure how many jobs are created by extending a tax cut that's already in place. But we do keep hearing that corporations are sitting on cash, afraid to invest, so perhaps extending the cuts will add a little more certainty to the picture and free up those purse strings. (If that's the argument it's an interesting acknowledgement that Obama's policies have terrified already-skittish managers.)

 

At any rate, I've already acknowledged swansont's point that just because 900,000 businesses are affected doesn't mean that each of them will lay off workers.

 

 

I agree, saying our taxes are insufficiently high because others are higher is silly. Our taxes are insufficiently high because we spend more than we take in, and nobody is willing or able to cut spending. But, it still remains a fact that the most recent balancing of the budget came with higher taxes, and the economy was doing OK in that era.

 

Exactly right -- and I think even now, looking ahead past the election, Republicans (and many of their potential voters) are failing to realize that even if we somehow manage to cut spending we will STILL have to raise taxes or at least keep them at the present rate if we're really going to "do something about the debt".

 

It all boils down to this: If we're going to be the nation that demonstrates the validity of the claim that low taxes and small government can work while still providing safety nets and very little/temporary human suffering (whew, deep breath), then we have to back that up by demonstrating a low taxation level AND non-deficit spending AND economic growth. We have to show that for an extended period of time, THROUGH at least minor economic downturns, while at least addressing/reducing the total debt each year rather than building it.

 

If we can't do that then we can't make the claim that it's the better way.

[iNow]

I'm not sure how many jobs are created by extending a tax cut that's already in place.

Except, this is not a fair representation of my actual point. I was talking about jobs created by ceasing the cuts.

 

 

 

But we do keep hearing that corporations are sitting on cash, afraid to invest, so perhaps extending the cuts will add a little more certainty to the picture and free up those purse strings.

Yeah, except most businesses are sitting on cash because of a lack of demand. There's hardly a need for capital investment if the existing tools and equipment are making more product than there is demand. They're sitting on cash because the equipment and people resources they have are MORE than enough to satisfy the low demand, so a decision to invest in more people or more equipment is a foolish one.

 

Yeah... or we could blame the cash reserves on Obama, or on uncertainty about extension of the Bush tax cuts, or on healthcare, or on all of the other irrelevant crap on which people keep blaming the huge stores of cash seen in business right now. Sure... I guess there's always that.

[lemur]

There's a lot here, but I will comment on this for the moment:

 

 

 

The government has been doing this, and government civilian employee compensation comprises about 7% of the total budget, so it's not like many companies, where compensation is a large fraction of the budget.

 

Ultimately all expenditures get paid to people. That means everyone who doesn't take a loss in income is effectively driving up the basic standard of income determined by average income. The reason no one wants to take an income-cut is because they think there are going to be other people whose income increases. Consider that you can measure income in terms of inflation and deflation the same as goods. If many people's income is going up, those whose stay the same or go down are worth less relative to the others. If everyone took a 10% cut in income, it would be a uniform deflation and have relatively little effect on relative income levels. If on the other hand, some incomes increased by 10% while others decreased by 10%, those that decreased would effectively decrease by 20% relative to those that got raises. What everyone should be doing is accepting the deflation by accepting a certain amount of income loss, but that would require people to trust that others were doing the same, and since they don't they try to grab as much income for themselves as possible. The result is that there is stronger budget-cutting pressure to make up for the GDP going to these people by taking it away from others. When GDP growth drops, the slowdown is not evenly distributed and because some people are exploiting the cuts to maintain or raise their income, others try to keep up by doing the same. What happens to people who lose all their income as a result?