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As a family business owner in the top income bracket during Clinton, Bush, and Obama.
The decision to hire employees is based on demand, not taxes. In 2010, we made around $550k net profit. So, if the tax rate goes back to the Clinton years, we will have to pay 5% more on $300k profit, which is $15,000.
Do we want to pay an extra $15,000? No we don't, but it does not make us want to cut payroll because it would hurt sales. If demand continued to grow, we would not change our mind about hiring employees because it wouldn't make sense. Think about it. Would I really want to turn away customers because I don't have enough staff? No. Taxes don't influence the decision at all. DEMAND is the only thing that matters.
Personal example: Now to take the argument even further... if taxes are raised 5% on everything above $250k, it would give us an incentive to complete any needed projects. For example, we have an ancient heating system. It will cost around $30,000 to install a new system. We aren't sure how much longer we plan on owning this business, so we are putting that project on hold for now. If taxes were raised, we would want to invest in our business instead of paying more in taxes. It makes sense right? If we install the new heating system it not only adds value and saves on us money on utilities, we can write it off! This boosts our economy because businesses instead of sitting on cash are encouraged to spend their profits in order to pay less taxes, which add no value to the business.
Note to everyone reading this, this is his opinion only and not representative of the business community as a whole. You should have noted that in a disclaimer because my brother-in-law also owns a business in Missouri that would be hit with the Obama tax increases and he thinks opposite you do. Increasing taxes will force him to start saving for a rainy day and lay off staff
Interesting explanation. I am no expert on this, so I might need some explanation.
If I understand it, the demand issue is central for your business. What drives that? Now, depending upon your business, some of the $15k in taxes might come back in increased demand from government employees or contractors. Or not. My critique of of the slash government approach is that it will almost certainly lower demand in some way. And that may be ok over the long haul, but not right now.
Your second point is interesting, in that business owners will engage in business investment and associated activity as a way to avoid taxes. And they might not do it otherwise.
So, as a midsized business owner, if I might ask, what will you do with that $15k at current tax rates? Save? Invest? Expand?
And of course that 15,000 won't be passed onto the consumer at all. Might not hurt your economy, but it will hurt all of your customer's. (Well maybe you are Mother Theresa and will eat the added cost, but most sane people who own businesses aren't going to take a pay cut because they love Uncle Sam and will simply pass off the added cost to the customer.)
Note to everyone reading this, this is his opinion only and not representative of the business community as a whole. You should have noted that in a disclaimer because my brother-in-law also owns a business in Missouri that would be hit with the Obama tax increases and he thinks opposite you do. Increasing taxes will force him to start saving for a rainy day and lay off staff
That came through loud and clear.
The rest of us do so much shouting about it...Hearing at least one business owner explain their reasoning is interesting.
With respect to your brother in law, is he in a business where cutting staff is still possible with increased demand? The demand question seems fundamental, and you could argue either way. The damn tax hike will kill profits, so bad if demand is down. But if the demand for your services is booming, you will likely be needing staff. This damn recession has killed demand in so many fields that usually one wants to do a tax cut to goose things along, but we've been doing that and still things stink.
So why aren't Republicans talking about doing something to increase consumer demand? To them, it's all about cutting taxes for the wealthy and somehow that will inspire them to create new jobs. But then if they really do, how many of them are going to make new jobs for China or Mexico? GE, for instance, is creating 65 new jobs for the Chinese when it moves it X-Ray business from Wisconsin to China.
Note to everyone reading this, this is his opinion only and not representative of the business community as a whole. You should have noted that in a disclaimer because my brother-in-law also owns a business in Missouri that would be hit with the Obama tax increases and he thinks opposite you do. Increasing taxes will force him to start saving for a rainy day and lay off staff
Then how did he survive paying higher taxes under Clinton, assuming he was in business back then?
Then how did he survive paying higher taxes under Clinton, assuming he was in business back then?
Clinton only introduce one new income tax bracket for the highest earners. He dramatically cut capital gains taxes and introduced a lot of tax deductions for small businesses.
Interesting explanation. I am no expert on this, so I might need some explanation.
If I understand it, the demand issue is central for your business. What drives that? Now, depending upon your business, some of the $15k in taxes might come back in increased demand from government employees or contractors. Or not. My critique of of the slash government approach is that it will almost certainly lower demand in some way. And that may be ok over the long haul, but not right now.
Your second point is interesting, in that business owners will engage in business investment and associated activity as a way to avoid taxes. And they might not do it otherwise.
So, as a midsized business owner, if I might ask, what will you do with that $15k at current tax rates? Save? Invest? Expand?
1. Our current business is in the hospitality industry. Some of our business comes from public schools and hospitals, but as a percentage of revenue, it's a small amount. However, there is a infrastructure project being considered and if it were completed, our business would see a rise or at the very least would become more valuable for resale.
2. The current debt deal, our business shouldn't feel any pain. If medicare was drastically cut or social security, it could possibly hurt because these customers would have less discretionary spending. Although, I'm not sure if any of our customers have to depend solely on either program.
3. We have been involved in businesses for awhile. One of the key reasons for our successes is we constantly invest our profits back into our business. However, we also save a lot. If the tax rate were increased, we would most likely upgrade our heating system. Upgrading our heating system will have no direct relationship with sales, so it's not high on our list. There has to be a good reason to install a new system as it wouldn't increase revenue, only add value and save us some money each year since it would be more efficient.
Expanding and hiring depends 100% on customer demand. That's why the tech boom still happened even during a tax hike. If the demand is there, no business owner will let a tax hike stop them from expanding or hiring. If you can make $1 million instead of $500k, it's worth it even if taxes increase by 15%. Anyone who says otherwise I don't believe is a business owner.
I dont think higher taxes will help the economy---and I dont think that is, or was the goal in this latest round of comedy and hijinx.
I think the intent was to plug up massive loopholes and escape hatches that trilloionaires and corporations have discovered.
If some of these grabags were eliminated, new sources of revenues would develop----of course, the zealots have labeled these as new taxes. I am vehemently oppossed to new taxes on lower and middle class Americans----that being said, eliminating some of the folly and humorous tax breaks of the rich and famous will allow for new revenue streams and aid somewhat in debt reduction.
Remember now------according to the zealotists eliminating tax heavens and escape hatches is actually a tax increase----which is very bad for the country-----and allowing the supernovas to avoid their true reponsilites is very good for the country----get it now?
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Might not hurt your economy, but it will hurt all of your customer's. (Well maybe you are Mother Theresa and will eat the added cost, but most sane people who own businesses aren't going to take a pay cut because they love Uncle Sam and will simply pass off the added cost to the customer.)
