Skip to comments.From Facebook...Does this make sense to you?
Posted on 10/17/2012 9:02:46 AM PDT by The Louiswu
Romney loves to say that lowering taxes on companies
will create jobs. This is spoken like some gospel truth.
I actually stopped to think this through
tonight and came to a much different conclusion.
I believe that higher taxes actually encourages
increased hiring and investment. Why? Because, as a
small biz employer
(structured as an S Corp) all company profit flows
through to my (and Joe Downey's) personal taxes. As
both candidates regularly note, 90%+ of all businesses are structured this way.
So if you reduce my tax rate then I'm more likely to
take money out of the company since the penalty for
doing so (taxes), is reduced. Whereas a higher tax
rate means I'm incentivized to take a reasonable
salary and reinvest the money in the business- new
hires, marketing, etc, instead of taking it out and
paying the taxes. This will then grow my business.
So I hire more people, the economy grows and the
value of my business also grows. Everyone wins.
Also, consider what happens to the profit business
owners take out of their companies with this lower
tax rate. Will they reinvest it here or overseas?
Chances are they will do some of both leading to an
exodus of cash.
I am, of course, writing from the perspective of running
small businesses. An enterprise (think
Walmart) business may see this differently but from
where I'm sitting: higher taxes=encourage
All money coming out of a Sub S is taxed as ordinary income.
The author gives away his ignorance when he states that money left in the company isn't taxed. That's not true for an S corporation since the tax is on the corporation's book income, not cash dividend payments to the owners.
High tax rates on corporate earnings slow job growth, increase prices for consumers, and lead to wasted use of resources. Put another way, if you have to pay a high enough tax rate on your S corporation or LLC, then you might as well do whatever you can to steer as much of the profit of the corporation into fancy office furniture, nice company cars, boats and planes, and sales offices in warm climates so you can enjoy your work day without paying as many taxes as you would otherwise. Needless to say those kinds of decisions result in fewer jobs in the USA.
Less profit from taxation = more money to expand business?
Pass the blunt Barry Bogart!
“All money coming out of a Sub S is taxed as ordinary income.”
That’s wrong. Income that is previously taxed as s corp profits are not taxed when taken out of the corporation by the stockholders.
During the Bush Years, a very small local business (music store) was able to expand into twice their size, hire a manager, hire at least six music teachers, and have a store plus a busy music school.
2 years into the Obama Administration, the whole thing folded.
The two store fronts are STILL empty.
Crap. I could post enough libertard incoherence from Facebook to bring JR’s servers to their knees.
This actually makes more sense than most!
BTW a good article that answers this rambling post and explains the Laffer Curve is this one:
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