Where is the US economy headed?

What I described was no "appeal to the extreme": it was typical of a very large number of individual proprietors and entrepreneurs in this country

and it went to the heart of the very data which you enployed as "proof" of your proposition that the tax increases will have no effect.

Are you really trying to assert that "5% changes in marginal rates have NEVER materially affected anyone's investment decisions" ? "NEVER" is a very difficult thing to prove.

What the hell IS your point???

You are dead wrong on several points. The chart did NOT depict data from all C corporations or even only C corporations, and may not include all small businesses either.

The statistics cited in this paper adopt the Bush Administration’s definition of a small business as any tax unit that receives any income (or loss) from a sole proprietorship, farm proprietorship, partnership, S corporation, or rental income

You also have a bad habit of ignoring parts of posts that you can't meaningfully respond to. Why would anyone be convinced by argumentation which ignores the need to produce evidence, and which ignores the points which it cannot reasonably support? These are the hallmarks of an unconvincing debater - wouldn't you agree?

Cycloptichorn

Her business generally grossed a few hundred thousand a year, and she provided a regular source of revenue for her suppliers and artisans. She enjoys the incidental travel to Europe and Asia in search of sources and made a net profit (no salary) of about 8% of the gross. Never has her business income reached the level of the top tax rate: she qualifies among the 98+% of small businesses that Cyclo cited. However, every dollar that she made was taxed at a higher marginal tax rate by both State and Federal governments in filings that included all sources of our income. The forthcoming tax increases will wipe out nearly all of the profit in her business, and that indeed is a significant disincentive. I believe this describes the situation behind a very large component of the data Cyclo so blandly cited.

The forthcoming tax increases will wipe out nearly all of the profit in her business, and that indeed is a significant disincentive.

I believe this describes the situation behind a very large component of the data Cyclo so blandly cited.

It seems to me that it is you who evades issues here - particularly on points where your assertions are found to be flawed or wrong.

A little googling found the source for that chart.
http://www.cbpp.org/cms/index.cfm?fa=view&id=2697#_ftn1

Here is what they used for "small business".

Quote:

The statistics cited in this paper adopt the Bush Administration’s definition of a small business as any tax unit that receives any income (or loss) from a sole proprietorship, farm proprietorship, partnership, S corporation, or rental income

However this only reinforces the point I made about the harmful effect the increase in marginel income tax reates will have for such proprietorships that generally constitute only a part of the total income of the individuals who own them.

However, I have not evaded any criticisms of my posts

Evidently you would like to see the largest of them, Bechtel is an example, subject to the corporate income tax.

That the upcoming marginal tax increases for the rich will have no meaningful effect on their levels of investment or their economic activity. That the 'concerns' presented by you and others are completely false; they are thinly-veiled arguments for increasing your personal wealth, at the expense of our country's financial situation. That we have seen comparable levels of growth and investment under MUCH higher marginal tax situations.

You are ignoring secondary effects. The higher marginal income reduces the value of other tax deductions by raising our AGI and all of it is taxed at the highest marginal rate. The net tax increase is substantially higher than you calculated and, given that even in your own hypothetical calculation the net income reduction due to a 5% increase in the marginal rate is 8.4%, the real effect - closer to about 14% of net income is a real disincentive.

I believe you should be a bit more circumspect in your assertions about algebra.

You posted a chart depicting the rise in the number of such sole proprietorships and pointed out that some (Bechtel & Price Waterhouse were your examples) have very large earnings that are not subject to the corporate tax and comprise a disproportionate share of the total incomes of such companies. I merely made the obvious deduction.

Evidently I was wrong about the point you were making. What then was your point ?

Theoretically, if all the net profit on the small business is being taxed at the highest marginal rate already, does that 22k or so really reduce the value of your other deductions by as much as you claim? I'd be interested to hear how this is true.

Cycloptichorn

Cycloptichorn wrote:

Theoretically, if all the net profit on the small business is being taxed at the highest marginal rate already, does that 22k or so really reduce the value of your other deductions by as much as you claim? I'd be interested to hear how this is true.

Cycloptichorn

Too painful for me to recite. However, you can read the currrent IRS rules for itemized deductions with particular attention to those for AGI based limits and reductions if you are curious.

How Do You Figure the Limit?

If your itemized deductions are subject to the limit, the total of all your itemized deductions is reduced by the smaller of the following reduced by two-thirds:

80% of your itemized deductions that are affected by the limit. See Which Itemized Deductions Are Limited , earlier, or
*

3% of the amount by which your AGI exceeds $166,800 ($83,400 if married filing separately).

Before you figure the overall limit on itemized deductions, you first must complete Schedule A (Form 1040), lines 1 through 28, including any related forms (such as Form 2106, Form 4684, etc.).

The DREAM Act: A Spending Nightmare


The Spendocrats in office right now are attempting to tie the "DREAM Act" as an amendment to the Defense Authorization bill, and will be voting on it tomorrow, Tuesday, September 21 at or around 2:00.

In a nutshell, the DREAM Act will allow the federal government to - again - force the American taxpayers to pony up more money we don't have in order to pay for their ideological pursuits. The DREAM Act will increase the cost of higher education for every state, but especially those with large illegal immigrant populations.

Our states are flat broke and need to reform their budgets, not spend more.

It forces states to give taxpayer funded financial aid to illegal immigrants.

It forces states to allows illegal immigrants to pay in-state tuition.

These provisions can be utilized by illegal immigrants until the age of 35.
There is ZERO accountability in place to track the money and costs.
There is no scoring from the Congressional Budget Office.
There is no estimate of the cost to the American taxpayer for the cost of the education and military benefits, or the cost of the fast track to citizenship also mandated in the bill.

Nancy Pelosi, Harry Reid, and President Obama have not passed a BUDGET for FY2011 which starts in October and they want to spend more without any thought about how much this will cost you and me!

From a lawmaker in California (the state with a $19 Billion shortfall!) on the potential costs: "We're spending roughly a billion dollars annually for financial aid now, so every one percent increase in that spending would translate to an additional $10 Million from the general fund."



Fight back against wasteful, ideological spending that violates all of our principles: fiscal responsibility, constitutionally limited government, and free markets.

You are ignoring secondary effects. The higher marginal income reduces the value of other tax deductions by raising our AGI and all of it is taxed at the highest marginal rate. The net tax increase is substantially higher than you calculated and, given that even in your own hypothetical calculation the net income reduction due to a 5% increase in the marginal rate is 8.4%, the real effect - closer to about 14% of net income is a real disincentive.

The forthcoming tax increases will wipe out nearly all of the profit in her business, and that indeed is a significant disincentive. I

I believe you should be a bit more circumspect in your assertions about algebra.

Do not deduct state and local sales taxes imposed on the buyer that you must collect and pay over to the state or local government. Also, do not include these taxes in gross receipts or sales.

http://www.ncpa.org/sub/dpd/index.php?Article_ID=19803&utm_source=newsletter&utm_medium=email&utm_campaign=DPD
State Health Exchange Will Slash, Not Boost, Choice

Unless repealed, the new health reform law will require every American not dependent on government health plans like Medicaid or Medicare, or enjoying employer-based benefits, to purchase health insurance in a state-based "exchange" as of January 2014, says John R. Graham, director of health care studies at the Pacific Research Institute.

Massachusetts provides an example of what to expect from these exchanges:

An April 2006 law created an exchange called the Commonwealth Connector, which deploys a politically appointed board to limit people's choice of coverage.

Not surprisingly, limited choice means higher costs.

Economists John Cogan and Daniel Kessler of Stanford University, and R. Glenn Hubbard of Columbia University, found that premiums in Massachusetts increased by 6 percent more than in the rest of the country, and 14 percent more for small businesses, between 2006 and 2008.

California's Legislature has proposed an exchange similar to Massachusetts':

Its most important power would be to "selectively contract" with insurers to offer policies in the exchange. This is fundamentally different from traditional insurance regulation, which concerns solvency, fraud and good-faith claims processing by insurers.

The exchange's bureaucrats would choose the policies available to Californians that Obamacare will force into the exchange.

Worse, the California exchange would persist even if Obamacare is repealed.

Most of us throughout the country will be facing exchanges like Massachusetts' and the one proposed in California, says Graham. Indeed, John Goodman, president, CEO and Kellye Wright Fellow with the National Center for Policy Analysis concluded that any household earning less than $80,000 annually will lose its employer-based benefits and be driven into an exchange.

Source: John R. Graham, "State health exchanges will slash, not boost, choice," San Francisco Examiner, September 9, 2010.

Bottom line is the marginal state & Federal tax on business income is about 61% and adding another 8% to the mix is indeed a very serious disincentive to such activity.