Business/Finance

Obama's tax plan doesn't hurt small business (Update #2)

UPDATE: Marc in the comments made a point about sole proprietorships with employees that I’d like to address as well.

Barack Obama wants to reduce taxes for roughly 95% of the United States while raising taxes on the other 5% – those making more than $200,000 per year. John McCain wants to lower taxes on everyone, and attacks Obama’s tax increase on the upper 5% as destroying small businesses and jobs. I decided to do some research on this issues to see if, in fact, raising taxes on those individuals making more than $200,000 would reduce employment or not, and I found out some interesting things. The conclusion, however, is this: Obama’s tax increase on the wealthy will not directly harm small businesses. At. All.

First, some definitions so we all know what I’m talking about. So far as I can tell, the only small businesses that pay taxes at the personal income rate are “sole proprietorships”, the simplest type of business in the U.S. According to NOLO.com, a sole proprietorship may have employees, but the census indicates that the bulk of sole propreitorships do not – they’re considered nonemployers, and they are the largest portion of all U.S. businesses.

In 2005 (the last year for which there is both data on nonemployers and employers at the U.S. Census Bureau), there were 20,392,068 nonemployers with a total income of $951 billion (Source: Nonemployer Statistics, 2005, Total for all sectors, United States). Small business employers1 numbered 5,878,784 (Source: Statistics of U.S. Businesses, All Industries, 2005). The total number of all employer and nonemployer businesses in 2005 was 26,375,614, of which 26,270,852 (or 99.6%) would qualify as small businesses as I’ve defined it above. This would be why people respond when you threaten to increase taxes on small businesses – there’s a LOT of small businesses.

But look closer at those numbers. The average income per nonemployer small business is the total income divided by the number of employers, which in this case is only $46,635. What that means is that the vast majority of nonemployer small businesses (which we can probably fairly say are mostly sole proprietorships) would be unaffected by the Obama tax cut. In fact, since they make so little, they’d get a tax cut, not a tax increase.

Yes, you read that right: the average small business would get a tax cut under Obama’s tax plan, not a tax increase as McCain has suggested.

Various websites have suggested that there are between 15 and 20 million sole proprietorships – that’s less than the number of nonemployers from the Census data, but since some employers are certainly covered while some non-employers certainly aren’t, we’ll assume that all the nonemployers are sole proprietorships. Further, if you look at the Census household income survey for 2005, you’ll find that only 3% of all households made more than $200,000. Since sole proprietorship income is taxed as household income, we can probably fairly assume that only about 3% of all sole proprietorships in 2005 would be affected by Obama’s tax increase.

This means that only 3% of all businesses would see their taxes go up as a result of the Obama tax plan.

And this will cause our employment situation to get dramatically worse how, exactly? It’s not like all 3% will go out of business entirely as a result of the tax increase – the increase just isn’t big enough to drive them all out of business. In fact, according to this BusinessWeek Q&A, the numbers are hard to estimate, but that 9% per year is a commonly used value. If we assume that the Obama tax increase boosts the failure rate for sole proprietorships from 9% to 14%, then that’s approximately an additional 31,000 jobs lost.

Of course, if we say that the tax cut to the other 97% of sole proprietorships drops the failure rate from 9% to 8%, then that’s an additional 198,000 jobs created by the other sole proprietorships, for a net increase of 167,000 jobs. Annually.

Or, as Factcheck.org said when they tackled this issue earlier this year:

McCain has repeatedly claimed that Obama would raise tax rates for 23 million small-business owners. It’s a false and preposterously inflated figure.

UPDATE: Let’s broaden the definition to assume that all small business employers with less than 10 employees are also sole proprietorships. From the employer Census link for 2005 above, there were 4.72 million employers with fewer than 10 with a total of 12.83 million employees. Let’s assume that, as above, no more than 3% of those employers fall into the $200,000+ individual pay bracket. That’s a total 110,000 employers and 31,000 employers for businesses with 0-4 employees and 5-9 employees respectively. Again, if we assume that there’s a 5% increase in business failures equally through both sizes of businesses (from 9% to 14%), that’s a total of 5500 businesses sized 0-4 employees and 2790 businesses sized 5-9 employees that would fail due to the tax increase.

The average number of employees for all businesses in the 0-4 employees category is 1.66 employees per business. The average number of employees for businesses in the 5-9 employees category is 6.66 employees per business. Calculating the job losses we get 8,855 employees in those 5500 newly failed businesses (0-4 employees), plus 5500 for the owners themselves, and 18,582 employees in the other 2790 businesses (5-9 employees) plus another 2790 for the owners. Total is 35,036 extra employees losing their jobs.

Adding that to the 31,000 sole proprietorships from the first analysis, that’s a total of roughly 66,000 jobs lost every year. And just in sole proprietorships alone (never mind the newly expanded 0-9 employees category) we created 167,000 new jobs. Include the 1% decrease in employer small business failures (from 9% to 8%) on businesses sized 0-9 employees and that’s an additional 176,000 new jobs, for a total of 343,000 new jobs across all nonemployer and employer small businesses.

Put bluntly, even if we assume the worst case cost of 66,000 jobs and that every business with fewer than 10 employees is a sole proprietorship (and it’s not), the Obama tax plan is still creating 277,000 new jobs every year.

1 I chose to define “small businesses” as those businesses with fewer than 100 employees. The Small Business Administration uses a much more complicated measurement that depends on the industry and total revenues/number of employees.

UPDATE #2: I’ve been able to do some more accurate calculations with the IRS data from 2005, and the numbers of small businesses (defined as all partnerships, S corps, and sole proprietorships) that fall in to the Obama tax increase zone is actually just over 7%, not 3% as I’d originally estimated. However, the rate of business failure and closure is much closer to 2% of all businesses, and so I’ll need to rework my analysis some. Instead of tagging that rework onto this post, I’ll do a new post sometime next week with the updated analysis.

100 replies »

  1. Congratulations you found the average income per nonemployer. They are worried about the sole proprietors who have employees. It is going to hurt them. You know those 5 million employers you neglected to put into your equation with their over 40 million employees based on your definition of small businesses. They will have to fire workers to stay in business. You’ve proved nothing. Again congrats. Let’s say the average worker at a sole proprietorship gets $30,000 a year. You have 6 workers that puts you over that $200,000(7 * 30K including the owner’s profit) income alone without any other expenses just having to pay wages. (I’m using the logic that you won’t hire workers unless you have the revenue to match it.) So, think of every landscaping business in your area, or plumbers, contractors, electricians, . Those are all sole proprietors, I know because my family owns a rental business and I deal with them on a daily basis. They stay a sole proprietorship because its an easy way to stay liquid, I know because our business has been that way for a long time. And also don’t forget LLC’s can be listed as a sole proprietorship. So please, when you say you have researched something, make sure you have facts that back up your conclusion rather than skew the data to bring voters to Obama.

    sent from: fav.or.it [FID2225148]

  2. Marc – I’d happily have neglected all those 20 million nonemployer sole proprietorships if the McCain campaign would have done so.

    However, you’ve got a fundamental flaw. The IRS deductions page says that sole proprietorships can deduct the following things as business expenses:

    Employees’ Pay – You can generally deduct the pay you give your employees for the services they perform for your business.
    Retirement Plans – Retirement plans are savings plans that offer you tax advantages to set aside money for your own, and your employees’ retirement.
    Rent Expense – Rent is any amount you pay for the use of property you do not own. In general, you can deduct rent as an expense only if the rent is for property you use in your trade or business. If you have or will receive equity in or title to the property, the rent is not deductible.
    Interest – Business interest expense is an amount charged for the use of money you borrowed for business activities.
    Taxes – You can deduct various federal, state, local, and foreign taxes directly attributable to your trade or business as business expenses.
    Insurance – Generally, you can deduct the ordinary and necessary cost of insurance as a business expense, if it is for your trade, business, or profession.

    In other words, in your own example, the sole proprietor can deduct all the pay except his/her own profit from their IRS taxes. And until the profit of that sole proprietorship (ie the owner’s individual personal income) exceeds $200,000, they’re unaffected unless they’re doing their taxes wrong. Remember, only 3% of all Americans in 2005 made more than $200,000, and only a fraction of those would be from sole proprietorships.

    Even if we applied your logic, the Obama tax plan would still create jobs. I’ll edit that in as an update, however.

  3. Oh, jeez, Brian, there you go again…using logic, math and reasoning skills? I can tell that you’re not a Republican; now i have to decide if i’m offended by your partisanship. /snark

    The issue that i’m afraid must be confronted, but probably won’t be, is that with the bills piling up at the national level, any tax cuts may well have to dropped. We are, collectively, that family in the neighborhood that pulled out all the equity in our house; leases cars we can’t really afford; and still have $18,000 in credit card debt. Everything still looks fine on the outside, and we tell all our friends at cocktail parties about our plans to visit Europe next summer…but our real situation is rotten and precarious.

    I understand that Obama cannot/will not speak the hard truths publicly, so i appreciate your time and effort to defend what he’d like to do against the fear mongering of the right.

  4. I started reading the article and you lost me at “Barack Obama wants to reduce taxes for roughly 95% of the United States…” Right off the bat, that’s not true. Why should I, or anyone else, read any further?

  5. How can 95% of the population have their taxes lowered, when 29.3% don’t pay any income taxes at all? Many benefit from the Earned Income Credit(EIC) which is a direct transfer of wealth. Perhaps their checks will go up….but then again, I suspect that most who qualify for EIC would vote for Obama anyways.

    Jeff

  6. No, no, I remember this “95% of the population” line. FactCheck.org hammered Obama on it. It’s technically 95% of American families, not the American people. They’re citing the same Tax Policy Center report.

    Why should I, or anyone else, read any further?
    Because it was a generalization and not something the article set out to prove. Even taking into account the contextual meaning of “95% of the United States”, the article’s facts don’t hinge entirely on this one sentence. We don’t have to be so sensitive to various gradients of truth as long as we acknowledge them, do we? This isn’t Meditations on First Philosophy, it’s an examination of what competing tax codes mean for employment.

  7. You declare your sales revenue as your income when filing taxes for a sole proprietor. Then you deduct from what you owe to get you how much you pay for taxes. Your income minus your deductibles gets you your Adjusted Gross Income. Obama says he will raise taxes on people “making” over 200,000 dollars but makes no distinction between income and adjusted gross income on his website, or in any of his interviews, his speeches, or debates. You say income which is completely different from AGI or net profit for sole proprietors. When someone says they “make” x amount of money, they usually tell you their income. They don’t tell you how much they have left after they pay their mortgage payments and other expenses. A sole proprietors’ income is their total sales revenue, not their profit or adjusted gross income.

    sent from: fav.or.it [FID2246176]

  8. Marc, you have a fair point that it’s unclear, but given that Obama hasn’t called for a dramatic change in how taxes are calculated, it’s probably accurate to say that the taxes apply to adjusted income minus deductions.

    Can you counter my point that, as of 2005, only 3% of the U.S. would have been affected? Or that my analysis, applied to the millions of small employers, still proved you wrong?

    If you can’t disprove the basic mathematics or can’t show me where Obama says that he’ll be changing how taxes are calculated in their entirety, then my point still valid, and your argument remains disproven mathematically.

  9. Steve – my apologies on the error. I spent my time researching the taxes, incomes, and such and forgot to verify the accuracy of the 95% claim itself. I apparently missed the right TPC document.

    In 2005, however, only 3% of U.S. households made more than $200,000 per year. When I saw that number, I figured that the base number remained accurate.

  10. Yea, but the problem is that it won’t only affect that 3% of small business owners, it will affect their employees as well. It will also affect their prices, causing a ripple effect. You are down-scaling it. And you don’t have to change the way taxes are calculated to say you are going to increase taxes for sole proprietors whose income is over 200,000 dollars. You write your income on the tax form then you counter what you owe with deductions to lower your total taxes. The IRS knows how much your total income is before deductions. If it’s solely based on income, it will affect a lot more businesses than people think especially people who have income over 200,000 dollars due to sales but only bring home under 50,000. They will pay taxes on the same amount of money but pay a higher percentage.

    sent from: fav.or.it [FID2249237]

  11. Yes, some people will be hurt. There’s no disputing that. If my math is even close to right, then the number of additional employees that lose their jobs as a result of the tax increases will be around 66,000 annually. But another 343,000 employees who would have lost their jobs under the existing tax plan will keep their jobs. This effectively creates 277,000 new jobs every year simply by keeping people who would have lost their jobs employed. Those employees will be better off than they would have been otherwise.

    This is how our form of capitalism works – some people lose their jobs, other people keep theirs or find new ones. Some people are hurt, others are helped. And it’s possible that some of the people you know will be driven out of work in the process. It’s impossible to guess, on an individual basis, who will or will not be injured by this. But someone else will step in to take his or her place.

  12. Sorry, completely disregard my last comment about the income calculation. It didn’t sink in what you were saying about changing the way taxes were calculated until now. I wasn’t thinking in terms of the graduated income tax scale. Again my apologies.

    sent from: fav.or.it [FID2249506]

  13. In answer to Marc regarding “gross income” vs “net income” for a sole proprietor: Look at the Form 1040 you submit for taxes. You will see that Line 12 is where you put business income or loss from the Schedule C. You do not enter gross income on this line, and when you add all the income together, you never use the gross income from the business. A Schedule C filer has “income” reported that is net. Yes, you can argue that the gross income is in the IRS records, but it is nowhere on the Form 1040 and is not included in a person’s income.

  14. I’m no expert on either economics or taxes, but I’d just like to give my $0.02 on the subject of Obama and taxes.

    A couple of years ago I read the classic “Economics in One Lesson” by the late great Henry Hazlitt. His “lesson” was that most people look only at the short term, short span gains of one group when considering an economic policy. He then sets out, using a number of examples, to show why a broader perspective changes things entirely.

    So listening to those who support Obama’s economic logic, I’m driven to sit back and look at the overall philosophy here, from a distance. It seems to me that at the root of Obama’s economic ideology is the idea that big business should be plundered in order to let smaller businesses thrive. I’m pretty sure that many liberals harbor a romantic fantasy wherein the balance on Main St shifts from big box chains (those soulless tools of Lucifer) to small Mom and Pop enterprises (service with a smile, part of the community).

    But let’s be honest, Obama’s tax plan is a disincentive for businesses to expand out of their small business definition. He also wants to sting large corporations for billions more than they are already paying. The inference: small business good for America, big business bad.

    But are we forgetting here just how much big business does for our economy? There’s a little thing that everyone keeps neglecting to mention and that’s “economies of scale”. The larger the operation, the lower the costs of materials and the less energy expended per unit of production. This means of course….lower consumer prices.

    If we sting corporations and big business for more of their profits, they’re going to get that money back one way or another. How? By charging us more for mass produced goods. If we shift the production balance in favor of small businesses who don’t benefit so much from economies of scale, the cost of goods are going to rise too. Economies of scale affects both manufacture and retail too, additionally.

    Whatever way you look at it, this means higher costs to the consumer. How would you like your tax decrease eaten up (and then some) by paying more for your goods? Additionally, since most of our everyday essentials are mass produced, paying higher prices for them is going to mean less dollars out there chasing the kinds of things that small businesses produce.

    I just wanted to point out, overall, that it’s not just “tax rates” that affect the well being of business, it’s their potential revenue too. In fact it could be said that their levels of revenue have more influence over whether or not they stay in business than their tax rate. Am I the only one who’s thinking this broadly, or am I just totally and utterly wrong?

    I run a small business in Manhattan. I provide a service. If the cost of consumer goods rises as a result of Obama penalizing larger businesses, then a lot of people for whom my service was previously viable as part of their weekly budget, might just be tipped over the edge into thinking “OK, what can we do without here?”

    The answer, as always, is that the ONLY way to increase standards of living for everyone is through overall economic growth and the creation of more wealth. Like it or not, large businesses play a tremendous part in enabling such economic growth and those who think that big business can be plundered in order to give small businesses a break are, to me, not thinking of the wider picture. Economic growth requires, not a rearranging of wealth, but MORE wealth and LESS government spending, ie less taxes across the board, not just to the group that Obama figures is going to send him the most votes.

    Let’s face it, Obama is an outright socialist who poses as a centrist because socialism is still a dirty word in the Land of the Free. I have no doubt whatsoever that his real ideology is “wealth redistribution.”

  15. Brian,
    I could possibly agree with these numbers regarding only sole propieterships. Usually sole propieterships, in my experience aren’t really businesses hiring a majority of employees, but a business opportunity for an individual like for example many indpendent sales professionals, contractors, title agents, self employed attorney’s etc. I’m not saying they don’t hire employees, but it is usually an entrepenuer in a very strong self-employed opportunity. As an individual it is very challenging to net $200,000 after deductions in income. Not to say some don’t do it, but as a sole producer there is only so much time and opportunity one can attain in most given industries as in individual business person. Thus I understand why in your estimation most small business owners would not be affected. I guess we’re on the same page here. However, I think you also need to include S-corps and LLCs. these are corporate entities that favor small business incorporation versus C corps which are usually much larger corporations. To my understanding while C corps have their own corporate tax brackets, S corps and LLCs are taxed at the primary principal’s tax bracket. Thus if you are in the 35% tax bracket any retained earnings in the corporation would be taxed at the primary prinicipal’s tax rate. Conversley, these are also small businesses which I would imagine have revunues after deductions that are greater than the $200,000 limit set by Obama if a principal is single or $250,000 if they are married which would increase their tax rates. I would also argue that part of the reason these small business have greater revenues is because unlike most sole propieters they do employee a small number of individuals which could range from under 10 to your 100 person figure, to 500 defined by the government. Small businesses incorporate like this to separate the business owner’s and companies’ assets and liabilities. It also protects the business owner from being personally sued if the business is found at fault even though the principal could still be accountable. I think you need to include these corporate entities in your small business numbers as well as sole propieterships to have an accurate representation. Obama’s plan will raise taxes on a lot of small businesses, however most of them will not be sole propieters. When business owners are taxed on productivity they’ll have to decide “do I want to work harder, have to manage more employees or do the activities it takes to increase market share and spend time away from my family for a lesser return?” Some will, some will try to keep the business at status quo (admittedly tough to do) and some will say screw this. I can fire my employees reduce costs, get rid of the government red tape ( worker’s comp, group health which Obama will fine companies for not offering etc. regardless of revenue) keep my revenues below the tax increase run the business myself and keep my families’ lifestyle. The loser here will be the employees. In an economy where 75% of job offerings (defined by the government as companies with 500 employees or less even though for arguement I can agree with your addition of 100 or less) we need governmental tax policies that encourage business owners to grow their businesses and offer job opportunities not policies that discourage them. Jobs come from businesses not businesses from Jobs. Higher marginal tax rates will make it harder for some employers to be able to expand their business or kill the desire to do it at all and that does hurt the economy. Also Obama’s claim that he won’t tax starts ups on capital gains is absurd. First, most start up aren’t profitable and second of all most small business don’t pay capital gains unless they’ve raised capital as a private placement and buy back shares as future warrants. they pay taxes on revenue, but very few business will do $250,000 in the first year. Those that do are business sponsored by angels and venture capital, but they are job opportunities for well connected (fine by me) not the middle class Barak deems to protect. However, possibly people Barak would like to get money from as croney donors as any politician would..

  16. James, I’d like you to answer this question: do you think it’s right for big corporations to pay less than a small business because either a) they’re using every loophole in the tax code they can find or b) because they’ve sheltered their profits overseas? That’s the situation as it stands now – big companies have sufficient lobbying power in the government that they’re able to buy tax loopholes with political donations, and so they pay, as a rate, dramatically less in taxes as a percentage than most small businesses do. That’s a crime in my opinion, and it’s not wealth redistribution to demand that this change.

    Finally, lower taxes help only so much. There comes a point where you make government ineffective due to lack of investment and the result is the Minneapolis bridge collapse or the massive power outage several years back (if you were in Manhattan at the time, I suspect you probably remember it more vividly than I ever could). The problem isn’t too much or too little government, or even too high or too low taxes. The problem is ineffective government and a lack of public investment. Not government spending – public investment.

  17. Joe, according to the IRS, you’re right about LLCs potentially being taxed at the personal tax rate (but not necessarily – the members of the LLC get to choose whether to select personal or corporate taxation), but I don’t know how to separate the two styles of LLCs for a better analysis. My reading says that S corporations work differently, with members being taxed on their personal income and the corporation being taxed on capital gains and a few other non-personal income ways. As I’m not a tax expert, though, I could be wrong.

    As for the 100 vs. 500, if you look at how the SBA defines a small business, it varies hugely from industry sector to industry sector, with some businesses defined by number of employees and others defined by having less than a certain amount of money coming in. I chose to limit myself to sole proprietorships specifically because they were what I could talk to intelligently. It’s possible that the inclusion of some LLCs could alter the job balance, but I couldn’t tell you how much. I’d trust someone like FactCheck.org or the Tax Policy Center to do a much more thorough job of analysis on those issues.

    I intentionally didn’t go anywhere near capital gains taxes or corporate taxes (nominally 35%, but with bazillions of loopholes) in the post because I don’t know enough to talk about them intelligently. I agree that we need to help businesses employ people, but there are a lot of ways that Obama’s other plans may (or may not) do that besides tax policy.

  18. Brian:

    I’m in favor of any efforts for any business of any size to lower their tax bill, absolutely. Abolish corporate taxes altogether. They just end up as higher prices or fewer jobs one way or the other. It is not a “crime” to find ways to keep more of the wealth that you own, of course it isn’t.

    I’m a great believer that wealth is far more effective in the hands of the people who created it. Government is far too big. It is absolutely about reducing government spending. Government isn’t ineffective because of a lack of investment, it’s ineffective because of the incompetence and inefficiency which arises when operations are run by politicians and faceless bureaucrats spending money which isn’t theirs, which has been extorted by force from the taxpayer.

    In fact I’m inclined to believe that the more the government has money invested in it, the more inefficient and incompetent it becomes. Anyone who has ever switched from working in the private sector to the public sector will know what I’m talking about. When people are working with money that’s come from the seemingly bottomless well of the taxpayer, they’re far less concerned about efficiency and waste than they are when they’re directly answerable and accountable to the people who’ve actually invested that money.

    I’m reminded of the words of Walter Williams:

    “Those areas where people are motivated the most by greed are the areas that we’re the most satisfied with: supermarkets, computers, FedEx.” By contrast, areas “where people say we’re motivated by ‘caring'” — public education, public housing etc. — “are the areas of disaster in our country…. How much would get done,” Williams wondered, “if it all depended on human love and kindness?”

  19. “I’m a great believer that wealth is far more effective in the hands of the people who created it. Government is far too big. It is absolutely about reducing government spending. Government isn’t ineffective because of a lack of investment, it’s ineffective because of the incompetence and inefficiency which arises when operations are run by politicians and faceless bureaucrats spending money which isn’t theirs, which has been extorted by force from the taxpayer.”

    So I am guessing that the government bailing out the banks and the wealthy bankers who brought about the current situation should not be doing so on behalf of the taxpayer?

  20. Interesting. Flawed, superficial and incorrect, but interesting. Interesting in a confirmation of representativeness heuristics kind of way. Your conclusion is a big bag of conjunctive fallacy tied with a bow of false precision that becomes less true probabilistically with each number you provide. You have parsed parts to arrive at a whole by mixing and matching dependent and independent variables and macro / micro juxtaposition and correlations that have no basis in reality other than you just made them up.

    ex- . “If we assume that the Obama tax increase boosts the failure rate for sole proprietorships from 9% to 14%, then that’s approximately an additional 31,000 jobs lost.

    Of course, if we say that the tax cut to the other 97% of sole proprietorships drops the failure rate from 9% to 8%, then that’s an additional 198,000 jobs created by the other sole proprietorships, for a net increase of 167,000 jobs. Annually.”

    Yeah, that’s fun, erroneous, but, heh, based on numbers I just pulled out of my bum, Obama’s sunny disposition will increase the non-farm payrolls by variable x! WTF?

    This, I guess, stands to prove your thesis that Obama’s Tax plan is not going to impact in any significant and negative way Small Business Owners, or at least the greater total number of them; you seem to like this 3% will pay assumptive number. How do you think the vendors (which in most cases are small business owners) are going to do better when their higher revenue customers (also in most cases other small business owners) reduce capital outlays because they are paying between 4.6% and 15% more to the government depending on how they file. Not soo good, I think. So, here is a little real world non-assumptive math for you on an owner that has income of $300,000. That is between $13,600 and $45,000 that is off the book. That is the part time receptionist’s wages. That is the in house book keeper’s salary. Hello, outsource! That is a reduction in benefits for 20 employees. That is reduced purchases of new Equip, Fix and Furn.

    But at least the owner can feel patriotic knowing his hard work and ingenuity provided a handout, sorry, a tax cut, to the 30% of the country that pays no Fed inc tax at all. At all.

    Have you actually read BOJoe’s SB and Tax plan or have you garnered your info from the media? It seems more the latter than the former.

    I won’t argue your data, assume every data point you offer is accurate and you still totally miss the point. (although the BOJoe Small Biz plan puts the number of small bizs @ 25.8 million representing 99%+ of all employers, 2006 is the last available data year for the IRS Statistics of Income Bulletin, and the revenue inflow from small-business constituting income derived from all pass throughs… sole props, partnerships AND Sub S corps is closer to $700 billion, but, why quibble)

    The point being, it is not about the total number of SB owners, it is about the nominal tax rate applied to the bulk of SB revenues.You don’t factor many of the relevant variables including that BOJoe’s proposal is not indexed for inflation, uncaps payroll / FICA ( a nice double ding for sole props), raises cap gains and div tax and doesn’t mention if those are included or excluded in the total number or that the total number threshold of $250,000 is based not on the small business income in isolation but on total ‘household’ income. Kind of changes the picture when you imagine an experienced Fireman or Teacher who has sole prop on the side and is married to an experienced Fireman or Teacher. That $250,000 does not seem so unattainable to anyone not in their 20’s. But, fear not, that $500 “Making Work Pay” tax credit will really help the small business owner. thumbs up!

    Whatever warm and fuzzy you arrive at, the end principle presents that in your mind, and Obama’s, it is beneficial or least ‘equitable’ to the greater whole of society to confiscate wealth from a small tranche of society to redistribute to the benefit of another larger tranche. That is a factually unknowable and entirely reliant on mutually agreed temporal horizons and philosophical contexts in the abstract. It is just crazy commie shirker on the dole talk in the concrete.

    Do you truly believe, that in this day and age, in this economic environment, and in spite of all historical example, that governmental debits and credits correlate? Really? Talk about trickle down economics. In your wildest dreams you feature that increased taxes taken by the government really ‘trickle down’ in real time to ‘make benefit for glorious’ lower tax brackets? Amazing.

  21. #
    Elaine, October 7, 2008 at 3:00 am :

    So I am guessing that the government bailing out the banks and the wealthy bankers who brought about the current situation should not be doing so on behalf of the taxpayer?

    No, they should not.

  22. MacFaux – you raised a couple of good specific points, but your rude attitude (“crazy commie shirker on the dole talk”) doesn’t exactly make me interested in addressing them in too great of detail. However, to further discussion among others, here’s a few counterpoints:

    Yes, I’ve read the Obama tax plan and an excellent analysis of it. It pretty much says that Obama’s tax plan sucks. It also says that the McCain tax plan sucks about twice as much and, because there’s more unknowns about what McCain will do to taxes, has higher risk too.

    As far as the effects of capital gains taxes, here’s what that analysis from the Tax Policy Center says: “the capital gains and dividends provisions probably have little or no effect on the performance of the economy.” And as far as the effects of raising or lowering tax rates (or so-called “virtual” taxes like minimum wage hikes) on employment, every economic study that says lower taxes raises employment is offset by another study that says the reverse. Which really means that, if changing taxes changes employment, it changes it so little that other economic factors swamp the direct effects of taxation on employment. And, if you looked closer at my numbers (and divided the annual rates by 12), you’d see that’s shown above as well: the upper number, 277,000 new jobs per year, is just over 23,000 jobs per month. If we need 150,000 new jobs per month, then these new jobs from taxation would be only 1/6th of the total needed. And when you look at the seasonally adjusted unemployment data over the last 10 years, the standard deviation from month to month is, depending on how it’s calculated, either 201,000 or 535,000 jobs. With that kind of expected variation, 23,000 is well in noise.

    Of course, if you want to look over the last 20 years, you’ll find that the unemployment rate was a lot lower during the comparatively high tax Clinton years than it was during either Bush presidencies.

  23. Brian:

    The trouble with that statement (and your article) is that you seem to have a very broad brush in hand when it comes to describing “libertarians”. It is true that I am fundamentally libertarian at heart, but you also have to realize that libertarianism represents a broad spectrum of views, from outright anarchy to the leftist/hippie libertarianism all the way to right leaning libertarianism.

    All libertarians believe in one fundamental premise – that of the essential necessity of freedom. Where they differ mainly is in their idea of what freedom is. It’s at this point that I have to mention that I’m not strictly a libertarian, I’m much more of the Ayn Rand school of thought – and as you might be aware, in looking at things from an Objectivist viewpoint she was highly critical of much of the libertarian movement. Since saying “I’m an Objectivist” usually brings either a shrug of shoulders or muffled laughter in political debate, I simplify matters by referring to myself as right-leaning libertarian, in that my definition of “freedom” is a society in which the state’s only job is to protect the individual from crime, whether it be violence, fraud or anything else that abrogates the right of the individual (and I fully share Rand’s excellent definition of what a right is and what it isn’t, incidentally). Without these protections, we are not “free” since we remain at the mercy of whomever wishes to attack or enslave us.

    You say you disagree with me on the issue of “governments vs corporations” but I have yet to hear anyone successfully argue that governments do things better or more efficiently than the private sector. There is also the issue that in extorting people’s money to pay for things like stadiums, the state abrogates their right to property. There are many reasons why property rights are the cornerstone of civilization (e.g. if there are no property rights, how can you own your own life?) and why the extent to which they are abrogated by the state is the extent to which we are oppressed. Taxing to pay for a stadium and justifying it on the grounds that “everybody benefits” is the same as saying that there is a “common plan” that everyone must be forced to follow. I hold that no such plan can rationally exist and that attempts to enforce such a plan necessarily lead to oppression. Those who don’t quite understand why should read the utmost authority on the subject – Hayek’s “The Road to Serfdom.”

    There are actually very good non-crazy arguments for all of the things you mentioned in that article, for instance that of pollution, but of course this isn’t the place for that discussion. I’ve already diverted too far from the subject at hand, Obama’s tax plan.

    On the subject of which, I notice that nobody commented on my original post about economies of scale and the wider implications of penalizing big business.

  24. Furthermore, I must take issue on the subject of Clinton, taxes and the economy. It is true that the economy grew under Clinton – but there is no clear link between that growth and his tax hikes.

    Clinton’s economic growth came largely from the technology boom – which was stimulated by Reagan’s marginal tax rate cuts a decade earlier. These cuts fueled risk taking and massive capital investment in the private sector. It was entrepreneurs like Bill Gates and Jerry Yang who aided the 90’s economic boom, not Clinton’s tax hikes.

    It is a credit to this strong private sector that it was able to flourish *despite* Clinton’s tax increases. The only pieces of legislation which stimulated the economy during the Clinton administration were the lowering of capital gains tax (1998) and welfare reform, both of which were sponsored by the GOP-controlled Congress.

    And for the record, unemployment averaged higher under Clinton than it did under GW Bush.

  25. Comrade Brian, apologies. I swear to the Democratic mandated non-existent G*d of whatever faith system that you might believe. The prior post cut off the part where I typed, “Too much snark? I keed. I keed. and apologies for the…” Well, you get the gist. Yes, it is a poor craftsman who blames his tools, but that is what happened. Object to the style, fair enough, but I wasn’t being rude to you, only your ideas. My manner is born of training and experience that demands brutal faulting of system and plan or somebody dies. That is all. I am sure you are a swell fella. smooch.

    As for your rebuttal, will allow me to retort Jules style:

    1) So, we agree, both Tax plans suck. However, I disagree with your assertion that McCain’s tax plan sucks twice as much, as his first principle is to not raise them. Judge the truthiness of that principle in implementation independently of operation. Obama’s first principle IS to raise taxes in a variety of venues.

    2) You type, “the capital gains and dividends provisions probably have little or no effect on the performance of the economy.” Beg to differ, my retired folks, and many many more draw income off of monthly dividend dispersement and selling of stocks accumulated by 45 years of hard, up at dawn, pride swallowing work. Obama’s plan to raise those cap/div taxes anywhere from 5% – 15% depending on the day and the balkinized audience he is addressing, is less disconcerting than the fact that he will most assuredly in conjunction with a Democrat controlled legislative branch wave buh-bye to the sunsetting Bush tax-cuts.

    That is a real and well felt reduction in income to many many pensioners and there is no way around that fact. I don’t want to make up the difference. And, I do not want to see so many old folks fighting their cats over who can haz the cheezburger flavored friskies. dong le ma?

    3) The Tax Policy Center slash Brookings Inst is hardly anywhere near danger close to the center or unbiased. They are left of left and then some.

    4) I agree ” if changing taxes changes employment, it changes it so little that other economic factors swamp the direct effects of taxation on employment.” in the theoretical, however, the gross impact is exampled by the hypo I previously typed. Lowering taxes may not increase job growth, but raising taxes can certainly impede it. As most are want to do when advocating and favoring higher taxes on the upper brackets, you default to the Clinton years (and you should now, I not only voted for the Man several some such times and his wife, but was a big big supporter…I can tell you stories about debate prep in KC in ’92.)

    But, in point of fact, the point you made confirms the point you make; “economic factors swamp the direct effects of taxation on employment” The macro of the Clinton years was one of expanding global trade and more importantly an historical adaptation of a new paradigm. Fancy pants words for everyone bought a computer. I know not your age, but what you may not remember or might have forgot, is that in 1992 (and I speak from personal experience) most small business offices had one, maybe two computers, one, maybe two or three folk with cellular comms, minimal interconnectivity (mostly credit card transactional) and few who knew how use them.

    Over the course of Wild Bill’s eight years all, ALL, of that changed. It exploded. Every worker, from sales to parts got a box on their desk and a phone in their pocket and all the downstream usability and upstream outlay that it produced. Schools had one, maybe two Computer rooms, kids didn’t game online, did not text, certainly did not attend class with 14 pound laptops. It was an age undreamed of. I am typing about a mythological ‘between the times the oceans drank Atlantis and the rise of the suns of Arius’ kind of Robert E. Howard world of amazing. Ah, the good old days. So, in re Clinton, higher taxes and a boooming economy, you are left sucking on a bitter bon bon or at least a proven bon mot; Correlation does not equal causation. It was not because of or in spite of higher taxes that the economy boomed. It was entirely due to yet another tectonic shift in the global continents.

    5) As to job creation, well, who the hell knows, mano. As much as I would love to get on board the big ole historical funky train of Obama, I just can’t. I must fall back on the financial prime directive, General Order #1, the prominent guiding principle of free markets and peoples, there can be no interference with the internal affairs of the economy. Debatable and arguable as that generalization must be.

    That, and I am betting dollars to dough nuts, all the change in my pocket against all the change in your pocket, that there is going to be a war between Israel and Iran, and I want the combat tried crazy fighter pilot in the big chair sending me on missions of certain death, rather than the effete cocktail party Chicago commie radical who will probably get us all killed. Just sayin.

    Interesting stuff though.

  26. James, it’s economic fact that government-controlled health care around the world is better on nearly all measurable statistics than our system of corporate health care. This data comes from the WHO and OECD, and while I don’t claim they’re perfect, they’re good enough to draw a general conclusion – the U.S. pays more for health care than other developed nations, gets less for its money, and the other developed nations that are beating us have some form of nationalized health care.

    Or, to keep the argument entirely within the U.S. borders, if the VA can offer some of the best health care in the country, at reduced cost due to the economies of scale that the government offers, to our veterans, then why shouldn’t we apply that same logic to everyone else too?

    Oh, and I just did the math using the BLS seasonally adjusted unemployment numbers – unemployment during the Clinton years was 5.204 and has been 5.217 thus far during the Bush.

    And the data (from the Economic Report of the President, and supplied via Slate) says flat out that the economy has done better with Democratic administrations than with Republican ones. GDP growth is higher, inflation is lower, unemployment is lower, federal spending is lower, and the deficits are smaller. The only thing that’s “better” with a Republican administration is taxes are lower. But if growth is lower, inflation is higher, unemployment is higher, deficits are larger, and federal spending is higher, I think I can deal with higher taxes.

    Finally, I won’t speak for anyone else, but the reason I didn’t go after you on the economies of scale and preferring small businesses over large ones is because you’re right – the policies as they stand give preferential treatment to smaller companies. I don’t personally see a problem with that, given that large companies are just like the very wealthy – they’re wealthy enough to afford legions of accountants to find every tax loophole and reduce their taxes. It’s the folks in the middle – not big enough to afford tax shelters, not small enough to get tax cuts – that will be hosed, relatively speaking.

  27. Mac, if you can’t accept the analyses of groups like the Tax Policy Center as “centrist” and non-partisan, who do you think is non-partisan? Cato? AEI?

    You and I have very, very different ideas of what non-partisan and centrist are, methinks.

    Ultimately, IMO both tax plans will be thrown out the window, either man as President will be forced to raise taxes dramatically, cut services a lot, pull out of Iraq and probably most of the rest of the world, and go into massive deficit spending just to keep the country going. We all need to be ready for the next New Deal (specifically the government work programs), because I suspect that nothing short of it will matter.

    So, will you feel betrayed less when McCain raises taxes just like Reagan did, or when Obama does it?

  28. Comrade Brian, you typed “who do you think is non-partisan?” Look, all 501(c)3 institutions must be, in order to avoid problems with the Internal Revenue Service, ‘non-partisan’, but using labels based on the scores from the Groseclose and Milyo analysis, maybe the Institute for International Economics, WWICS, Carnegie..maybe.

    But, well, darn ya, ‘wink’, pin me down, so based on my personal experience, and in the immortal words of the Highlander, “There can be only one” – Rand Corporation and the happy PPA few from Pardee RAND. How bout that?

    Also, mi amigo, as you typed “either man as President will be forced to raise taxes dramatically, cut services a lot, pull out of Iraq and probably most of the rest of the world, and go into massive deficit spending just to keep the country going.”

    Well, to Posit 1, it is irrelevant, as typed previously, governmental credits and debits don’t correlate..so, understand, should either one determine the ‘need’ to raise taxes, initially in McCain’s case or more more more, disco inferno style bigger than proposed in Obama’s case, it won’t be in offset of prior obligations.

    Posit 2, McCain yes, Obama no..he can’t, his constituency won’t allow it. You may have noticed last eve, that Obama talked of “hope to do it in my first term” ..the man is not elected and he already running for a second term.

    Posit 3, No, neither. I have not the time or the inclination to go into the deep deep global security lease holds that keep us prepositioned permanent around the world outside of Presidential notion. We, will still be in Europe, Korea, Japan, UAE, fifty other places and, because of the just proffered prop from nice guy Nouri Kamel Mohammed Hassan al-Maliki, we will be in Iraq at least until 2011 (read as, as long as we want) Now, practically we may have to park a Carrier Battle Group or three and some such several SSBN/SSGN’s (but we have been quietly short-shrifting their sorties for a few years now anyway) But, no, Fortress America is still aways away.

    Posit 4, we are already in massive deficit spending. I assume you meant more more more disco inferno bigger deficit spending. Well, the old sales maxim is, you only need one sucker dumber than you to move your stuff. India, will be where China is in 5 years, Brazil and her sphere of influence will be where India is and all of that is irrelevant because I already tolds ya Iran and Israel are gonna fight bloody and Barack is gonna get us all killed. just sayin.

    Posit 5, I never feel betrayed by a politician. Politicians, practically, think of the average citizen as much as they think about them; once every election cycle. I learned that lesson in Mogadishu. They all lie, kid. Its in their nature.

    And just to mention, you typed “it’s economic fact that government-controlled health care around the world is better on nearly all measurable statistics than our system of corporate health care” Based on what? For the greater number or for the greater effect? This is an example of the Churchill needs corollary: The vice of our private-controlled health care is “there is an unequal share of the blessings” the virtue of your favored government-controlled health care is “there is an equal share of the misery”

    Which is more better then, eh? All of the folk who truly need some such thing cut out or cut in fly the globe to come here for a Doc. How bout that? So, obviously, you are a glass half full, better everyone share in the misery than some have a greater share of blessing kind of cat. huhn.

    Better everyone wait 9 months for an operation that should be done 3 months ago, than anyone get the operation 3 months ago if some must wait 9 months. You may not remember this, but once upon a time, it was called under privileged not under righted. Soon, everyone will have a right to WiFi.

    I ask you, Comrade Brian, what’s next? And how much will it cost me?

  29. James:

    Good posts. Not that it will do any good around here. I’m just surprised that the name calling hasn’t started yet….it will.

    I also use Objectivism as a guiding principle.

    Jeff

  30. Mac, I started researching to answer your “based on what?” question re: healthcare and rapidly discovered that it deserves a post all its own, so I’ll try to put one up in the next few days.

    Alas, RAND doesn’t do much with business taxes (so far as I can tell by searching their website for a couple of hours, anyway) and has done literally nothing on either the Obama or McCain tax plans and how they’d affect small businesses, so I can’t use your preferred source of information to supply you with tax data you’ll accept.

  31. Jeff – I try to avoid name calling whenever possible, although everyone – posters and commenters both – occasionally loses their temper.

    I have two problems with laissez-faire capitalism. The first is that there’s no data to suggest it works, and what little data we’ve got illustrates exactly the opposite, and I’m a very strong data guy – liberal, yes, but my highest ideology is pragmatism. You have to convince me on logic that unregulated capitalism is the right thing to do, and yet every situation where the U.S. has got close to it we’ve had to deal with robber barons, illegal monopolies, and financial meltdowns. The available data would thus appear to suggest that a strong(er) government than that proposed in a true laissez-faire system is required to keep the system under control.

    My second problem is ethical/moral, and thus it ties into a minor conflict raging in our culture these days. Ayn Rand would say that a person has no moral or ethical requirement or responsibility to anyone else. As an existentialist, someone who believes that everyone is responsible for both themselves and everyone and everything else around them, I have major, irreconcilable problems with that ethical statement. In many respects, my existentialism and your objectivism are diametrically opposed. Thankfully (for me, unfortunately for you), our culture tends more towards existentialism than objectivism or libertarianism.

    The greatest good for the greatest number of people, or, if that’s not possible, harm as few people as little as possible. People are responsible for everything they do, and everything that happens that they could have prevented. Those are probably the two guiding principles in my life and my politics.

  32. Brian:

    To call the claim that state health care is better than private health care “economic fact” is nonsensical. It’s like calling the claim that pianos are louder than clarinets “geographical fact”. What aspects of the first claim are “economic”, for instance? Is, say, “availability of new drugs” an economic fact?

    Is the cost of health care the only criteria the WHO use to determine its merits? If so, then let’s just cut the bull and discount the WHO, the UN or any other organization staffed largely by leftists (the kind of people who succumb to the kind of communist propaganda which holds that the hospitals that ordinary Cubans have access to, are the same quality as the ones that Castro makes available to rich tourists with dollars and foreign journalists writing about “Cuba’s superior health care system”).

    What if, say, a country had wider health care coverage, but the quality of that health care was only half that available in the US? Would you still hold that it was “superior”? If so, state your case.

    The fact is, the US has the best quality health care in the world. Nobody is claiming that it doesn’t have problems, because it does – it’s too expensive. The reason for that is because it is so heavily regulated and mandated that it is next to impossible for health care providers and drug companies to engage in the kind of free competition and consumer choice which led to such things as computers and TVs and microwaves becoming cheaper and cheaper.

    Today, even relatively poor families have access to computer microchips which are thousands of times more powerful than the chips which launched the first Space Shuttle. Freedom of innovation and free trade has had everything to do with this. There is no reason why the same process cannot work on our health care. To socialize it is absolutely 100% the wrong thing to do, I’m sorry. Do you really want the kind of inferior health care that plagues countries like Canada and Britain?

    I’m originally British, so I know what I’m talking about. I grew up with the NHS. Compared to US health care, it is a disgrace. It is quite common for people with low-risk, survivable cancers to die after having sat around for months waiting for treatment. By the time the bean counters wave their green flags, the cancer has spread. Many of Britain’s renal units have been described as having “3rd world standards”. You will frequently find articles in the press which describe heart wrenching stories about people who are basically given a death sentence because the NHS refuses to shell out for a revolutionary new treatment available in the US.

    Which brings me to my next point. The vast bulk of the world’s medical innovation comes from America. This is why we have the best quality health care in the world, despite its expense. How many revolutionary new drugs originate in Canada, Britain or France? None. In short, they let America carry out all of the expensive research and development. Socialize American medicine and you’ll see a catastrophic slowing of medical-related innovation.

    You mention economies of scale – well, there is no reason why a private medical industry, freed from the chains of its mandates and excessive regulations, can’t provide exactly the same economies of scale and do it far more efficiently and competitively than the government.

    Explain to me why those with the money to spend choose “private care” in Britain. Explain to me why there exist companies in Canada to take sick Canadians across the border to take advantage of medical technology which their government has deemed “too expensive” and has thus prohibited.

    Let me also give my own experience. A few years ago I was diagnosed with skin cancer in New York. I was not insured. Everyone around me told me I was crazy not to go back to the UK to have it treated for free on the NHS. I made inquiries and it turns out that I would have waited at least 12 weeks for treatment. I was told by my doctor here that for my best chances of survival, I should not wait longer than 6 weeks. Thanks, NHS. I chose to stay in the US and have the best care in the world (which was stupendously good, by the way), even though it cost me thousands of dollars. I don’t care, I could not think of a better way to spend the money than to save my own life. Had US healthcare been a truly free market, I have no doubt that it would have been a lot cheaper.

    Onto Clinton and unemployment. So you’ve found figures which place Clinton’s rate as almost identical to that of Bush. And then you claim that Democrat economies have been better than Republican ones. Which ones are you talking about? Let’s see now, for instance we have Carter’s. Forget about it! Stagflation, anyone? Now let’s move onto Clinton’s. The only reason Clinton had any economic success was because of the technology boom for which you can thank Reagan’s policies. You sure as hell can’t thank Clinton’s tax increases. Lots of jobs were created under Clinton yes, but a large proportion of them were short-lived jobs in the dot-com sector (and we all know what happened to that). Incidentally, the only reason why federal spending was relatively low under Clinton was because of the Republican controlled Congress, who kept Democratic spending in check. You can thank the Republican Congress for “the end of welfare as we know it”, for instance.

    To keep claiming that higher taxes leads to long term sustainable economic growth is just nonsense. Take a look at the “social democracies” of Europe. They saw their greatest economic growth after the war, when their economies were much freer. In the 70’s they decided look, we’re doing great, let’s jack up taxes and create a vast welfare state full of government control and entitlements. After that they suffered from almost stagnant growth.

    You say you didn’t go after me on economies of scale because you don’t see anything wrong with the favoring of small businesses over large. This confused me, since my point was that going after large companies will hurt our economic growth – and would also be detrimental to small businesses, following what I thought was a not unreasonable chain of cause and effect. The argument that raising taxes on big business is OK because they can afford the accountants to avoid paying them is ridiculous. How about just not taxing them so much in the first place? Save them the accountant’s fees. You speak of those not small enough to get tax cuts “getting hosed” – well, then first of all don’t hike anybody’s taxes and secondly, cut everyone’s taxes. How simple could it be?

  33. Brian:

    To answer a couple of the points in your reply to Jeff (thanks to Jeff by the way):

    1) You say you have a problem with laissez-faire because there’s no data to suggest that it works. Well, that’s not entirely true. We know that when the market is free to do its own thing as much as possible, high levels of innovation and price reduction ensues. We also know that too much regulation and state intervention chokes a market. Also, how can you gather data on a system that’s never actually been permitted to exist? If humanity had held that attitude throughout our history then we would never have made our way out of the caves we once lived in.

    Aside from that, there is a moral side to laissez-faire capitalism that is rarely mentioned – that, partnered with a state that protects individual rights, it’s the perfect embodiment of personal freedom.

    You say your “highest ideology is pragmatism” – let me just point out that pragmatism is the absense of ideology, the absense of principle. I’m not a fan of pragmatism, it’s something which embodies the following phrase: “the end justify the means.” Pragmatism must come second to principle – if not, then by what criteria do you evaluate your “end”? You could be a pragmatic murderer, like Hitler. Stalin was a pragmatist too. If you place pragmatism above principle then there is no way to differentiate between the actions of Hitler and Mother Teresa.

    2) I really wish that people who have not read Rand extensively would not attempt to speak for her. Her philosophy is frequently misrepresented. For instance, she never said that a person “has no moral or ethical responsiblity to anyone else.” What she said was that it is immoral for a person to sacrifice a greater value for a lesser one. I fully agree with her. Let me give you an example. Let’s say you’re in the desert and there are two people in front of you who are dying of thirst. One is your child, the other someone else’s child. You have enough water to save the life of one of them. Rand held that it would be entirely immoral to give that water to the other child at the expense of yours. This is sacrificing a lesser value at the expense of a greater one. Value is in the eye of the beholder. To you, your child is more valuable than the child who isn’t yours. Those who would save the life of the other child in some self-congratulatory display of “sacrifice” and “selflessness” are immoral.

    Similarly, it would be immoral to sacrifice your life for the benefit of another. It’s like you’ve chosen the relatives of that other person above your own relatives, who you should value higher.

    The idea that a person is responsible for themselves is entwined with the basic metaphysics of reality. You have certain physical requirements which much be fulfilled (eating, drinking, breathing) otherwise you will die. You cannot refute this, it is objective fact.

    In contrast, the idea that a person is responsible for those around him is purely subjective. It is a matter of opinion. Therefore, it is wrong to use the state’s sanction on the use of physical force in order to coerce people to be responsible for others. They may do so if they choose. However, as an individual I should have the right to decide my own priorities – and if I decide that those priorities entail looking after my own family instead of looking after my neighbor’s family then so be it. I don’t see what it has to do with you or anyone else.

    The only way to provide the greatest good to the greatest number of people without abrogating the rights of minorities who disagree with the “consensus” is by reducing the role of the state to one which sustains and protects the conditions under which individuals can get on with doing what they need to do to survive and lead fulfilling lives of their own choosing (just as long as those actions don’t interfere with the rights of others to do the same). As soon as you start saying, “well, 75% of the country wishes to enslave the other 25% to the needs of others against their will,” then what do you have? Mob rule.

    Democracy is only a good thing so long as it does not have the power to satisfy the whim of majorities to oppress minorities. Let me give you an extreme example. Let’s say that a vote was held on the question of whether or not to immerse you in a vat of boiling water – and the majority voted “yes.” Would you still believe in the validity of democracy, the “will of the majority”? Did Hitler act on the will of the majority in Germany? Was it widely believed among the German people that the “best thing for the most people” would be to eliminate the Jews?

    Let me remind you, finally, that the most oppressed, endangered minority in the world is….the individual.

  34. James said:

    Is the cost of health care the only criteria the WHO use to determine its merits?

    Hardly. Cost is a single metric, but the more meaningful metrics are infant and child mortality, life expectancy, cancer survival rates, and so on. On those metrics, and comparing the U.S. to other developed nations in the OECD (Organization for Economic Cooperation and Development), the U.S. is pretty bad, especially when you consider that we pay the most per capita.

    The fact is, the US has the best quality health care in the world.

    When we have the 3rd worst infant and child mortality in the OECD, the higest obesity rates, the 5th highest maternal mortality rates, are tied for 8th for life expectancy at birth, but we pay the most per capita, you’re going to have a hard time convincing me that all those other nations, many of which have nationalized health care of some flavor, aren’t demonstrably better. The only two areas that the OECD says we’re the best in is post-cancer life expectancy and access to medical technology. And the access to medical technology is one of the drivers behind our extremely high per capita health care costs.

    The reason for that is because it is so heavily regulated and mandated that it is next to impossible for health care providers and drug companies to engage in the kind of free competition and consumer choice…

    Prove it. Show me the data. Until you can show me the data, you’re spouting ideology, not facts. And I’m not willing to risk my health or my children’s health on a risky, ideology-based health care system.

    Do you really want the kind of inferior health care that plagues countries like Canada and Britain

    Let’s look at that inferior health care a little, shall we? Yes, people in Canada and the UK have to wait, and sometimes months. But it’s not that simple.

    Life expectancy for both sexes in Canada and the UK: 81 and 79 years respectively. The US? 78 years.
    Healthy adult life expectancy at birth, in years: 72 in Canada, 71 in the UK, and 69 in the US.
    Neonatal mortality rate: 3 per 1000 live births in both Canada and the UK, 4 in the US.
    Infant mortality rate: 4 per 1000 live births in both Canada and the UK, 5 in the US.
    Probability of dying before age 5, per 1000 births: 6 in both the UK and Canada, 8 in the US.
    Adult mortality rate, measured as probability of dying between the ages of 5 and 60, per 1000 population: 72 Canada, 80 UK, 109 US.
    Maternal mortality per 100,000 live births: 7 Canada, 8 UK, 11 US.
    Mortality rates per 100,000 people by cause: non-communicable diseases – 388 Canada, 434 UK, 460 US; cardiovascular disease – 141 Canada, 182 UK, 188 US; cancer (one of the few bright spots) – 138 Canada, 143 UK, 134 US; injuries – 34 Canada, 26 UK, 47 US.
    Incidence of TB per 100,000 population (another bright spot): 5 Canada, 15 UK, 4 US.
    Immunization coverage: the US and Canada roughly tie with 90%+ of residents immunized, with the UK taking third place in the upper 80% range.
    Low birth weight newborns (percentage): 6% Canada, 8% both the UK and the US.
    Obesity rates as a percentage among men: 15.9% Canada, 22.3% UK, and 31.1% US. Among women: 13.9%, 23%, and 33.2% respectively.
    Number of hospital beds per 10,000 people: 34 Canada, 39 UK, 32 US.
    As a percentage of average GNI per capita, Canada pays 9.9% of it’s GNI on health care, the UK 7.3%, and the US 14.3%.
    The US does have more doctors, pharmacists, dentists, medical lab technicians, and other non-midwive medical professionals per 10,000 than either the UK or Canada.

    And finally, government expenditure as a total of healthcare expenses: 70.3% in Canada, 87.1% in the UK, and 45.1% in the US.

    So, for all that extra money we spend on health care every year, we get more underweight and dead babies, more dead kids, more dead mothers, a shorter life expectancy, fewer years healthy, higher rates of obesity, more deaths from cardiovascular disease, injuries, and non-communicable diseases, and fewer hospital beds. But we get more vaccines (which don’t seem to do us a lot of good in the lifespan area), more doctors, and less TB. If that sounds like the “greatest healthcare in the world” to you, then we’ve got fundamentally different ideas on what “greatest” means.

    The vast bulk of the world’s medical innovation comes from America.

    Agreed. Totally. And that’s a huge part of the reason why our healthcare costs so much. The rest of the world is letting us stupidly pay for all the R&D and are getting off lightly as a result of it. If we socialize US medicine, then the rest of the world would have to start developing all those technologies and drugs themselves instead of having the US taxpayer subsidize their health.

    Explain to me why those with the money to spend choose “private care” in Britain. Explain to me why there exist companies in Canada to take sick Canadians across the border to take advantage of medical technology which their government has deemed “too expensive” and has thus prohibited.

    Because there are always exceptions, and people with money can always afford better care. It’s unethical in my opinion, but it’s also a fact. CEOs can afford to go to the Mayo Clinic for cancer treatment – the rest of us are stuck with public hospitals and private insurance and risk losing our homes due to medical bill-induced bankruptcy.

    Had US healthcare been a truly free market, I have no doubt that it would have been a lot cheaper

    And again, you have what data available to prove this?

    So you’ve found figures which place Clinton’s rate as almost identical to that of Bush.

    Yep. The federal government’s Bureau of Labor and Statistics. You can verify my calculations here.

    And then you claim that Democrat economies have been better than Republican ones. Which ones are you talking about?

    All of them from 1959 to 2007. Check out the Slate link – it’s really quite fascinating, and since it’s all published data from the various Administration’s own economic reports, it’s going to be pretty hard to formulate a good argument to dismiss it.

    You’re assuming that because I’m supporting raising taxes on the wealthy that I want to raise taxes across the board. I don’t. I’m a fiscal moderate and social liberal. Lower taxes help consumers a great deal, although the data doesn’t appear to support the conclusion that taxes have any demonstrable effect on employment. I don’t support turning the U.S. in to a welfare state like much of Europe, because the economic data is clear on that – socialism is bad for the economy. But the data on health care in particular is also clear – more government control over health care generally improves the health of the government’s citizens and reduces costs. As a pragmatist, I go where the greatest good can be done for the most people at the lowest cost. For creating products and services, that’s capitalism with enough controls to keep greed in check. For health care, that’s socialized medicine.

    I’ll address your second comment separately.

  35. Brian

    This conversation is excellent ~ you should repost it up before it drops off the screen. 😉

    I am going to contribute two things:

    1. The UK’s NHS is only *just* surviving because of new ways of making it work. The waiting list still exists but depending on where you live it can be a few weeks or months before you are seen by a Consultant and/or have any necessary treatment. Also depending on the ‘Trust’ you come under you may or may not be entitled to the more expensive drugs. People are moving to get into the right areas.

    The NHS has huge financial problems and increasingly private enterprise ‘add ons’ are being used to make the state system work. It is evolving into a hybrid organisation.

    I use Private Healthcare because :

    1. I am seen more quickly

    and

    2. Dominic’s place of work offers family insurance. Due, however, to his change in jobs recently we have now gone onto the BUPA Healthcare system and I am now excluded from anything involving back and hands and husband cannot get cover for knees for his back. Thus any treatment required in the future would be treated on the NHS or we would have to pay from our savings.

    2. “Rand held that it would be entirely immoral to give that water to the other child at the expense of yours. This is sacrificing a lesser value at the expense of a greater one. Value is in the eye of the beholder. To you, your child is more valuable than the child who isn’t yours.”

    The quote, from James, is the very reason why we HAVE to stop certain families and business from hurting the wider society. I KNOW I PUT MY CHILD FIRST so if push comes to shove I will do anything to ensure her survival. If there is to be a society of any sorts constraints and regulations must be put in place to ensure there is order and a fair system. Taken to its logical conclusion a family could come to dominate all others in the society and the Emporer Dictator would be born again.

    Healing and treating fellow members of the tribe when we were cave dwellers was something we did out of kindness, tribal necessity, care and attachment. It ibecame a part of our intrinsic basic humanity. For it now to spring forth only from the business viewpoint with Rand’s Objectivism riding shotgun is crazy with a pound or dollar sign as the motivating force is misguided and dehumanizing.

    There is very little nobility to be found in Las Vegas Slot Machines dominating the economies of the world.

    Elaine

  36. First of all Brian, when I say that the US has the best quality health care in the world, then please take this as I intended: literally. That is to say, I meant it to mean in terms of quality, not taking into account cost. As well you know, I am fully aware that the problem in US health care lies in its cost.

    Secondly, I will take strong issue with your use of WHO data in determining the relative merits of health care systems. This data would be fully relevant in the absense of any cultural or other factors in a nation’s overall health.

    Does it not occur to you that the culinary and recreational cultures of a people have a huge effect on their health? For instance: France, Spain, Italy and Greece are among the world’s top seven healthy countries. This is not because they have superior health care systems, but because of the Mediterranean diet – lots of fish, vegetables, fruit, olive oil, garlic etc. The French typically cook their food with a lot of butter and cream, yet they have drastically lower levels of heart disease than found in America. Why? Because in addition to the healthy foods which complement their diets, they also consume red wine on a regular basis.

    Contrast this with the fast food, shopping mall culture of much of America. Could this not have something to do with its high rate of obesity and heart disease? The UK is generally considered to have one of the best socialized health care systems in the world (as far as socialized systems go, which isn’t very far) and yet they still suffer from high rates of obesity and lower life expectancy, especially in northern England and Scotland. Why? Because they eat a lot of stodgy, greasy, fat filled food and few fruits and vegetables, that’s why.

    Additionally, you’re forgetting that America has huge quantities of illegal immigrants, who mainly come from poor countries in South America and settle into city ghettos where the culture is again, one of eating unhealthily. Obesity levels explode in the ghettos too. These illegals on the whole do not have health insurance. Would you prefer that the US had socialized health care and made such care available to illegals who don’t pay taxes? How long do you really think that would last?

    I must also take issue with your claims of high infant mortality rates in the US. Aside from the problem of illegal immigration which I previously mentioned and which skews all kinds of US data as a consequence (health care, crime etc), there is the issue of the different ways in which such data is gathered from country to country.

    The main factors affecting early infant survival are birth weight and prematurity. The way these factors are reported differ in each country. In many countries which report low infant mortality rates, low birth weight infants are not counted below a certain weight. In Canada, Germany and Austria for example, a premature baby weighing less than 500 grams is not considered a living child and is not counted. In the US, such births are counted. This skews rates somewhat.

    Your comments which go “for all that extra money we spend on health care, we get more dead babies…” etc are completely disingenous and uncalled for.

    As are your comments that it’s “unethical” that better health care can be had by those with more money. The same is true in every single country in the world, even those with socialized health care. In fact the problems with socialized health care in Britain for example means that almost everyone who can afford it goes private when they have something serious wrong with them.

    But do you have a beef with society, or a beef with reality? There are many areas of life which are enhanced when you have more money. For instance, you can afford better food. Better clothing. A better apartment. You can afford to live in a safer neighborhood, drive a safer car. If you’re stinking rich, you can afford a better security system for your home and even hire private security guards to protect you.

    So how far would you go in creating a society which satisfies your idea of “ethical”? If you really believe that it is unethical that those who create more wealth can afford an enhanced life, then I’m driven to believe that you harbor a secret desire for socialism or communism.

    But what usually happens when societies strive toward 100% equality of result? Irrefutably – tyranny. Every communist or socialist society in existence has either turned into all out slaughter, or settled upon something less sinister but characterized by a lack of freedom, lots of oppression and extremely mediocre living conditions.

    But really, let’s not kid ourselves, it really IS down to cost when we’re talking about US health care. To be honest I lost a lot of respect for you when you cited our predominance in the field of medical innovation as a reason to socialize our care. We should do so in order to force other countries to “do their share”? Are you out of your mind? What makes you think that these countries will be able to offer innovation anything like ours, when their health care budgets are already stretched to the limit? The reason for their lack of innovation is not because they figure they’ll “leave it up to the US” but because they don’t have the means or resources! If they did, do you seriously believe they would refrain from carrying out more research just out of laziness? Sorry, I don’t buy that line of reasoning one little bit.

    Yes, free market health care is the answer. It’s the reason why most other forms of technology are relatively cheap and affordable. I do not have to cite data to prove this – the evidence is all around you. Do you dispute that consumer goods have become cheaper because of market forces? Why should health care be any different? Currently, people are forced into paying for non-competitive health plans which cover things that they don’t need – so young people find themselves with plans that cover the kinds of things which only really affect old people, and vice versa.

    Thanks to lobbying by chiropractors and the like, the average state requires you to buy 38 “mandated benefits” whether you want them or not. Is is so hard to understand why putting control back in the hands of the consumer would result in a cheaper, more efficient and cost effective way of paying for health care? With health care providers free to offer plans with no mandates and regulations to stifle them, is it so hard to understand how this will lead to more competition, as providers compete to attract the kind of free consumers who know what they want and what they don’t want?

    I’m a little puzzled by your shallow reliance on the data in the Slate link for Republican/Democrat economic performance. It’s as if the idea that economic policy takes time to have an effect escapes you. This for instance, explains the technology boom which accounted for a lot of growth and jobs during Clinton’s term – and the conditions for the boom were instigated by Reagan years earlier. Can Clinton thus take credit for economic conditions put in place before his administration? I doubt it! Also, you can find information about the myth of the “Clinton Surplus” right here:

    http://www.letxa.com/articles/16

    The idea that lag affects the time between economic policy and its effect is a valid one and is discussed here with interesting results:

    http://www.americanthinker.com/2008/09/presidents_and_the_economy.html

    There is no doubt, however, that a lower rate of income tax spurs economic growth. This can be seen of course by the fact that lower rates of tax lead to higher tax receipts. Even if lower taxes don’t necessarily always lead to significantly higher economic growth, this is not always the be all and end all in supporting or not supporting lower taxes – and this leads me to your idea of “pragmatism”.

    If it were proven that a high income tax rate led to higher economic growth than a low tax rate, would this be the end of the argument? Of course not. There is the issue of a little thing called “freedom”. Of course the pragmatist in you would say no, “what’s best for the most people” trumps everything else.

    But let’s look at this issue of “pragmatism”. I said earlier that pragmatism without principle is not a good idea at all, and gave examples why. Here is another one. Consider this: we could virtually eliminate violent street crime – by imposing a strict curfew after nightfall. Does the end justify the means? To the pragmatist, yes! After all, who could argue with zero street crime? Think of all the murders and robberies which could be avoided. Think of the money we could save in avoiding all of the criminal incarceration which costs us hundreds of millions. But does this necessarily mean a better society? No, because the principle of “freedom” has been bypassed in order to justify the means.

    But let’s forget about all of this and get back to basics, which is – you said that you support tax increases on the wealthy. In my original post I outlined why I think stinging wealthy big business is not good for the economy and how it could actually harm small businesses and lower earners too. You did not refute or challenge my reasoning at all. Perhaps it’s about time to get back to that point?

  37. My response to James’ second comment, re: laissez-faire capitalism et al:

    We know that when the market is free to do its own thing as much as possible, high levels of innovation and price reduction ensues. We also know that too much regulation and state intervention chokes a market.

    Generally true, and I support free markets in general for those reasons. This is observable in how the USSR’s economy ultimately crashed and burned during the cold war, and it’s a large part of why I’m confident that China’s economy can’t continue growing at it’s current rate even if the global economy wasn’t collapsing all around us.

    Unfortunately, this is only half of reality. The more a market is free to do its own thing, the more likely people are to try and take advantage of each other, to get creative with financing and money, and so too little regulation leads to the current global situation – failing banks, panicking depositors, etc. I’m sure we all read the news enough for me not to need to go into the gory details of the situation.

    Ultimately, because no market can ever be truly free, because equal freedom is not actually possible on the scale of an entire society, especially not one that’s as heterogeneous as our own is, governments must regulate. The trick is to create a system where the regulations required to control the worst tendencies of humanity do not impose an undue burden on the innovation and wealth creation of a properly functioning market. Ronald Reagan started the process that led us here (although both Bush presidencies and the Clinton presidency also contributed), and my crystal ball says that history will not be kind to Reagan in 20 or 30 years.

    Also, how can you gather data on a system that’s never actually been permitted to exist?

    You can’t, but you can try to extrapolate from existing systems. You can also try to create economic models to see how the economy would react. I’m sure that models exist, but I’d treat them with a far, far larger grain of salt than any climate model – economics as a science is nowhere near as advanced as physics, chemistry, optics, et al.

    Extrapolating from existing models, however, leads inexorably to the following conclusion: too little regulation leads to the kinds of failures that we’re seeing now, to robber barons, to inefficient monopolies, to economic collapse. It’s what happened right before the Great Depression (exacerbated by government action to be sure), and it’s what we’re seeing now.

    [L]aissez-faire capitalism… [is] the perfect embodiment of personal freedom.

    No such thing. Laissez-faire capitalism is as impossible in the real world as pure communism is, and for the same basic reason (although on the opposite end of the spectrum). Once you have a sufficiently large population, inherent inequalities in human ability and available resources make some people inherently more “free” than others. When that happens, the more “free” folk acquire, purely by luck, the ability to control the others. And it’s basic human nature to try and control. Communism suffers from an assumption that everyone is inherently equal when in fact they aren’t, and the end result is identical – people who are more “equal” than others controlling everyone else.

    Governments exist to ensure that the inherent inequalities in opportunity, ability, and resources don’t destroy the larger society. And both laissez-faire capitalism and communism have equal power to destroy. Economic ruin from lack of control vs. economic ruin from stagnation. Choose your poison, just be aware that you’ll still end up dead at the end of the day.

    pragmatism is the absence of ideology, the absence of principle.

    First off, let me start by saying that I didn’t know that there was an official “Pragmatism” philosophy until I started trying to formulate this argument, although my small amount of research on the philosophy shows that my views do stick pretty solidly to the philosophy of pragmatism. That said, let me address what pragmatism means to me, and why you’re statement that it’s the “absence of ideology” is false.

    For me, pragmatism means precisely what I said previously – the greatest good for the greatest number of people at the lowest cost. Costs are not necessarily economic, but could be lives, rights, health, environment, etc. Similarly, the concept of “greatest good” could be measured in health, life, money, species saved, etc. My brand of pragmatism reduces all of these things, in an ideal sense, to variables and equations that include their relations to each other and even the fact that people such as yourself have radically different ideas of “greatest good” than someone else. Other principles, such as your Objectivism and my Existentialism, inform the importance of the different variables, goods and costs, but do not otherwise negate the principle that data, logic, and rationality should guide every decision.

    That data, logic, and rationality should guide every decision is fundamentally a principle.

    pragmatism [is] something which embodies the following phrase: “the end justify the means.”

    First, allow me to thank you for putting me in the same category as Machiavelli – that’s a high compliment. In case you don’t understand why I feel that way, please read my review of The Prince – we made him a Scrogue for a reason. Second, you’re partly right, but, for my personal brand of pragmatism, only partly.

    In some sense, the ends do justify the means, but only in the sense that the means take into account all the ends. If the “end” is the greatest good for the most people with the fewest costs, and if the accounting produces a full understanding of all the costs (within the limits of human understanding, of course), then, by definition, the means are justified. By no definition does “personal power” or “the destruction of the Jewish race” qualify as either a “greater good” or a “fewest costs”, and for that reason I’d say that your description of Hitler or Stalin as pragmatists is specious at best (oh, BTW – Godwin’s Law!). No accurate understanding of “greatest good” or “fewest costs” could ever rate Hitler and Mother Teresa equal. Now, if you want to claim that pragmatism doesn’t say anything about whether you should value life over money, freedom over equality, belief over truth, and so on, well, I can see your point, but I disagree with it rather vehemently. You’ll just have to take my word that that’s not how I see pragmatism.

    To you, your child is more valuable than the child who isn’t yours. Those who would save the life of the other child in some self-congratulatory display of “sacrifice” and “selflessness” are immoral.

    There’s two fundamental problems here. The first is that there’s no gray area, and reality isn’t so black and white that it can be reduced to such a falsely simple set of decisions. The second is that it’s impossible to know with 100% certainty that you’re doing the right thing even as you save your own child. You may believe that it’s the right thing, but you cannot know. Human understanding is not sufficiently omniscient.

    Let’s use a more realistic example, though. You are destitute and your child needs expensive medicine that you cannot afford and that is in limited supply. Do you steal it and possibly kill someone else’s child as a result, or do you let your child risk death and hope they get better? On the one hand it’s immoral to use force on others, on the other hand it’s immoral to not save your own child. The laissez-faire capitalism model of this moral dilemma offers no way out – you have sacrifice either your fundamental belief and force yourself on someone else via theft or you have to sacrifice something you value highly (your own child) to something you value less highly (someone else’s child). You have to fall back on secondary principles.

    it would be immoral to sacrifice your life for the benefit of another.

    So, your own life is always of higher value than the life of someone else. Reality isn’t that neat – people value their children and spouses and parents higher than themselves all the time, and you’ve just told them that they’re all immoral as a result of it. OK, I can actually live with that. But the logical extension is narcissism and selfishness – valuing your own wealth more than that of anyone else, valuing your own position more than anyone else’s, valuing your own power more than anyone else’s. In other words, yourself is the highest ideal and, as I said originally, you have no ethical or moral responsibility for anyone else. Caring for anyone else is subjective, not objective, after all.

    In contrast, the idea that a person is responsible for those around him is purely subjective. It is a matter of opinion. Therefore, it is wrong to use the state’s sanction on the use of physical force in order to coerce people to be responsible for others.

    It simply doesn’t work that way. Taking care of your neighbors, and them taking care of you, is a way to reduce risk to your own family. Governments exist to serve as middlemen to prevent your individual decisions from coercing other both directly and indirectly. When your decisions impact your neighbors is when you start to coerce them, even unintentionally. Government regulations and laws are the means by which your neighbors ensure that you coerce them the least and, in return, you’re protected from coercion by them.

    There is certainly a point past which there are too many regulations and laws. But there is also a point at which there are too few in order to provide equality of freedom to both yourself and your neighbors.

    In the final analysis, Objectivism as you’ve described it, and radical libertarianism as I understand it, is blind to the fact that personal freedom is impossible without a strong government to ensure that those who are luckier, smarter, or stronger don’t impose their own “freedom” upon you. In that way it’s nearly a religion, with blind faith in a system that cannot function in the real world and that elevates the mythical “individual” to the status of God.

  38. Brian, thank you for your second response. Needless to say, I disagree with absolutely everything you said (no surprises there then!) and I will outline why tomorrow evening, after a nights sleep and a day’s work. Goodnight!

  39. I look forward to reading it. Just a head’s-up – I won’t be able to respond until later this weekend, so don’t expect any more responses from me before tomorrow night at the earliest. Like you, I work during the days, and I’ve been staying up far too late writing up my responses as it is.

  40. 30% of the population doesn’t pay federal taxes. How is he going to reduce taxes on 95% of the population?
    Obama’s tax plan will reduce government income, as happens any time democrats raise taxes, the receipts go DOWN. On top of that, it will cost jobs. If I’m a small business making $250,000 a year net, and Obama raises my taxes by 30k, I lay someone off.
    When will the dumbocrats learn – hostility towards business, and class warfare doesn’t pay.

    sent from: fav.or.it [FID2429724]

  41. can someone tell me how obama defines “small business”? also what the $250,000 means?
    obama hasn’t specified either and it’s not on his website.

    thanks,

  42. Whew, what a conversation! Very interesting points on both sides for sure.

    I would like to point out that Obama (and Hillary) have not advocated changing our healthcare system to one of “socialized medicine.” Their plans essentially advocate for creating an insurance backup to cover the people who are not covered presently by insurance. These plans would not threaten the current private health care system or nationalize it in any way.

    This type of system both preserves the good in the current system by leaving the access to care and technology that we have in place. It also provides a way for those who don’t have insurance, can’t get insurance, or can’t afford either insurance or care to get the care they need when they need it.

    The current insurance system is completely untenable. Around 20% of the population does not have insurance for various reasons. These people often go to emergency rooms for care that could have been taken care of through primary care, but could not afford it. The result? The hospitals, clinics, and doctors must eat the cost and then pass it on to everyone else. In addition to this, ever rising deductibles and spotty coverage discourages many people from seeking preventative care when they should seek it.

    My personal story: last year my father died of prostate cancer. He was a self-employed upholsterer who never had the opportunity to work for a business that provided health insurance. Private coverage was too costly for him due to pre-existing conditions and other reasons. Instead of getting regular PSA tests done after 50, he put them off since they would be many hundreds of dollars. He finally found out about his cancer once his back started bothering him. By that point, it was too late to battle his metastacized cancer. He died in the hospital with $30k in medical bills, bills the hospital and doctors had to write off in the end.

    There has got to be a better way, and I believe that better way involves private health care and a basic/preventative care insurance net provided or brokered by government to ensure that every citizen in this country has true access to coverage.

    On another note…

    Regarding government regulation vs private business activity in the economy, I believe that government’s proper role is to maintain the necessary balance that needs to be achieved with business depending on current economic conditions. Government needs to at times enable business, other times to regulate it. Anyone who has lived in an economically stagnant city or county will know how hard government tries to create business and favorable conditions for it to form and grow. Often, it is very effective at this depending on the creativity (or desperation) of the local residents. However, when times are good and have been good for a while, business can begin to impact society in myriad negative ways due to the forces of greed. It is government’s responsibility to then limit potential corporate abuse of power. If government had not forgotten its proper role, we likely would not be going through the economic turmoil that we now are facing.

    Jacob

  43. Broke, a sole proprietorship with two employees each making $500,000, the owner (you, presumably) making $100,000 would have a gross income of $1.1 million. But as the sole proprietor, most of that gross income is considered expenses – your two employee’s payroll of $500,000 each. Each of them could pay more taxes, depending on whether they had enough deductions to reduce them below the $200,000 individual/$250,000 joint tax limit, but you as proprietor would get a tax cut since your $100,000 income is less than the limit. If you’re in a married, single earner household with no children, you’d get a tax cut of about $920. Not a ton, but nothing to sneeze at either.

    For more information, I recommend my co-blogger J.S. O’Brien’s latest, Dear Joe the Plumber: if you end up paying more taxes, you’re an idiot

  44. Obama’s tax increase is an incrase on income (!) above $250000. This has no effect on the operation of a small businesses at all: any money that is taxed under this plan is money that the small business owner has already taken out of the business and doesn’t contribute to the operation of the small business at all.

  45. In case you haven’t realised most businesses make more than 250,000 dollars a year, in fact 2/3 of small businesses do. In 2006, $473 billion of the $706 billion (two-thirds) of small business profits was earned in households Obama has said he would raise tax rates on. if you ask me, that sounds like alittle more than that 3% you mentioned, well actually it sounds like a lot more to me, more like 66%. Yes he would help the 33% of business that makes less than 250,000, but he would hurt 66% of small businesses that provide jobs and invest in America. So i don’t really see what you mean by him helping small businesses or that only 3% of small businesses make more than 200,000 a year.

  46. my father is an owner of a small business, and for those of you who don’t know, it is hard. if you have JUST 5 employees who each make only 50,000 dollars (which is not a salary to live on if you have a family, WHICH MOST AMERICANS DO!) that is already 250,000 that the company must make in order to pay salary, BOOM i’m already being hit by Obama’s taxes, and on top of that i need to keep buying supplies for the company because in case you didn’t know, employees aren’t the only expense. New technology, health care, salary, months with little business, and now we have to pay more money in order to satisfy Obama’s business plan. Its a business plan that is going to drive many small businesses out of business. And in case you didn’t know, 2/3 of all small businesses make more than 250,000 dollars a year, not 3% like you said.

  47. Anon – If your father’s business is a sole proprietorship, then until he makes $200,000 (or $250,000 if married and filing jointly with your mother) in profit, after deducting that $250,000 in payroll, the technology, the health care, etc., then he won’t be hit by Obama’s tax cut. At. All.

    2/3rds make more than $250,000 in gross profits, but it’s net profits that are taxed this way.

    Now, if your father’s business is incorporated as something other than an LLC, S Corp, or sole proprietorship, the taxes will be different than discussed above. But the same principle holds – your father shouldn’t be paying taxes on his gross income regardless.

  48. I’m just some random person that likes to know thing, and after reading MacFauxes first post (I stopped reading at that point) I have to say he is one of stuck up idiots who believes he knows what he is talking about because he has money. Just look at the way he writes… he uses these large words to make it sound like he knows what he is talking about but I’ve found out in life that when you have to use big words to make your point get across then your point is most likely not valid in the first place. Really if you just start reading over some of those sentences it is a bunch of jargon that could have been made much clearer in like a third of a sentence, but then again the information is bogus to begin with so if it was in a clear sentence you could see how flawed it is. So fuck you people like MacFaux you are the reason why our economy is failing. Ooh and it IS going to fail, it is just a matter of time. And during this time we will have to look at the greater meaning of life, which I do look forward to.

  49. Ryan – incorrect. Here’s the exact quote from the Obama tax plan:

    Ordinary Income: The top two income tax brackets would return to their 1990’s levels of 36% and 39.6%. All other tax brackets would remain as they are today. Obama would also restore the 1990’s levels for the personal exemption and itemized deduction phaseouts (known as PEP and Pease). Obama would work with the Treasury Department to adjust the thresholds of these rates slightly to ensure that no married couple making less than $250,000 (or single making less than $200,000) was affected by these changes.

    “Ordinary income” is taxed after deductions, including deductions taken on Schedule C for sole proprietorships.

  50. I think this comes down to Obama taking the profits some have worked a life time building up to, and giving that money to those Obama thinks deserves it more. I have a very profitable company that earnes well in excess of the 250k limit and I can already see that I will have to cut wages to pay these extra taxes. This appears to me that Obama is trying to buy the election. I bet you see every business that is negativly effected by this will end up either raising prices of their products, cutting pay and benifits or all of the above.

  51. Marc in comment #1 is absolutely correct. I ran my own independent calculations earlier this evening before stumbling across this scholarandrogues website and I immediately agreed with Marc after reading his comment. According to the Bureau of Labor Statistics there are approximately 23 million “businesses” of all forms in the US. Roughly 5 million of those businesses have paid employees. Approximately the same number of those businesses (which employee many tens of millions of Americans) have net incomes that exceed $250,000. Keep in mind that taxes only apply to net income. The remaining 17 million businesses report net incomes less than $250,000. Bottom line is quite simple. Roughly 17 million of the smallest businesses in the US may not see a tax increase according to Obama’s claims on his website yet at least 5 million businesses will. Those 5 million businesses employ tens of millions of people and any tax increase a company has to endure leads to two results: 1) increased expenses leads to reduced competition which leads a business to either lay off employees or pass on the costs to consumers to maintain its profit margin. Effectively, Obama’s business tax plan will indirectly INCREASE taxes on tens of millions of people, or adversely, cause job loss. I have to say that Obama’s tax ideas are just plain NOT SMART in today’s extremely challenging economy. McCain may not always get his facts straight but at least he understands that tax increases are unwise and bad fiscal policy.

  52. I believe Obama has done an aweful job of explaining his tax plan. I understand that the majority of Americans do not have a mind for business or large numbers, but a large portion do, and it could seriously sway some votes in leiu of the accusations from the opposition.

    Someone please explain to me if I am wrong in this sample scenario:

    My father’s small business employs 4 workers. Myself, my father, my mother, and one outside employee. Three of us make approximately $30,000 a year each, while he makes about $40,000 a year. Say the company, after cost of sales, wages, and investments (new computers, office furniture, etc.) of about $150,000 nets $50k in profit for the year after expenses ($200k base after cost of sales).

    So:

    Gross Profit – $200k
    Wages – $130k
    Capitol Investments – $20k

    Net Profit – (200k-150k) = $50k

    Would this equal a tax cut under Obama’s proposed plan?

    Wouldn’t it make sense that any company that ends up with a net profit of $250k for the year would do well to hire more people, expand the business, buy tons of sweet ass computers, or *give everyone a raise* before turning in that kind of a profit?

    I know this is an overly simplified balance sheet, but I’m afraid I don’t keep the books, and don’t know much about tax code. Also, in reality, during the last 8 years, the business has been running negative numbers or very close to zero, while my father routinely skips pay checks, and my mother works temp jobs during slow months. The business’ best year did over $5 million in sales in 1997 with over 40 employees, but has steadily declined since 2000. I have very little concept of capital gains tax rates, as I’ve never been able to make any investments or begin a retirement account. I gave my $15 to the Obama campaign and proudly drive around with my sticker on the back of my pickup truck in Texas.

    Please correct my logic if it is flawed, or point out where I might be missing something.

    I’d say I’m an amateur economist at best, having changed my major in college to macroeconomics for all of 2 semesters in college. My general grasp of the economy indicates that nobody really understands all of the intricacies of the global economy, but my underlying principle is that both sides are right, and both sides are wrong. That’s why there must be a healthy balance. The reason the business cycle is so cyclical is that we never know where that balance point is. Democrats don’t have it even close to right, and neither do Republicans, but right now we need to swing back toward the left. Given 5-10 years, I’m sure we’ll need to swing back to the right some. Philosophy is interesting to read, and all three of the primary posters make excellent cases for their side, but the truth is that there is no black and white to life. I don’t mean to come off as a hippy, but a harmony is necessary to survive. When you become entrenched in one principle too much, you lose the flexibliity to concede when your opponent makes a valid point. Being humble is one of the most honorable traits an individual can have. I don’t presume to change anyone’s mind, and hopefully everyone realizes that it’s an exercise in futility to attempt to.

  53. I am closing my company if I am forced to pay anything more than I am paying in taxes, etc. I work over 80 hours a week to keep my company going strong with six well paid employees. If I am faced with anymore expenses because of this “redistribution of wealth” that I and others WORK for just because some liberal individual wants to see his brothers live the life off our dime, I will close my doors and MOVE to another country with what I have EARNED so that I can enjoy the life I spent 6 years in COLLEGE and at least 80 hours a week WORKING for. GO AWAY OBAMA!!

  54. S Corps, Partnerships, Single Member LLC’s and Sole Proprietorships all flow their net profits through to the shareholders, partners and members – taxes are then assessed on the net profits of these companies at whatever the ordinary income tax rate is for these individuals. Hopefully all of you who have expressed your opinions or thoughts on our tax structures will seek the advice of competent accountants to advise you. Some of yours ideas are way off base. I have an LLC, Single Member, with employees. I gross over $600K and net somewhere around $200K. I give my employees benefits – pension, 401K, health insurance, etc. I sure could use Obama’s tax credits for providing insurance – being a small business, believing that I should provide benefits for those who work hard. Obama’s tax plan will benefit my employees along with me. My wealthier clients (I do taxes for over 400 small businesses and individuals) are well aware of how much they pay in taxes, and how that is due to the graduated tax structure we have in the US. I do taxes for many people from other countries who would rather file and pay taxes in the US – their countries do not allow for deductions, or mortgage interest, or other tax-savings strategies that we have here. We have a system that needs adjusting – those who make a lot of money have had tax preference items that allow them to actually pay less. We who are at the lower end of the spectrum, and those in the middle, do not have those loopholes. Obama’s plan willl raise taxes on those who can afford it, and lower taxes for the rest of us.

  55. Marlen, I think you miss the main point here. This is America and no one should be able to say “hey, they can afford to pay more so they should”. I am already at the top end of the tax scale and I already pay more then double (by percentage) then the people like you who say I can afford it. This is socialism plane and simple, take from a few to give to the masses. and hey, as long as its not costing the people who say its not a problem, then whats the harm, right. The harm is we will be destroying what has made this country great due to the greed of those who just want more at someone elses expence.

  56. Scott, I think everyone on this chain would agree that (1) as a general concept, taxes are necessary in our society and (2) every citizen should pay their fair share. However, there seems to be a great divide between two groups of people: those (like you) who believe that the only way to be fair is for everyone to have the same tax rate and those (like me) who believe that the tax burden should be shouldered proportionately to one’s ability to pay. A 10% tax rate hike on a lower-middle class family could be the difference between sending a kid to college or not… making the mortgage or not… real life impact. A 3% rate hike on someone like me (top tier) means I may only spend $3,000 on wine this year and not $4,000… or maybe my vacation will be to Hawaii and not Italy. But really, it will have absolutely no effect at all.

    I’ll gladly take a smaller vacations this year and every year after if that means a middle-class family can make send a kid to college. But, like I said, I’ll still probably go to Italy.

  57. tjm, Yes I think we all agree that taxes are necessary but it should never be as lop sided as obama wants it to be, take a good look at the real numbers; http://freakonomics.blogs.nytimes.com/2008/09/16/competing-tax-plans-two-perspectives/
    The difference in the two tax plans for the avarage american family is only about $200.00 per year while the difference for those making over 3 million per year is $970,000.00. The $200.00 an average family saves will not pay for a college education but a million dollar increase in my taxes will effectivaly cuase me to cut pay and benifits to my 500 employees by $200.00 per employee to balance things out, so who comes out ahead, no-one. Keep in mind most large companies that make over 3 million per year net are working on small margins against high volumn and a tax hike like this results in over a 25% loss of profit to me. How can anyone say thats fair.

  58. Scott, I call bullshit.

    No-one making $3 million will see their taxes increase by almost 33%. The top rate will increase from 35% today to 39.6%, an increase of 4.6%. 4.6% of $3 million is $138,000, not $970,000. In order to see your personal taxes increase by $970,000, you’d have be taking home, after deductions, marketing expenses, payroll, health care, et al. over $21 million in personal income via a sole proprietorship, S corp, or LLC.

    For 500 employees installing satellite TV, I can easily imagine that your gross income would be over $21 million, but I have a really, really hard time imagining that your personal income is that high. And frankly, if you do bring in that much, you can afford to pay an extra $970,000 taxes extra without having to cut your employees’ benefits. After all, even if you paid every one of your employees a salary of $100,000 per year, that’s still an executive to employee pay differential of 210x.

    If you did cut your employees’ benefits to keep your own personal income up, that would be a really shitty thing to do. If I worked for a company where I knew my boss was doing that, I’d send out my resume, find another job, and then poison the well behind me as I left by telling everyone why I was leaving.

  59. Brian
    Your right I dont bring home that much but I am taxed on that amount, every year myself and many other companies invest in our infurstructure to stay competative. due to this I actually pay out 4 times more in taxes then I personally bring home. and some pretty simple math shows that companies like mine will have to stop investing in them selfs or decrease pay and benifits. This has nothing to do with people like me trying to keep the same amount of income it deals strictly with trying to keep the doors open so all my employees dont lose their jobs. I find it frustrating that people are so quick to make judgements based on partial information, like you kinda left out the increase of 6.2% just in ssi taxes. And yes the assetts that I am being taxed on do have value, but only if they are sold, which they cant be as long as the business is operating. Almost all S-corps see this same thing, all income and assets flow down to me personally no matter how much money I make and get to take home. You comment about how shity it would be to cut employees pay to keep mine the same is bull. Why should I be the one taking a pay cut when I am the one who has the most at risk. The main point is that no business owner should be put in a position that he has to chose between letting his business slowly go under or to cut pay (including his own) just so people who dont even pay taxes can get a credit (walfare) that is being funded by someone elses hard earned money.

  60. Your corporation is not taxed on that amount, Scott, unless you’re doing something really, really weird that I’m not seeing in the tax forms.

    According to IRS form 1120S, “U.S. Income Tax Return for an S Corporation”, an S corp is taxed according to your net income – gross income minus a whole slew of deductions including benefits, salaries, pensions, advertising, rent, taxes, licenses, et al. Unless I’m missing something huge (and I’ll admit I might be, although I don’t think I am), I’m just not seeing how you’re going to be subject to such a huge tax increase. All you have to do to avoid it is invest in your business more, not less.

    FYI, the total combined payroll tax increase under the Obama plan appears to be only 3%, not 6.2%. I admit that I missed it, but since all the comments had been based on personal income, I’m not going to lose sleep over it.

    As far as your pay is concerned, I don’t have a problem with you claiming a decent salary for your risk. I have a problem with you either cutting employees or cutting benefits in order to keep your personal salary stable. Business owners pass costs down to their employees all the time these days, and that effectively cuts employee salary. No employee should be put in a position that he has to choose between slowly seeing his pay and benefits eroded just because his boss is unwilling to suck it up and forgo a new Lexus or a few cases of wine.

  61. Everything I’ve read backs up Brian. Business are taxed on net income, not gross profits or gross sales. So, very successful business owners will have to endure a 3 point increase in personal income tax, just like successful non-business owning working stiffs (like me).

    And if that 3 percent is just passed along to the consumer, so be it. According the the Urban Brookings Institution Tax Policy Center estimates, only 1.9% of business fall under the top two tax brackets. 3% inflation on 1.9% of small business is not going to hurt the American consumer/economy. http://www.cbpp.org/8-29-08tax.htm#_ftnref1

    We can talk details until we’re all blue in the face but the bottom line is this: I’d like to see a bottom-up economic approach for 8 years to see if it can work. After all, the end of the Reagan and W Bush trickle-down eras both ended with significant recessions, how much worse can the opposite approach be?

    Check out the book, Obamanomics: How Bottom-Up Economic Prosperity Will Replace Trickle Down Economics, by UCLA professor of Economics, John Talbott. It’s a surprisingly good read.

    Thanks to all on both sides for the excellent conversation.

  62. Brian
    Lets try this, it might help you to understand.

    Lets say for the sake of argument that a business owner pays himeself $400,000.00 with salary and bonuses.

    Now lets assume there was a capital investment into this business of $5,000,000.00 to get it started.

    Now lets look at a s-corp that has taxable income of 3.5 million. and once again for the sake of argument lets say 50% of the taxable income is due to expanding the business with more trucks and computer systems. (For simplicity sake lets not worry about accelerated depriciation in this example)

    So now we have $400.000.00 personal income plus 3,500,000.00 of business income for a total of 3,900,000.00. out of which 1,750,000.00 (the 50% from above) has already been spent.
    so now we figure the current rate of 35% on 3,500,000.00 which is $1,365,000 of federal tax, plus another 6% state tax of $240,000.00. thats a total tax today of $1,605,000.00.

    So currently this senerio shows $1,605,000.00 of taxes plus the 1,750,000.00 of taxable investment into the company for a total outlay of $3,355,000. of the $3,500,000.00 leaving a after tax profit of $145,000.00.

    Now lets add the additional 11.5% total increase under obama’s plan for an additional $448,500 in taxes which lowers this companies net profit after taxes from $145,000 to a loss of $303,500.

    Now keep in mind this person was earning $400,000.00 before taxes but only $190,000.00 after taxes, so now he has to pay $303,500.00 out of the $190,000.00 he took home so he is effectily $113,500.00 in the hole.

    This is why so many business owners are scared to death.

    I think you can see why this doesnt make sence for any business owner to make less then 2% on his investment. when anyone can earn more then that without risk in a simple savings account.
    .

  63. Scott,

    I’d like to see your sources for that 11.5%. Right now I see a total increase of 4.6% as a result of personal income and 3% from payroll taxes, or 7.6% worst case.

    There are other ways to handle this problem, if it’s real (and I’m not confident it is without references). You can change how you invested in the company – lease or rent equipment instead of purchase it as an asset, for example. In other words, do what you need to in order to grow the company without acquiring taxable assets in the process. This would be one of the reasons why most businesses lease their buildings instead of owning them. You might also be able to re-incorporate as something other than an S corporation.

    In addition, I find it really hard to believe that you’re paying the full 35%. At 500 employees, you’re big enough to afford tax accountants who are good enough to find the loopholes.

    I’m sure you believe that you’re screwed, Scott, and maybe you are. But there are things you could have done to minimize the business impacts to your own business. I’m sure you had good reasons not to do them to start with – there’s no doubt they made sense to you at the time. But the point of this post, and all my comments and responses since, is that the tax increase will help the little guys more than it’ll hurt the big guys, and so the employment impact will either be negligible or a small net positive to the overall economy.

  64. Obama’s plan is a lie. 95% get a tax break? 40% of Americans don’t pay income tax. Obama is a liar. I make under $250,000 and my taxes will increase under Obama according to the WSJ. It will go up to 45%! Wow what a tax break! I’m paying more under Obama, but I was suppose to be in the tax break group. I am under $250,000 – the magic number that Obama keeps throwing around. Wake up America vote McCain.

    http://veerright.wordpress.com/2008/10/07/95-of-americans-will-get-a-tax-cut/

  65. He he he he…. 45%? Right…. One problem – it’s not the WSJ that says that, it’s the American Enterprise Institute, and it’s about as unbiased on economic issues as EarthFirst! is on environmental issues.

    So why don’t you come back with the link to the WSJ article that says what you claim and I’ll consider it more than just an attempt to invoke irrational fear.

  66. To Veerite – please note the messenger – someone who works for Bush who wrote an opinion letter in the WSJ. His facts are screwy – they make no sense. Your taxes will not go up – your benefits will improve under Obama’s plan.

  67. Ok, I have a question and hoping to get an answer that the average person can understand … Say I own a small busness with my wife, my son works with us and we employ a part time worker ( he works about 20 hrs per week ) so we have 4 “employees” we do about 3 million a year in retail / resale and we make about $80,000 a year profit. How will Obama’s tax plan effect us? is the 3 million included as my income? Thank you !

  68. To Joseph. You didn’t say what form the business is – a C Corp, S Corp, LLC Single Member, LLC Partnership? The answers will be different. Also, if your son “works with you”, is he on payroll? As a corporation, the owners, if they work for the corporation (both C and S) should be on payroll also, thus reducing net profit. For all, though, taxes are based on profits not gross earnings. So…the gross earnings are not taxable, the 80K is. Obama does you good. McCain will cost your employees (and you on the FICA and Medicare burden) taxes on your health insurance! Obama will give your small business a tax credit for providing health insurance.

  69. hmm…. 99.999% of the things you own got to you by truck, meaning a truck driver drove it. Over two thirds of trucks are independently owned, 2/3rds of them are sole proprietorships, which have to pay nearly half of their budget to daily operating costs (diesel), most of the rest goes to state road taxes, Insurance, vehicle maintenance, and other daily expenditures (food, etc). Most independent truckers make over $150k a year, some MUCH more, yet only take home $25k.
    Let’s say we don’t care about the truck driver in this case. With Obama’s tax “cut” we’re looking at losing roughly half of the trucking industry, which means taking those oranges from Florida to Idaho will take 60 days. I wonder what kind of supply/demand issues will crop up in the mean time, especially considering the body’s reliance on vitamin C.

  70. Skyler, what part of “you get taxed on net income, not gross income” is so confusing? Operating costs are deductible expenses. Insurance is deductible in this case. So is vehicle maintenance. So if their take home (net) pay is $25,000 or so, they’ll get a tax cut, not a tax increase.

    In fact, a married filing jointly, 1-earner, 2 dependent household would get a cut of $915. A married filing jointly, 2-earner, 2 dependent household would get back $1266. (source: Obama Tax Cut)

  71. Fair AGI criticism. My error.

    That doesn’t actually change my point, however, since a trucker’s household with adjusted gross income of $150k, and itemized deductions in of 50% of his income, would a) receive a $3924 tax cut (married filing jointly/1 earner/2 dependents) or $4427 tax cut (married filing jointly/2 earner/2 dependents), would b) have taxable income of only $61,400 (derivation: 50% of $150,000 is $75,000, minus four exemptions each worth $3400, or $13,600), and c) would receive back a tax refund of about $24,000 (after the tax cut was applied to the initial taxes – in 2007 it would have been $27680)

    Furthermore, the trucker in this hypothetical would have paid in $36,112 over the course of the year (without Obama’s tax cut, according to the IRS Rate tables for 2007). That’s about $3,010 per month. Obama’s tax cut would reduce that by about $327 per month, improving the trucker’s monthly cash flow significantly.

  72. Here’s a perspective from an actual business owner. I am a partner in a marketing communications firm. We are a Sub-S Corporation, and have 30 employees. We are a member of the Inc. 5000 (fastest growing privately held companies). One of the reasons is we have invested in staff ahead of demand – giving us resources to generate new business and have the resources to except new clients, even on tight deadlines. We can afford this because we keep money in the bank every year (instead of paying out all profits to the partners). These profits – whether distributed or not – are taxed to the partners at our individual tax rates. When the combination of income distributed plus income retained is more than $200,000 the income tax rate will go up. This will cut into liquidity – and therefore provide less funding for future job creation. It’s as simple as that. Or we can complicate things and take on lots of debt. Heck maybe the government will make the payments on it! Contrary to popular belief, business owners are not all greedy. Let us keep more of what our companies earn and we’ll do the right thing with it.

  73. Somebody smart give us a sample balance sheet of a typical small business owner. Spell it out real clear with easy to understand math. Throw in any outstanding loans the company might have and explain what they should do if they end up with a net profit of over $250k. If I’m right about what I’m understanding, then it would end 80% of the arguments being made against it. The personal income tax example isn’t really in question. Everyone pretty much understands that part. It’s the small business balance sheet thats at issue both here and on the campaign trail.

  74. Hi Andy. There is nothing strange or hard to understand about a balance sheet. You do not pay taxes on the balance sheet – you pay taxes on your net profit. A competent accountant, with an eye toward the future – future trends in the business, future potential profits, or future potential slowdowns in your field, will make smart choices on expensing or depreciating equipment purchases – this affects both net profit and balance sheet. A balance sheet is just a snapshot of what you have versus what you owe at the present, if time were to stand still. Assets = liabilities plus equity.

  75. To Mark. If you are an S Corp there are no partners – there are shareholders. If you (the partners, er, shareholders) actually work for the S Corp, you should be receiving salaries for your work, thus reducing net profit. Still each of you will pay taxes on your payroll plus your share of profits. You say you have 30 employees (including you?) and that you are “investing in staff ahead of demand” – does that mean you haven’t earned the income to pay the staff? Is the money you have in the bank from earned income or capital investment? If from investment, it seems you would have a loss, not a gain – no profit to tax. And if it comes to a $200K profit, it is shared pro-rata by the shareholders according to the operating agreements. so if there are 4 of you with equal ownership, the profit is $50K thus no additional taxes under Mr. Obama’s plan. He is the way to go.

  76. I am a small business owner and have had my accountants run our last years numbers through obamas proposed tax plan and what I am being told is that I can expect a 12.57% increase in my federal tax under obamas plan compared to the current tax plan. That is figured using all aspects of the obama plan not just the 4.6% increase on the top scale. If you are a small business owner who has total taxable income of over 250k I highly suggest that you have a good account run your numbers so you can see for yourself how Obamas plan will effect you.

  77. Hey guys, keep this detail in mind when running your numbers: the SSI tax increase isn’t planned to take effect until 2018! That means, effectively, NEVER!

    And of course, who knows what tax plan will actually come out of Congress in the end.

  78. Are we also taking into account how we’ll be paying more taxes to help people get that free healthcare he wants? Just wondering. Or the extra cost we’ll have to pay for the education plan he’s proposing? Do we know how much that will tax on to what we’ll be paying in? Still, just curious.

  79. He plans to pay for it with savings from ending the Iraq war, ending subsidies to oil and gas, and other tweaks to the federal budget. However, it will still not balance out even after these anticipated savings and cuts are made. Keep in mind that the congressional budget office ran these plans through their models and found that McCain’s plan would end up with a higher additional budget shortfall in the neighborhood of several hundred billion dollars over what Obama’s would. That is because he plans to keep the war going indefinitely, keep the Bush tax cuts fully in place, and proposes more tax cuts that are effectively un-funded by any specified cuts or revenue increases.

  80. Isn’t it funny though? We picked the guy who will have the government doing all our spending to help us, yet this government has put us, what 10 tril. in the hole? And how come gas prices were fine during this war until 06? Was it due to Pelosi or the majority becoming demoratic? I’m just wondering why it seemed like the gas prices suddenly started going wherever they wanted. Little strange.

    Actually, after asking I did a search and found this. I guess I know why now.
    http://article.nationalreview.com/?q=N2M4NzNkMDQ4YjZjZjFkZWE4YWJjODUzMDZiYTcyOWM=

  81. Ah yes. Show us concrete evidence that it’s all the democrats fault by quoting the national review. If you’ll notice, the only proof they point to is blocking drilling offshore or in ANWR. Otherwise it’s just basically filler saying how bad dems are. That’s generally what all conservative publications do. Two pages of filler bashing dems with about 3 lines of “facts” which can be dismantled just about as fast. In fact I’ve heard more conservatives talking about how good high gas prices are for the market, and that Europe has been paying these kinds of prices for a long time so we should suck it up.

    The biggest problem with drilling here is that OPEC can just as easily offset our production by lowering theirs, increasing the price of oil back up to the levels they like, and since their market share would be less, they’ll have to increase it further than current levels in order to make the same money. The only person that wins is Chevron who gets to cut into OPECs profits for themselves. That’s better than nothing, but still doesn’t help the citizen one bit. Therefore, while we have this wave of public outrage, lets go ahead and make a major shift in the way we use energy that sets us up for long term prosperity and severs our ties to “countries that don’t like us very much”.

    If we dump all of the big oil subsidies into solar energy, wind farms, and 100+ MPG cars, we become the major renewable power player for the 21st century, which many economists predict will overtake the automobile industry as the backbone of the next hundred years and put us squarely in the lead again globally.

    Plus, if we put the money into these fields, we can get past the Prius and on to something more like that Tesla sports car. I’d like to be fuel efficient, but until they make something with the same kind of torque as my 12 MPG pickup, I’m sticking with dirty.

  82. Your first presumtion, before you even begin to analyze the impact on small business is incorrect.
    Sole proprietor status is not the only organized structure where liability for taxes is at the individual rate.

    SCorp and LLC’s are other forms of small business structures where the individual is “LIABLE”
    for all taxes. This a “Joke”

  83. There isn’t a single progressive / liberal that owns a business or even runs one that would agree with the bull the author wrote. I for the life of me cannot imagine how you people make it even a day without being guided by your mothers. Oh, progressives must not have biological mothers, because you haven’t been nurchered into logic thinking or apparent logical thought.

  84. Bill B,

    I got an email telling me this thread I commented on 2 years ago had a new reply and just so happen to be a small business owner who’s also a progressive/liberal. I live in Texas to boot. I’m 100% behind the Obama tax plan as laid out in his 2008 campaign. My small business would get a tax cut under that proposed plan, but I’d just settle for the big dogs to get a tax hike the way things are going.

    And calling liberals somehow “non-human” as implied by the lack of biological mothers is really just beneath you anyway. I don’t doubt that you’re an intelligent person (or that you do/did in fact also have a mother), although I would suggest you spell “nurture” correctly next time you impune someone’s intelligence. I mean there’s only one word separating “nurchered” from “logic thinking”.

  85. I got an email advising me of the recent posts, and yes, like Andy, I am a small business owner. I will also get a tax cut, even though I do take in about $750Kper year, after expenses, I do fall into the under $200K guidelines. And I have clients who are in the top 5% of taxpayers who are not having any issues with their tax rates going back to where they were before Bush cut them and created the crap we are still dealing with today. They are grateful that they live in a country where you can rise to the top, where you can realize a dream, and understand that taxes are part of the deal. And Bill, perhaps you should turn on your spell-check.

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