Don't "small businesses" pay tax on income after payroll?

[dhpgetsit]

Why are cons always trying to say that allowing tax cuts on personal income at the top margin to expire would cause small businesses to have to lay people off? I thought expenses like payroll came right off the top and were not included in taxable income.

[ret5hd]

1. You are correct.

[liberal N proud]

2. They use that rhetoric because a majority of the people don't know any better

It's all part of keeping the voter stupid.

[grasswire]

3. sure

taxes are not paid on gross revenue of a business. If they were, GE could be paying its fair share.

[ProfessorGAC]

4. The Theory, Such As It Is. . .

. . .and i'm not saying it's correct, is that if a small business has $1 million in revenue, employs 6 people at total cost of $80k ($480k), has $10k per month in other operating expenses and has interest and depreciation of another $150k, then end up up with $250k before taxes.

If their taxes at (making up the rates) 25%, they pay $62.5k in taxes. This leaves them $187,500. The owner keeps $125k as profits and reinvests another $62,500.

The claim is that if the rates go up to 30%, the owner has to pay another $12,500 in taxes. This means they can either invest less in the business, take a smaller profit as their income, or get rid of somebody.

Now, the argument would make a LOT more sense if the proposal were to shift the marginal rate from my hypothetical 25% to 55%. That extra $75k in taxes would make the business incapable of growth, have the owner make less than the employees, or have to get rid of someone to stay at par.

But, nobody is suggesting raising taxes 120%. So, the argument falls flat.
GAC

[Z_California]

5. The Big Lie

The big lie is that tax rates on the rich have ANYTHING to do with the decision to hire or fire. 99.8% of the time, tax rates have NOTHING to do with the decision to hire and fire. It's about demand for your products and services and maximizing profit. Period.

Ask that business owner friend of yours how many people he hired after Bush slashed his taxes. You didn't hire anyone as a result of your personal tax cut. Gee why not? Luckily for Republicans, the vast majority of Americans have no clue when it comes to business decision-making or basic microeconomics so they can just lie lie lie.

[JustAnotherGen]

6. Well said

A smart small business owner will pay him or herself less. A smart business owner who HATES working for someone else (my husband is a prime example) will GLADLY pay another $12K in taxes just so he doesn't have to march to anyone else's drum, can keep the diamond in his nose, and sport his tatoos in all of their glory.

Besides - we think it's a small price to pay to make sure our poorest can eat, have eat in the winter, and our roads, schools, bridges, police force, firefighters, etc. etc. - that's all there for those who need it.

You can tell the majority of Republicans have never built from the ground up a business - truly entrepreneurs - because they don't realize how stupid they sound. Their logic makes absolutely no sense to the average trades business owner. None at all . . . Oh - and don't forget how so many benefit from SBA Loans and such. They know government can work for them if we all chip in just a little bit more.

[ProfessorGAC]

8. Again, Read What I Wrote

You're agreeing with someone who's arguing against a point i didn't make.

I threw out the hypothetical upon which conservatives base their argument. Nowhere did i say i supported it.

So, you're throwing support to someone who belittled a point i didn't even make, rather than noticing that i didn't say any such thing.
GAC

[JustAnotherGen]

11. Woah

Calm down - I was agreeing with your tongue in cheek comments about their stupidity. How about you read my post again and lose the defensiveness?
I was not attacking you, or assigning that belief system to you.

It's the hypothetical - and nine times out of 10 those 'cons' that make those arguments - they have no idea what they are talking about. But they hand out that b.s. left and right.

[ProfessorGAC]

7. What In The World Are You Talking About?

Sheesh, try actually reading what i wrote! I didn't say anything about a business owner friend. I clearly said i didn't buy the argument, and i used the word hypothetical at least twice.

Save your anger for someone who actually says something tagentially related to the point you're disputing.
GAC

[Z_California]

9. Uhh....sorry

Yeah I think you misinterpreted my post. I guess it shouldn't have been a reply to your post but more a reply to the OP. Not angry (with you anyway) and not disputing what you're saying. Take a breath professor.

[Yo_Mama]

10. I think the biggest single issue for small business owners

is that they pay their taxes, but big companies get all the breaks and don't pay theirs.

There's a theoretical basis for the statement, but we aren't talking about that much percentage-wise. I think small businesses would be okay with a tax increase mostly if the large companies were forced to pay the same taxes.

The theoretical basis for cutting business income tax rates to create jobs is pretty sound, but a few percentage points doesn't change anything much. The biggest problem we have with our business tax system is that it is allowing too many big companies to pay very low taxes.

Another huge issue for small business owners is health insurance. There the inequity between large and small businesses is highest. Large businesses can be mostly self-insured. They usually pay an insurance company to administer a plan, but they allocate their own money for expenses. They are also allowed freedom from state laws on coverage.

Small businesses don't have that advantage, or group plan advantages, and are basically stuck with their individual risk rating, or even when community coverage is available, a much worse risk rating than large businesses. So they get stuck paying much higher effective insurance rates, and that definitely does hurt job creation.