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Who Is The Clown That Said "$250,000.00 A Year Isn't A Lot Of Money" ?

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DemocratSinceBirth Donating Member (1000+ posts) Send PM | Profile | Ignore Thu Sep-30-10 07:11 AM
Original message
Who Is The Clown That Said "$250,000.00 A Year Isn't A Lot Of Money" ?
Maybe it isn't if you're the Octamom.

As an aside I oppose "confiscatory" taxes but taxing income over $250,000.00 at 39.6% isn't confiscatory
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Redstone Donating Member (1000+ posts) Send PM | Profile | Ignore Thu Sep-30-10 07:47 AM
Response to Original message
1. Well, the problem is this:
I have a friend who owns a small manufacuring company. Unfortunately for him, he's incorporated as an "S" corporation (Why he's an "S" corp instead of an Llc, I don't know).

Because he's an 'S' corp, he can't leave profits in the business and store them up for equipment or expansion, because as an 'S' corp, all the profits are taxed as personal income. So if he wants to expand the business or buy equipment or start a marketing campaign, he has to put the money into the business during each calendar year, or get his ass taxed off. He can't just pay himself, say, $75K in a year and leave the rest in the business to let it accumulate for reinvestment in the company.

So in his case, over $250K is really NOT a lot of money. He's making a real product and providing real jobs.

Redstone
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iamjoy Donating Member (1000+ posts) Send PM | Profile | Ignore Thu Sep-30-10 08:06 AM
Response to Reply #1
3. True, But...
For a small business that wants to expand/hire workers $250k a year isn't very much.

As personal/family income though, $250k per year is plenty.

We need real tax reform that will truly help small businesses that are hiring people here in the US. We don't need exemptions for corporations that move jobs overseas or "small businesses" that wouldn't hire any one else anyway because they were just set up to help the owner avoid taxes.

But of course, that gets very bureaucratic.
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Scruffy1 Donating Member (1000+ posts) Send PM | Profile | Ignore Thu Sep-30-10 09:37 AM
Response to Reply #3
9. I was going to just ignore this-but its just silly
The only reason I gave ever hired anyone in my life is for them to make me money. This idea that employees are all cost with no profit is just nuts. Now it might cost me about 5,000.00 to hire someone initially I wouldn't do unless I was sure I could get my money back. Return on investment.
Depending on the nature of the job the return could be immediate or longer range, but it is still a capitalist venture. In fact I've hired people when I had hardly any cash, but lots of work and put them to work making money for me right away.If you have a capital heavy business by the time your done with depreciation you can show a small income and a large cash flow at times. The main thing is to keep the asset side strong and keep a good credit rating. In the past what has kept us expanding is credit and the real problem is that credit has all but dried up except for the largest businesses.
Hell, if it was about jobs we'd call it jobism instead of capitalism.
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LiberalAndProud Donating Member (1000+ posts) Send PM | Profile | Ignore Thu Sep-30-10 12:22 PM
Response to Reply #3
21. You know that salaries paid to employees are not profit, right?
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Toucano Donating Member (1000+ posts) Send PM | Profile | Ignore Thu Sep-30-10 10:12 AM
Response to Reply #1
11. Sorry Redstone, I'm calling bullshit. $250,000 is well above the median income.
Edited on Thu Sep-30-10 10:13 AM by Toucano
It's FIVE TIMES the U.S. median household income. Five times.

The source of the funds (stocks, salary, wages, bonuses, capital gains, or profits) is irrelevant. If that's your income, you're doing pretty fucking well.

Your friend is incorporated as an "S" corporation for one simple reason...tax benefits.

http://www.msnbc.msn.com/id/39317328/ns/politics /

Rather than paying corporate taxes, the firms operate as S Corporations, sole proprietorships or partnerships, including limited liability companies that put LLC instead of Inc. at the end of their names.


Fidelity Investments became an "S" corporation in 2007 to take advantage of the tax benefits available.

Your buddy's "S" corporation-generated income tax is going to increase from 36% to 39.6% if he's in the highest bracket. That's 39.6% on the income above $375,700. His liability on dollar number 375,701 will be forty cents. That's hardly having his "ass taxed off".

I hope you're not waiting to count the tears I shed for your poor, much maligned friend.

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LiberalAndProud Donating Member (1000+ posts) Send PM | Profile | Ignore Thu Sep-30-10 12:13 PM
Response to Reply #1
15. He's the sole shareholder?
Edited on Thu Sep-30-10 12:18 PM by LiberalAndProud
My heart bleeds.

We have an S-Corp with four shareholders. Profits are distributed as income to all shareholders. Our business would have to earn Salaries+Profit of more than$1,000,000 before we'd hit the proposed tax-break extension cut off.

I really wish we were in that boat.


Edit to add: I can take already taxed money out of the business and put it in my personal bank account at any time without paying any additional tax. It's not as bad as your friend would have you believe.
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lumberjack_jeff Donating Member (1000+ posts) Send PM | Profile | Ignore Thu Sep-30-10 12:14 PM
Response to Reply #1
16. I have an LLC, and I don't see the problem.
Everyone should be so lucky that they *must* take more than $250,000 income from the business.

If he's really at a loss as to how to expand, Maybe he should hire more people or lower his prices to get more market share.

$250,000 IS a lot of money, especially considering the fact that many personal expenses for working stiffs become business expenses for the owner of the business. Maybe he simply needs more incentive to invest his cash in his business instead of taking it as income, and a 39% tax rate just might do it.
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ieoeja Donating Member (1000+ posts) Send PM | Profile | Ignore Thu Sep-30-10 12:26 PM
Response to Reply #16
22. Higher taxes *spur* investment.

Just as you described. This is my theory on why the economy has always done so much better under Democratic presidents than Republicans. And why this time around, that has not yet happened.

Investors are still cashing out before taxes return to their 2000 level. Actually, they now appear to be in a holding pattern hoping that the taxes get lowered again. But once those taxes go up (if they go up), they will be reinvesting like mad knowing that at some future point, a Republican will lower those taxes again, and they can begin cashing out again.


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COLGATE4 Donating Member (1000+ posts) Send PM | Profile | Ignore Thu Sep-30-10 12:21 PM
Response to Reply #1
20. If here were an LLC the tax treatment is the same. It's a flow-through
to him as personal taxable income. He probably set it up as an S corp before LLC's became popular (and legal) in the 90's.
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Benzene25 Donating Member (6 posts) Send PM | Profile | Ignore Thu Sep-30-10 03:17 PM
Response to Reply #1
28. not my understanding
I know that state laws play a role in this but your friend can leave any money he wants in the corporation after paying himself a reasonable salary. He is personally liable for any profit left in the business as personal income. The company can reimburse him for the tax on the profits left in the company's name.

example

company net profit after taxes and all expenses (including say 75,000 for the owner's direct compensation)is 500,000

in this case your friend is responsible for the taxes on his direct income + the money left in the company. So the company pays for the taxes on the 500K and the money stays there.

Otherwise S corps would be a crazy tax haven because they don't pay taxes like c corps.

People who run s corps generally pay far less in taxes than a "regular" worker. The pay the same tax rates but they use the business to write off all sorts of things that people pay for. . . Such as

Renting a home office to the compay
cell phones
computers
internet connections
vehicles
purchasing extra stuff when they buy stuff for the company (paint, home decor, etc)

s corp owners are not going to suffer or not expand because they're paying 4% more on PROFITS over 250,000.
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billlll Donating Member (434 posts) Send PM | Profile | Ignore Thu Sep-30-10 07:51 AM
Response to Original message
2. 91% IKE's top rate - maher said
92 was JFK rate
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dkf Donating Member (1000+ posts) Send PM | Profile | Ignore Thu Sep-30-10 08:49 AM
Response to Reply #2
5. Where you could deduct any amount you put in a retirement plan with NO MAXIMUM
And that protects future gains from being taxed too.

Would we rather go back to those days?
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DemocratSinceBirth Donating Member (1000+ posts) Send PM | Profile | Ignore Thu Sep-30-10 08:53 AM
Response to Reply #5
7. 91% Is Too High
I'm ok with 40%
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dkf Donating Member (1000+ posts) Send PM | Profile | Ignore Thu Sep-30-10 09:27 AM
Response to Reply #7
8. Hawaii will take another 12% off you not counting property taxes and sales taxes.
And having the highest cost of living, highest gas and electricity prices and a median house priced at $550,000 or so. That median house may get you 1300 square feet too.

Taxes should be adjusted for cost of living.
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Hannah Bell Donating Member (1000+ posts) Send PM | Profile | Ignore Thu Sep-30-10 02:01 PM
Response to Reply #8
27. state income taxes are deductible from federal taxes.
median household income in hawaii = $66K (2008).
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Cirque du So-What Donating Member (1000+ posts) Send PM | Profile | Ignore Thu Sep-30-10 11:09 AM
Response to Reply #7
12. I believe there's still room for that 91% marginal tax bracket
say, on income in excess of $2,000,000/year. You're still making money Hanover Pfist. For example, if you make another million beyond the first $2M, you still keep $90,000 - well beyond the amount, after taxes, that could sustain two working-class families for a year.
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DemocratSinceBirth Donating Member (1000+ posts) Send PM | Profile | Ignore Thu Sep-30-10 01:44 PM
Response to Reply #12
26. Even The Rich Are Entitled to Keep At Least Half Their Money
I just scoff at the notion 250K is not a lot for most families.
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JVS Donating Member (1000+ posts) Send PM | Profile | Ignore Thu Sep-30-10 03:39 PM
Response to Reply #7
29. 91% is how you pay off a huge federal debt.
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billlll Donating Member (434 posts) Send PM | Profile | Ignore Thu Sep-30-10 10:07 AM
Response to Reply #5
10. go back? yes. No Great Recession then. 60's were prosperity
And record low Job Shortage for peacetime. IIRC

No hmlss. dying for
Lack of gov tax revenue. AKA tax cuts
For the rich.

None of todays mess.
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stray cat Donating Member (1000+ posts) Send PM | Profile | Ignore Thu Sep-30-10 08:16 AM
Response to Original message
4. If you live inthemidwest or south the cutoff could be 100,000
And in more expensive regions of the country 250,000-that would be fair
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Romulox Donating Member (1000+ posts) Send PM | Profile | Ignore Thu Sep-30-10 11:12 AM
Response to Reply #4
13. Nope. Nobody's job to subsidize the cost of living in California and New York,
save the people who live there. If it's too expensive, move.
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lumberjack_jeff Donating Member (1000+ posts) Send PM | Profile | Ignore Thu Sep-30-10 12:18 PM
Response to Reply #13
18. +1 n/t
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RainDog Donating Member (1000+ posts) Send PM | Profile | Ignore Thu Sep-30-10 08:49 AM
Response to Original message
6. Tim Noah mentioned him at Slate
you can look for his story there. he's a guy who lives in Hyde Park (Obama's old neighborhood) who complained on his blog. His wife disagrees with him. So does the majority of the nation.
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Cresent City Kid Donating Member (1000+ posts) Send PM | Profile | Ignore Thu Sep-30-10 11:56 AM
Response to Original message
14. I can sort of sympathize with those at the bottom of the top rate
My problem is when the republicans try to hide everyone in the top rate behind this small segment of the population, like hiding an elephant behind a palm tree. We need a new top rate for the top 1% which would better match actual income distribution.

For 30 years we've been fed the myth that cutting taxes for the rich will result in jobs, and for most of those years the policy was in place. It is debatable what effect tax policy has on the economy and job creation, but the last 10 years have shown that the gop tax strategy does not necessarily mean jobs, the strategy is the law of the land, and unemployment is 9.5%.

The bad news for Democrats is that it's hard to prove a negative. "It could have been worse" is not a convincing argument, though I believe it to be true. What sucks is that the only way to get across that republicans tank the economy is to have them in power and actually doing it. What's worse is that after 8 years of learning the lesson, it has only taken 2 to forget for some people.
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LiberalAndProud Donating Member (1000+ posts) Send PM | Profile | Ignore Thu Sep-30-10 12:15 PM
Response to Reply #14
17. Why?
Only the income over $250,000 is taxed at the top rate. If somebody makes $250,010, I doubt they'll even notice.
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Cresent City Kid Donating Member (1000+ posts) Send PM | Profile | Ignore Thu Sep-30-10 12:40 PM
Response to Reply #17
23. If by why you mean why the new top rate
I guess to defuse the political argument of the negative effect on those at the margins. I agree with you that the actual effect is small since it's the amount over $250,000. The top rate is essentially a flat tax for the upper upper middle class, and the super wealty whose income far outpaces them. A truly progressive tax structure should match actual incomes better than this.
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LiberalAndProud Donating Member (1000+ posts) Send PM | Profile | Ignore Thu Sep-30-10 12:59 PM
Response to Reply #23
24. Yes. I think a more progressive tax (more tax brackets) would be a good thing.
But our top rate is fair for those at the low end of the upper bracket, IMO. We should add additional income brackets for the two percenters, but I don't think that's likely.
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Cresent City Kid Donating Member (1000+ posts) Send PM | Profile | Ignore Fri Oct-01-10 01:02 AM
Response to Reply #24
30. Agreed
The top rate is fair for those at the bottom of it, and a picnic for those at the top. I also agree about how unlikely things are to change. If there was this higher rate on the top let's say one percenters, I wonder if we'd see the republicans bring out Joe the Millionaire instead of Joe the Plumber.
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kentuck Donating Member (1000+ posts) Send PM | Profile | Ignore Thu Sep-30-10 12:20 PM
Response to Original message
19. Well, if you're going to get the wife an extra Lexus....
and hire a new gardener for the summer months and plan on putting in the new swimming pool and taking the entire family on the vacation to Italy and buying that new summer home in Colorado, then that is not a lot of money.
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n2doc Donating Member (1000+ posts) Send PM | Profile | Ignore Thu Sep-30-10 01:04 PM
Response to Original message
25. This guy
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