Rand Paul - Don't Raise Taxes, Cut Spending

I believe nothing of the sort.

Yes my employees wages are 100% deductible. However, I'm short $5k in expenses THIS month. I get no deduction while paying that bill today. The federal government took $30k in profits this year, instead of last years $20k. If I had been allowed to keep that extra $10k, I would not be short this month.

Again, government creating a system that allows the most profitable(large crony corporations) to benefit the most.

 

You haven't paid taxes this year. It's December. How could the Govt have taken $30k in taxes? If if you are paying $30k in taxes, you must have been netting well over $10k a month. You should have plenty of cash on hand to pay your employees, and hire more if you want to expand. Which will reduce your profits and you won't have to pay taxes on it.

Again, you are simply demonstrating your misunderstanding of how business taxes are applied, which explains why you'd make a statement like raising taxes causes businesses to fire employees.

As I've demonstrated many time, they will only fire employees if it improves their pre-tax profit (or cuts their loss) to do so.

 

No you are mischaracterizing and/or completely bypassing what I am saying. Quit being pretentious. Its really lame.

 

Spoken like a true "conservative." Why plan to increase revenues and lower the deficit? Cut taxes and borrow more!

Increasing revenues lowers the deficits. That may not be wealth creation, but it's better than going more into hock, IMO.

That is the sort of ignorant demonstration we'd expect from Rand. Ignore inflation, ignore GDP growth, ignore population growth, just show nominal dollars. Maybe it'll trick the gullible and ignorant.

To have essentially no growth in tax revenues over 10 years of inflation, GDP and population growth is abyssimal and has never happened since they started keeping records.

 

You keep saying things that make no sense.

 

Because you keep replying with things that don't address what is said.

Lets start out simple.

Yearly balance sheet for a startup company, JUST AN EXAMPLE

Tax rate 20% (instead of 10%)

Year 1

Cash Reserves: $0
Income: $500k
Expenses: $450k
Net: $50k
Taxes: $10k

Amount remaining after taxes into cash reserves: $40k

Year 2

Cash Reserves: $40k
Income through month 8: $300k
Expenses through month 8: $345k
Net: -$45k
Net plus cash reserves: -$5k <- oh sh*t I cant pay my bills (have to cut something, somwhere, employees etc)

Your assumption that taxes being raised don't hurt small businesses (especially those small startups, those with smaller margins, and those whose profits are waning), fails.

Dont get me started on random unexpected expenses that come up as well, such as replacement of a large cost item, like a roof or vehicle.

 

The fact that you have to fire employees isn't because of taxes, but because you are losing money.

In year 1 you were making 41.7 a month in revenues with 37.5 per month in expenses.

In year 2 you are making only 37.5 a month in revenues, but your expenses have climbed to 43.1 a month.

That is the reason you have to fire employees. Your revenues are down and your expenses are up and you are losing money. That has nothing to do with taxes.

I never claimed that a business that is losing money won't have to fire employees.

You claimed that raising taxes causes businesses to fire employees. But in your example, it is because the business is not making a profit.

 

Its both!!! I wouldnt have to make any cuts this month, if it werent for the $5k extra taken with the tax increase! At least it would give me an extra month to work out the revenue issue. Taxes HASTEN the path to insolvency.

This is just an example of a revenue problem. What about a large unexpected business expense? A new local tax, a new regulation, a local flu epidemic. There is so much thats unaccounted for, and impossible to account for, the last thing a struggling small business needs is a means to make it worse.

 

It's really not both at all. If you continued making profits, you wouldn't have a problem at all. If you are losing money every month, eventually it doesn't matter how much cash on hand because sooner or later you're going to run out and be insolvent. Business aren't in business to lose money. And the practicality is, if you are starting to lose that much money, you're going to fire employees well before you run out of cash. You need to fire employees because you are losing money, not because of taxes you paid on prior profits.

Your argument seems to be we shouldn't tax people who run businesses because they might start losing money and they could use the money to operate in the red longer to put off the eventual bankruptcy. I agree, that might be the result. OTOH, a lot of profit is distributed as dividends to shareholders as well. That money isn't going to be available to stave off eventual bankruptcy either. And what if the company has a nice $50k profit in the second year? Then they are getting a windfall.

Cutting back on desparately needed revenues so rich folks can get more dividends and a business might be able to go a little longer losing money doesn't seem like the optimal plan to me.

 

A typical small business =/= a company who works with dividend payouts. In essence you arguing for spreading around the proceeds of the city orchards, and I'm talking about grandma's gardens. Whose right do you have to determine which businesses struggling or not, should be allowed more time to restructure? What a control freak.

I'll give you an example. If my mothers counseling business didnt have to match employee taxes, she could add another person. The fact is the demand is not quite there to justify another employee due to that employees initial overhead costs. She only gets about a 20% return on that employees legitimate counseling sessions (problem is so many people quit!).

She supplies counseling services to the needy, through a 501c. Her tax burdens are still too high to expand, and she owes taxes and expenses on every employee, before they even book a client.

 

For the record, btw, my arguments relate to your claim that raising taxes on businesses causes them to fire employees. My own view is that the corporate tax should be reduced to a very low rate, in which case they wouldn't pay much tax on retained earnings. Taxes should be higher on those who benefit from the corporation through dividends and salaries instead.

 

Bear in mind, tax matching isn't the only issue I am talking about.

 

I would agree with you there too, however NO ONE is even offering that.



and yes...

Higher taxes on retained earnings will contribute to the speed of the insolvency, which will result in the expediency of turnover, if it comes to that.

I didn't say taxes = only reason business fire people. It is a contributing factor, just like regulations, laws, sickness, etc...

 

Your grandma's gardens doesn't make the kind of money that puts her in high tax rates.

Employee taxes which fund pensions is a part of the employee's salaries. I'm sure your mom could higher more employees if she could get away with paying them $2.5 an hour as well.

That is a different issue that the business taxes we've been discussing.

No, she's just not making enough revenue to cover the cost of adding employees. Or else she would. As demonstrated above, that has nothing to do with the tax on businesses (eg corporate tax) or even income tax.

The solution to that would be to end FICA taxes and fund SS/medicare through greatly expanded income/investment taxes.

 

Haha, I need to learn you don't do very well with metaphors.

No way. No one would work for that. Her company requires them to have a BA Psychology or similar. However, because these types of people make so much money per hour, they can move in and out of jobs, create their own, etc. As a result, many times, they quit and start their own practice (and take their clients btw) far before they become profitable. The fact the company has to match some sort of government overhead reduces her desire to risk hiring. Just like, highering her tax rates reduces her risk of hiring. Its just a reduction of risk, and I am not claiming it is the SOLE REASON the risk is not taken.

EXACTLY. Government overhead SUCKS out risk. Remove that and suddenly her demand moves closer into the realm of adding employees. She will be willing to eat up some revenue to expand, every time you remove a little bit of burden from her business.

This is why I can't stand it when people say businesses will still expand if the demand is there. No, you are speaking GENERALLY. In terms of the counseling center, you are oblivious to the inner-workings of that service.

 

Haha you need to learn that you don't do very well with metaphors.

Exactly. What you are describing is an issue with the cost of labor. Not taxes.

What "government overhead"?

Obviously we are speaking in generalities. But the laws of supply and demand work for every business. If there is demand for counseling services, your mom can charge enough to justify hiring more employees.

 

There you go mocking again. The metaphor was fine. Your ability to understand it though...not so much.

Wrong, sorry. Its both.

Once again proving, in this service sector, you have no idea what you are talking about.

Here is how I know your logic doesn't work, and never will.

To you, 100% tax rate is bad, 40% instead of 20% is good. Why?

...Because at 100%, 99%, 98% and right on down the line, you end up making the same arguments I am right now.

A progressive tax rate is STUPID and it all ends up being about who controls the democracy. Not necessarily about good economics.


Good talking. But I now realize the argument is completely partisan and completely a waste of time.

 

It is? Why is it OK when you do it?

Non-argument.

To the contrary. There you go mocking again.

20% doesn't provide sufficient revenues.

Don't follow.

A progress tax rate is emminently logical. It's about those who reap the benefits of our capitalist system contributing to the Govt because they have the means. It's both good economics and good social policy.

Good talking. But I now realize the argument is completely partisan and completely a waste of time.[/QUOTE]

 

The employees wages are 100% tax deductable and aren't affected at all by the personal income tax rates.

Let us use the example of my brother's business. He owns a small independent automotive service center with a couple of techincians. If he has more work than his current technicians can do he would be stupid to not hire another technician and turn away customers instead. If the work load requires more employees then he has to hire them or lose business. It's that simple. What the tax rates are don't even come into the equation because it's the demand for his services that generate his net profits. If a business doesn't have demand for it's products or services then it needs to reduce employment. If the demand is greater than what it can furnish and it requires more employees to meet that demand then the business hires more employees. The income tax rates have nothing to do with employment except as how it affects consumption of products and services by those who are purchasing the products and services, not those that furnish the products and services.

A real simple solution for the small business owner. If they need more income then get more customers. Better marketing and more value for the customer are the keys to any small business. There are more than enough customers so all the small enterprise needs to do is work at obtaining a greater market share. This has nothing to do with income tax rates.